20190610Miller Direct.pdf

o
o
DAVID J. MEYER
VICE PRESIDENT AND CHIEF COUNSEL FOR
REGULATORY & GOVERNMENTAL AFFAIRS
AVISTA CORPORATION
P.O.BOX3727
I4I I EAST MISSION AVENUE
SPOKANE, WASHINGTON 99220 -37 27
TELEPHONE: [phone]
FACSIMILE: (509) 495-885 I
DAVID.MEYER@AVI STACORP.COM
l0l9 JU,q t0 At{
IDA::C i:LJBLI
:TlLl"ffliS CCL{Ml
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
TN THE MATTER OF THE APPLICATION
OF AVISTA CORPORATION FOR THE
AUTHORITY TO INCREASE ITS RATES
AND CHARGES FOR ELECTRIC SERVICE
TO ELECTRIC CUSTOMERS IN THE
IN THE STATE OF IDAHO
)
)
)
)
)
)
)
CASE NO. AVU-E-I9-04
DIRECT TESTIMONY
OF
JOSEPH D. MILLER
FOR AVISTA CORPORATION
(ELECTRIC)
REC E IVE D
tl
SION
o
o I.INTRODUCTION
2 Q. Please state your name, business address and present position with
3 Avista Corporation?
4 A. My name is Joseph D. Miller and my business address is 141 I East Mission
5 Avenue, Spokane, Washington. I am presently assigned to the Regulatory Affairs
6 Department as Manager of Pricing and Tariffs.
7 Q. Would you briefly describe your educational background and
8 professional experience?
9 A. Yes. I am a 1999 graduate of Portland State University with a Bachelor's
l0 degree in Business Administration, majoring in Accounting. In 2005, I graduated from
I I Gonzaga University with a Master's degree in Business Administration. I joined the
12 Company in March 2008, after spending eight years in both the public and private
13 accounting sector. I started with Avista as a Natural Gas Accounting Analyst in the
14 Company's Resource Accounting Department. In January 2009, I joined the State and
15 Federal Regulation Department as a Regulatory Analyst. My primary responsibility was
16 coordinating discovery for the Company's general rate case filings. In my current role as
17 Manager of Pricing and Tariffs, I am responsible for the Company's electric and natural
1 8 gas rate design, natural gas cost of service studies in all jurisdictions, and tariff
19 administration, among other things.
20 a. What is the scope of your testimony in this proceeding?
2l A. My testimony in this proceeding will cover the spread of the proposed
22 electric revenue increase among the Company's electric general service schedules. My
23 testimony will also describe the changes to the rates within the Company's electric service
24 schedules.
Miller, Di
Avista Corporation
o
o
I
o
o
1 Q. Would you please provide an overview of the Company's electric
2 requests?
3 A. Yes. My testimony will cover the spread ofthe proposed annual electric base
4 revenue increase of $5,255,000, or 2.1o/o, among the Company's electric general service
5 schedules.l On a total billed revenue basis the increase is also 2J%. My testimony will
6 also describe the changes to the rates within the Company's electric service schedules.
7 Accordingly, the Company has filed tariffs for each ofthe electric service schedules.
8 The tariffs for each rate schedule provides for an effective date of July 14,2019; however,
9 in the Company's Application in this case, Avista has requested that the tariffs related to
1 0 the rate request be suspended with a proposed effective date of Janu ary 1 , 2020.
11 Provided below in Table No. I is a summary of the proposed increase, by rate
12 schedule, on a billing basis (inclusive of all base and billing rate components, including the
13 effect of the canceled electric rebates discussed later in my testimony):
14 Table No. I - Electric Rate Request bv Schedule
19
l5
t6 Rate Schedule Description Billine Incrcase
Residential Service Scheduh I 3.5o/o
GeneralService Schedules 11 & 12 0.0%
L,arge GeneralService Schedules 2l &22 15%
Extra Large General Service Schedule 25 1.6%
Extra Large GeneralService 25P Scheduh 25P 1.6%
Pumping Service Schedules 3l & 32 1.50/o
Street & Area Lights Schedules 4l - 49 0.0%
Total 2.1"
17
l8
21
a. Are you sponsoring any Exhibits that accompany your testimony?
