20190621Decision Memo.pdf

DECISION MEMORANDUM
TO COMMISSIONER KJELLANDER
COMMISSIONER RAPER
COMMISSIONER ANDERSON
COMMISSION SECRETARY
COMMISSION STAFF
LEGAL
FROM:JOHN R. HAMMOND JR.
DEPUTY ATTORNEY GENERAL
DATE: JUNE 20,2019
SUBJECT: AVISTA GENERAL RATE CASE - ELECTRIC CASE NO. AVU-E-19-04
On June 10,2019, Avista Corporation ("Avista" or the "Company") applied to increase
its base rates for electric service it provides to customers in Idaho.l Specifically, Avista seeks to
increase its electric base revenues by $5.3 million dollars (2)%). Application at l. The Company
states the proposed rate increase also reflects the present Permanent Federal Income Tax Rate
Credit under electric tariff Schedule 72 being consolidated into its base rates. Id. Avista requests
that the proposed rate increase for electric service in Idaho take effect on January 1,2020. Id.
THE APPLICATION
Avista is a public utility primarily engaged in the generation, transmission and
distribution of electric power and the distribution of natural gas in certain portions of eastern and
central Washington, northern Idaho, as well as the distribution of natural gas in northeast and
southwest Oregon. Id. at2. The Commission approved Avista's existing base rates and charges
for electric service on December 28,2017. See Commission Final Order No. 33953, Case No.
AVU-E-17-01 .
Avista claims its existing rates are not fair, just and reasonable, and as a result it will
not have the opportunity to realize a fair rate of retum on its investment. Id. at 3. Avista states it
will notifu the public of the proposed rate changes through inserts to customer bills for the June,
1 The instant Application requests an increase in rates and charges for electric service only. Previously, the
Company filed a Notice of Intent to File a Combined Electric and Natural Gas General Rate Case on March 25,
2019.
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17,2019 through July 16, 2019 billing cycle, and through a news release. Copies of the bill insert
and press release are attached as Exhibit B to the Application. Id. at9.
Avista alleges the "primary factor" driving the Company's requested electric revenue
increase in 2020 is an increase in net plant investment. Id. at 3. Avista also states that for 2020,
there is an offsetting decrease in power supply expenses. 1d
Avista's evidence in support of its requested $5.3 million dollar revenue increase for
electric service is based on a 12-month test year that ended December 31,2018. Id. at 4. Avista
states documentation showing how the test year data was adjusted is provided in the testimony and
exhibits of Company witness Elizabeth Andrews, Senior Manager of Revenue Requirements at
Avista. Id. Avista requests an overall rate of return of 7.55o/o, which includes a 50o/o common
equity ratio, a 9.9%o return on equity and a cost of debt of 5.2%. Id. at 5. Avista asserts the
proposed rate of return and capital structure provide a reasonable balance between safety and
economy. Id.
If Avista's Application is approved, a residential electric customer using an average of
898 kilowatt hours (kwh) per month could expect to see a bill increase of $2.89 per month, or a
3.5Yo increase, for a monthly bill change from $82.57 to 585.46 in 2020. See Press Release at
Exhibit B to the Application. Avista is not proposing to increase the residential basic monthly
charge, currently set at $6.00 per month. 1d. Avista's proposed rate increase would impact
customers' electric bills by rate schedule as follows:
Proposed Electric Increase
Rate Schedule
Proposed 2020
Billing Increase
Residential Service Schedule I 3.5%
General Service Schedules ll &.12 0.0%
Large General Service Schedules 2l & 22 t.5%
Extra Large General Service Schedule 25 1.6%
Extra Large General Service Schedule 25P 1.6%
Pumping Service Schedules 3l & 32 15%
Street & Area Lighting Schedules 4l-49 0.0%
Overall Increase 2.1'h
STAFF RECOMMENDATION
The Company's Application requests that the proposed increases to its rates for electric
service take effect on January 1,2020. 1d Staff notes however, Avista's proposed tariffs specify
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a July 70,2019, effective date for these proposed increases. Id. at l. Staff recommends the
Commission issue a Notice of Application suspending the July 10, 2019, effective date until
January 1,2020, consistent with the Company's request in its Application. See ldaho Code $ 61-
622(4). Suspension until January 1,2020 is also consistent with Commission Order No. 33953,
Case No. AVU-E-17-01, wherein the Commission approved a settlement agreement between
certain parties in the Company's last general rate case. That settlement agreement provides Avista
would not file an electric or natural gas general rate case to increase base rates before May 31,
2019, and any such rates would not go into effect before January 1,2020. See Order No. 33953 at
2. Staff further recommends the Commission set a l4-day intervention deadline, and direct Staff
to convene an informal prehearing conference for the parties to discuss scheduling and other
matters that may arise, and for Staff to then report to the Commission with a proposed schedule.
Finally, Staff recommends the Commission direct Staff to convene one or more public workshops
in Avista's service territory.
COMMISSION DECISION
Does the Commission wish to issue a Notice of Application that:
1. Suspends Avista's requested effective date for any proposed, new rates and charges for
electric service to January 1,2020;
2. Establishes a l4-day intervention deadline;
3. Directs Staff to informally confer with the parties and report to the Commission with a
proposed schedule; and
4. Directs Staff to convene one or more public workshops.
R. Hammond Jr
Attorney General
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