I For purposes ofdiscussing the effects ofthis rate case on "base" rates, the Company is factoring in the
effects of moving the permanent tax reform benefits from Schedul e 72 into the base tariffs, as discussed
later in my testimony.
Miller, Di
Avista Corporation
20
2
o
22
o A. Yes. I am sponsoring Exhibit No. 12, Schedules I through 3 related to the
proposed electric increase. A table of contents for my testimony is as follows:
Table of Contents Page
2
3
4
5
6
7
8
9
10
11
L lntroduction
II. Proposed Electric Revenue Increase
Summary of Rate Schedules and Tariffs
Proposed Rate Spread (lncrease by Schedule)
Proposed Rate Design (Rates within Schedules)
II. PROPOSED ELECTRIC REVENUE INCREASE
1
J
3
5
7
o
12 Summarv of Electric Rate Schedules and Tariffs
13 a. Would you please explain what is contained in Schedule 1 of Exhibit No.
14 t2?
15 A. Yes. Schedule I is a copy of the Company's present and proposed electric
16 tariffs, showing the changes (strikeout and underline) proposed in this filing.
17 a. Would you please describe what is contained in Schedule 2 of Exhibit
18 No. 12?
19 A. Yes. Schedule 2 contains the proposed (clean) electric tariff sheets
20 incorporating the proposed changes included in this filing.
2l a. What is contained in Schedule 3 of Exhibit No. 12?
22 A. Schedule 3 contains information regarding the proposed spread of the
23 electric revenue increase among the service schedules and the proposed changes to the rates
24 within the schedules. Page 1 shows the proposed general revenue and percentage increases
25 by rate schedule compared to the present revenue under base tariff and billing rates. Page
26 2 shows the rates of return and the relative rates of return for each of the schedules before
27 and after application ofthe proposed general increase. Page 3 shows the present rates under
Miller, Di
Avista Corporation
3
o
o
o
I each of the rate schedules, the proposed changes to the rates within the schedules, and the
2 proposed rates after application of the rate changes. These pages will be referred to later
3 in my testimony.
4 a. Would you please describe the Company's present rate schedules and
5 the types ofelectric service offered under each?
6 A. Yes. The Company presently provides electric service under Residential
7 Service Schedule 1, GeneralService Schedules I I and 12,Large GeneralService Schedules
8 21 and22, Extra Large General Service under Schedule 25 and Schedule 25P (ExtraLarge
9 General Service to Clearwater Paper's Facility), and Pumping Service Schedules 3l and
l0 32. Additionally, the Company provides Street Lighting Service under Schedules 4l-46,
1l and Area Lighting Service under Schedules 47-49. Schedules 12,22,32,and 48 cover
12 residential and farm service customers who qualify for the Residential Exchange Program
13 operated by the Bonneville Power Administration. The rates for these schedules are
14 identical to the rates for Schedules 17,21,31, and 47, respectively, except for the
l5 Residential Exchange rate credit.
16 The following table shows the type and number of customers served in Idaho (as of
17 December 2018) under each of the electric service schedules:
l8 Table No. 2 - Custonren bv Seru
ResidentialSchedule I
General Service Schedules I I /12
l,arge General Service Schedules 2 1 /22
Extra large GeneralService Schedule 25
Clearwater Paper Schedule 25P
Pumping Service Schedules 3ll32
No. of Customers
I 08"991
21,767
1,077
l2
I
1,410
Miller, Di
Avista Corporation
19 Rate Schedule
20
2t
22
23
24
4
o
o
2
3
4
5
6
7
8
9
10
ll
12
l3
t4
15
16
t7
l8
l9
20
2l
22
23
24
Proposed Electric Rate Spread
a. What is the proposed electric revenue increase, and how is the
Company proposing to spread the increase by rate schedule?
A. The proposed electric increase is $5,255,000, or 2.1oh over present base
tariff rates in effect. The proposed general increase over present billine rates, including all
other rate adjustments (such as DSM and Residential Exchange), is also 2.lo/o. The
proposed percentage increase by rate schedule is as follows:
Table No.3 - Prcposed 7" Electric Increase by Schedule
Increase in Base Incrcase in
Rate Schedule
ResidentialSchedule I
General Service Scheduhs I l/12
Large General Service Schedules 2l /22
Extra Large GeneralService Schedule 25
Clearwater Paper Schedule 25P
Pumping Service Schedules 31/32
Street & Area Lights Schedules 4l-49
Overall
Rates Billing Rates
o
3.4%
0.0%
l.5o/o
1.5%
t.s%
15%
0.0%m
3.5%
0.0%
l.5Yo
t.6%
t.6%
1 .5o/o
0.0%ru
This information is shown with more detail on page I of Exhibit No. 12, Schedule
3.
a. What is the Company's proposal related to the current permanent
federal income tax rebate customers are receiving through rate schedule 72?
A. Through rate Schedule 72, customers are receiving a rate credit designed to
reflect the permanent benefits attributable to the revisions of the federal income tax code
caused by enactment of the Tax Cuts and Jobs Act signed into law on December 22,2017 .
As stated on ScheduleT2,the Permanent Federal Tax Rate Credit will be in effect until
such time that the permanent federal tax benefits are incorporated into base rates in a
general rate case proceeding. The Company has incorporated Schedule 72 as part of base
Miller, Di
Avista Corporation
5
o
o
o
I rates in this proceeding and is proposing to cancel the rate schedule altogether. The net
2 effect of eliminating the rate credit under Schedule 72 is an equal and offsetting reduction
3 to base rates, with no impact to customers.
4 a. How did the Company spread the total general revenue increase request
5 of $5,255,000 among its various rate schedules?
6 A. The Company used the results of the electric cost of service study
7 (sponsored by Company witness Ms. Knox) as a guide to spread the general increase. The
8 spread ofthe proposed increase generally results in the rates ofreturn forthe various electric
9 service schedules moving closer to the overall rate of return (unity). The rate of return
l0 provided by Residential Schedule 1 is, and has been in recent cases, providing significantly
I I less than the overall rate of return. In contrast, General Service Schedules 11112 and Street
12 and Area Light Schedules 4l -49 are providing a relative rate of return that is significantly
l3 higher than the overall rate of return, while the remaining schedules are relatively close to
14 the overall rate of return. Based on these cost of service results, Avista is proposing that
l5 General Service Schedules 11112 and Street and Area Light Schedules 41-49 receive no
16 rate increase in this proceeding, resulting in a 30%o movement towards unity. The parity
17 ratios for the remaining schedules (21122,25,25P, and 31132) are within an acceptable
18 range and the Company's is proposing an increase of approximately 75%o of the overall base
19 revenue increase, which moderately improves the parity ratios for the majority of these
20 schedules. The remaining revenue requirement is proposed to be spread to Residential
2l Service Schedule l, resulting in a34Yo movement towards unity. While we believe it is
22 reasonable and appropriate to use the cost of service study results as the basis for rate
23 spread, we have tempered the amount of movement toward unity proposed in this case due
Miller, Di
Avista Corporation
6
o
o
Proposed
Rehtive
ROR
0.88
1.36
r.06
0.90
0.95
0.96
1.38
1.00
2
3
4
5
6
7
8
9
10
11
l2
r3
l4
15
16
t7
l8
l9
20
2t
22
23
24
primarily to the impact such movement would have between the rate schedules. The
Company may propose additional movement toward unity in future proceedings.
Table No. 4 below shows the relative rates of return before and after application of
the proposed general increase:
Table No. 4 - Prcsent & Proposed Relative Rates of Return
Rate Schedule
Present
Relative
ROR
ResidentialSchedule I
GeneralService Schedules I l/12
Large Ceneral Service Schedules 2 l/22
Extra Large GeneralService Scheduh 25
Clearwater Paper Schedule 25P
Pumping Service Schedules 3l /32
Street & Area Lights Schedules
Overall
This information is shown in detail on Page 2, Schedule 3 of Exhibit No. 12.
Proposed Rate Design
a. Where in your Exhibit do you show a comparison of the present and
proposed rates within each of the Company's electric service schedules?
A. Pages 3 of Schedule 3 in Exhibit No. l2 shows a comparison of the present
and proposed rates within each of the schedules, which I will describe below. Column (a)
shows the ratelbilling components under each of the schedules, column (b) shows the
present base tariff rates within each of the schedules, column (e) shows the present rate
adjustments applicable under each schedule, and column (f) shows the present billing rates.
Column (g) shows the proposed general rate change to the rate components within each of
the schedules, column (h) shows the proposed revenue changes under Schedule 72, column
(i) shows the proposed billine rates and column O shows the proposed base tariff rates.
Miller, Di
Avista Corporation
0.82
1.52
r.09
0.88
0.94
0.96
1.54
1.00
o
7
o
o I Q. Is the Company proposing any changes to the existing rate structures
2 within its rate schedules?
3 A. No. The Company is not proposing any changes to the present rate
4 structures within its electric schedules.
5 Q. Turning to Residential Service Schedule 1, could you please describe
6 the present rate structure under this schedule?
7 A. Yes. Residential Schedule I has a present customer or basic charge of $6.00
8 per month and two energy rate blocks: 0-600 kWhs and over 600 kWhs. The present base
9 tariffrate forthe first 600 kWhs permonth is 9.1 l6 cents perkWh and 10.179 cents forall
10 kWhs over 600.
1l a. How does the Company propose to spread Schedule l's proposed
12 general revenue increase of $3,7911000 to the rates within that schedule?
13 A. The Company does not propose to increase the monthly customer charge
14 from its current level of $6.00 per month. The revenue increase for the schedule, after
15 incorporating the consolidation of Schedule 72, is proposed to be recovered through a
l6 uniform percentage increase of approximately 3.6oh applied to the two energy block rates.
17 The proposed change for the first 600 kWhs used per month under the schedule is 0.309
l8 centsperkWh,andanincrease of 0.347 centsperkWhforusageover600kWhspermonth.
19 a. What is the proposed increase for a residential electric customer with
20 average consumption?
21 A. The proposed increase for a residential customer using an average of 898
22 kWhs per month is $2.89 per month, or a3.5oh increase in their electric bill. The present
23 bill for 898 kWhs is $82.57 compared to the proposed level of $85.46, including all rate
24 adjustments.
Miller, Di
Avista Corporation
o
o
8
o I Q. Turning to General Service Schedules ll/l2,would you please describe
2 the present rate structure and rates under those schedules?
3 A. Yes. General Service Schedules llll2 are the service schedules typically
4 applicable to customers with an average demand of less than 20 kW per month, such as
5 small retail establishments (Schedule 1 I ), or shops for residential customers which require
6 a separate service (Schedule l2). The present rate structure under the schedules includes a
7 monthly customer charge of $13.00, an energy rate of 10.435 cents per kWh for all usage
8 up to 3,650 kWhs per month, and an energy rate of 7.487 cents per kWh for usage over
9 3,650 kWhs per month. There is also a demand charge of $6.00 per kW for all demand in
l0 excess of 20 kW per month. There is no charge for the first 20 kW of demand.
1 I O. How is the Company proposing to adjust Schedule llll2's rates within
12 the schedule?
13 A. As previously stated, the Company is not proposing to increase Schedules
14 l1/l2rates in this proceeding. Similarto the other schedules, the Company is proposing
15 to incorporate the rate credit under Schedule 72 into base rates. The effect of incorporating
16 Schedule 72 into base rates has no effect on the total billing rates charged to Schedules
17 1l112 customers.
18 a. Turning to Large General Service Schedules 21122, would you please
19 describe the present rate structure under those schedules and how the Company is
20 proposing to apply Schedule 21122's increase of $769,000 to the rates within the
21 schedules?
22 A. Yes. Large General Service Schedules 21122 are the service schedules
23 applicable to customers with monthly demands over 50 kW, but less than 3,000 kW.
24 Typical customers served are grocery stores, schools, and office buildings (Schedule 21)
Miller, Di
Avista Corporation
o
o
9
o
o
1 and retirement homes and other qualified residential load (Schedule 22).
2 These schedules consist of a minimum monthly charge of $425.00 forthe first 50
3 kW or less, a demand charge of $5.50 per kW for monthly volumetric demand in excess of
4 50 kW, and two energy block rates: 6.817 cents per kWh forthe first 250,000 kWhs per
5 month, and 5.818 cents per kWh for all usage in excess of 250,000 kWhs.
6 The Company is not proposing to increase the present minimum demand charge
7 (for the first 50 kW or less) of $425.00, or the variable demand charge of $5.50/kW. The
8 revenue increase for the schedules, after incorporating Schedule 72 into base rates, is
9 proposed to be recovered through a uniform percentage increase of approximately 2.0o/o
10 applied to the two energy block rates. The proposed increase for the first 250,000 kWhs
I I used per month under the schedules is 0.124 cents per kWh, and an increase of 0.1 05 cents
l2 per kWh for usage over 250,000 kWhs per month.
13 a. Turning to Extra Large General Service Schedule 25, would you please
14 describe the present rate structure under that schedule, and how the Company is
l5 proposing to apply Schedule 25's increase of $268,000 to the rates within the schedule?
16 A. Yes. Schedule 25 is applicable for customers with demands in excess of
17 3,000 kVa per month, such as large industrial customers and universities. Extra Large
l8 General Service Schedule 25 consists of a minimum monthly charge of $14,000 for the first
19 3,000 kVa or less, a demand charge of $5.00 per kVa for monthly demand in excess of
20 3,000 kVa, and two energy block rates: 5.586 cents per kWh for the first 500,000 kWhs
2l per month and 4.730 cents per kWh for all usage in excess of 500,000 kWhs.
22 The Company is proposing that the present minimum demand charge of $14,000,
23 and the volumetric demand charge of $5.00/kVA per month not be changed. The revenue
24 increase for the schedule, after incorporating Schedule 72 into base rates, is proposed to be
Miller, Di
Avista Corporation
o
10
o I recovered through a uniform percentage increase of approximately 1.8% applied to the two
2 energy block rates. The proposed energy rate increase for the first 500,000 kWhs used per
3 month is 0.097 cents per kWh and the increase for usage over 500,000 per month is 0.081
4 cents per kWh.
5 Q. Please describe the service the Company provides to Clearwater
6 Paper's Lewiston Plant under Schedule 25P.
7 A. In Commission Order No. 32841, dated June 28, 2013, the Commission
8 approved a five-year Electric Service Agreement (Agreement) between Avista and
9 Clearwater, applicable to its Lewiston Plant.2 The Agreement became effective July 1,
l0 2013 and was replaced with a new Agreement effective March 1,2019. The 2013
I 1 Agreement provided for Clearwater to use its on-site generation to serve its own load, and
l2 for Clearwater to purchase from Avista all of the electric power requirements that exceed
l3 the electric power generated by Clearwater. This contract was in effect Avista during the
14 entirety of the 2018 test year.
15 On February 27,2019 the Commission approved a new Power and Purchase and
16 Sale Agreement (Order No. 34252) between Avista and Clearwater that allows Avista to
l7 sell to Clearwater an amount of energy equivalent to its generation at a second block rate
l8 of $24.56 per MWh. In turn, Clearwater sells the electricity it generates and the
19 corresponding REC's to Avista at a contract rate of $24.50 per MWh (adjusted for
20 Commission fees). Because Avista buys and sells an equivalent amount of energy at near
21 equivalent prices, the new Agreement provides the same benefit to Clearwater as allowing
22 Clearwater to generate into its own load under the prior Agreement.
2 On July 30, 2015 the Commission approved (Order No. 33350) a Joint Petition between Avista and
Clearwater which, among other things, gave approval of a contract amendment which would extend the length
of the original contract from June 30, 2018 to June 30,2021 (Case No. AVU-E-15-06).
o
Miller, Di
Avista Corporation
o
tl
o I Avista serves Clearwater's load requirements under Schedule 25P. As described in
2 Schedule 25P, for purposes of all proposals related to General Rate Case Filings, "Base
3 Revenue" will be defined as Clearwater's "net" generation requirements as measured
4 through the Block I Retail Meter. Because the effects of the Block 2 Generation load are
5 removed from the Company's filing, the new Agreement has no impact on the level of base
6 revenue proposed to be recovered in the Company's filing.
7 Q. Please describe the application of the proposed Schedule 25P increase
8 of $340,000 to the rates within the schedule.
9 A. Like Schedule 25, the Company is proposing that the present minimum
10 demand charge of $14,000, and the volumetric demand charges of $5.00/kVA for all kVA
1l between 3,000 and 55,000, and $2.50/kVA for all kVA over 55,000 not be changed. The
12 revenue increase for the schedule, after incorporating Schedule 72 into base rates, is
l3 proposed to be recovered through an increase of 0.076 cents per kWh to the Block I energy
14 charge.
15 a. Turning to Pumping Schedules 31/32, would you please describe how
16 the Company is proposing to apply Schedule 31132's increase of $87,000 to the rates
17 within the schedules?
18 A. The Company is proposing that the customer charge of $l1.00 per month
l9 not be changed, and that the revenue increase, after incorporating Schedule 72 into base
20 rates, be spread on a uniform percentage basis of approximately 1.6Yo to the two energy
2l rate blocks under the schedules. The proposed increase in the first block rate is 0.153 cents
22 per kWh and the increase in the second block rate is 0.130 cents per kWh.
23 a. What is the proposed electric revenue change for Street and Area
24 Lights?
Miller, Di
Avista Corporation
o
o
12
o I A. Similar to Schedules 11112, the Company is not proposing to increase Street
2 and Area Light rates in this proceeding. Similar to the other schedules, the Company is
3 proposing to incorporate the rate credit revenue under Schedule 72 into base rates. The
4 effect of incorporating Schedule 72 into base rates has no effect on the billing revenue
5 charged to Street and Area Light customers. The (base tariff) rates are shown in the tariffs
6 for those schedules, in Exhibit No. 12, Schedule 2.
7 Q. Is the Company proposing any other changes to its Street and Area
8 Light schedules?
9 A. Yes. The Company is proposing to add several banded Light Emitting Diode
10 (LED) rates under its Schedule 46 rate schedule. Schedule 46 is an energy only lighting
1l option applicable to customer-owned street lights. Presently the Company has no LED
12 lighting options under rate Schedule 46. Through discussions with Avista's key Account
13 Executives, some customers are contemplating change-overs from Sodium Vapor lights to
14 LED's. These change-overs would require the need for several different LED light codes
l5 based on the various wattage requirements that could be installed. While the Company
16 could facilitate these request by developing several individual rates at the time the lights
l7 are converted by utilizing the Schedule 46 "Custom Light Calculation" described within
18 the present tariff, the Company believes it will be administratively more efficient to create
19 banded light codes, in 10 watt increments, that would encompass any new LED light
20 wattage customers may choose to install.3 The Company has utilized the Custom Light
21 Calculation within the tariff to calculate the applicable energy charges. Because these new
22 LED banded rates will encompass all future LED lighting rate requests, the Company is
o
Miller, Di
Avista Corporation
o
13
3 The Company created 25 watt bands for the largest LED bands from 200 - 225 and 226 - 250 in an effort
to minimize the number of new codes for wattage equivalents that are unlikely to be used by any customers.
o 1 proposing to discontinue the Custom Light Calculation within the Schedule 46 tariff.
2 Q. Is the Company proposing any other administrative changes to its
3 Street and Area Light schedules?
4 A. Yes. The Company has made some minor housekeeping type changes to
5 clean up the Street and Area Light tariffs which mostly remove lighting options that are no
6 longer being used by our customers.
7 Q. Turning now to the Company's Electric Fixed Cost Adjustment
8 Mechanism, how will new baseline information be incorporated into the mechanism?
9 A. As in the prior general rate case, the Company would, as a part of its
10 Compliance Filing, submit the final baseline values for its Fixed Cost Adjustment
1 I Mechanism prior to new rates going into effect as a result of this general rate case.4
12 a. Does this conclude your pre-filed, direct testimony?
13 A. Yes, it does.
a The Company's Electric and Natural Gas Fixed Cost Adjustment mechanisms were approved with an initial
three year term, which was extended one additional year, and which expires December 31 ,20'i,9. Per the
terms of the mechanisms, the Company may seek to extend the mechanisms prior to their expiration, and will
do so in 2019. While the Company would provide the baseline values for the mechanisms for 2020 in any
compliance filing in this general rate case, Avista understands that it must receive Commission approval to
continue the mechanisms in 2020 and beyond.
o
o
Miller, Di
Avista Corporation
t4