20190930final_order_no_34451.pdf

Office of the Secretary
Service Date
September 30,2019
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF AVISTA )CASE NO.AVU-E-19-07CORPORATION'S APPLICATION TO )IMPLEMENT FIXED COST ADJUSTMENT )RATES FOR ELECTRIC SERVICE FROM )ORDER NO.34451
OCTOBER 1,2019 THROUGH )SEPTEMBER 30,2020 )
On July 1,2019,Avista Corporation ("Company")applied to the Commission for
authorityto implement Fixed Cost Adjustment ("FCA")rates for electric service from October 1,
2019 through September 30,2020,and to approve its correspondingmodifications to Schedule 75,
"Fixed Cost Adjustment Mechanism -Electric."The Company also requested an FCA surcharge
rate of 0.158 cents per kilowatt-hour("kWh")for its residential group,a 1.7%rate increase,and
an FCA surcharge rate of 0.145 cents per kWh for its non-residential group,a 1.0%rate increase,
from October 1,2019 through September 30,2020.The Company requested its Application be
processed by Modified Procedure.The Company requested an effective date of October 1,2019.
The Commission issued a Notice of Application and Notice of Modified Procedure,
setting public comment and Company reply deadlines.Order No.34392.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 conservationby 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 provide service that do not vary with energy use,output,or production,andremainrelativelystablebetweenratecases-for example,infrastructure and customer service.
ORDER NO.34451 1
The Commission approved Avista's FCA as a three-year pilotprogram,and part of the
approved settlement of Avista's 2015 general rate case.See Case Nos.AVU-E-15-05,AVU-G-
15-01;Application at 3;and Order No.33437 at 10.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.Order No.33437 at 10.
On June 15,2018,the Commission approved an addendum to the settlement stipulation
approved in AVU-E-15-05 and AVU-G-15-01,which extended the term of the Company's FCA
pilotfor an additional year.2 See Order No.34085;Application at 3-4.
APPLICATION
In its electric FCA filing,Avista proposed to increase rates for its residential and non-
residential consumer groups,based on the deferred revenue recorded for January through
December 2018.Id.at 1.The Company attributed its electric FCA surcharge deferred revenues to
abnormally warm weather in January and December and savings from energy efficiency programs
in 2018 plus non-quantifiable drivers related to non-programmatic energy efficiency and changes
in business cycles.Id.at 6-7.
Avista recorded $1,753,478in surcharge deferred revenue for its residential consumer
group in 2018.Id.at 7.The Company proposed to increase residential rates by 0.158 cents per
kWh,to recover $1,882,379 (including approximately $75,000 in surcharge carryover from 2017)
from its residential customers.Id.The Company will record this amount in a regulatory asset
balancing account and reduce the account balance each month by the revenue collected under the
tariff.Id.at 8.
For its non-residential consumer group,Avista recorded $1,421,402 in surcharge
deferred revenue in 2018.Id.The Company proposed to increase non-residential rates by 0.145
cents per kWh,to recover $1,536,397 (including approximately $68,000 in surcharge carryover
from 2017)from its commercial and industrial customers.Id.at 8-9.The Company will record
this amount in a regulatory asset balancing account and reduce the account balance each month by
the revenue collected under the tariff.Id.at 9.
2 PUTSuant to the addendum to the settlement stipulation,the Company,Commission Staff,and interested parties met
on March 27,2019 to reviewthe effectiveness of the FCA mechanism.Application at n.2.The Company has filedAVU-E-19-06and AVU-G-19-03requesting authority to extend the gas and electric FCA mechanisms for anadditionalfiveyears.
ORDER NO.34451 2
STAFF COMMENTS
Commission Staff filed the only comments,and recommended the Commission
approve the Company's Application and proposed Schedule 75 as filed.Staff verified that the
Company correctly calculated its deferral balances and would not violate the 3%annual rate
adjustment cap.Staff Comments at 4.Although Staff recognized that the Company's FCA
"removes financial disincentives for energy efficiency,"Staff noted that the FCA also "removes
fixed-cost risk of declining sales associated with weather fluctuations,business cycles,and all
other factors."Id.at 2.Staff recommended the Commission allow the Company to recover
$1,882,379 from its residential consumer group with a surcharge rate of 0.158 cents per kWh and
recover $1,536,397 from its non-residential consumer group with a surcharge rate of 0.145 cents
per kWh.Id.at 3.
Of interest to Staff was the residential consumer group,which in 2017 received a rebate
of 0.176 and under the 2018 proposal would pay a surcharge of .158 cents.Id.The combined
effects of this change result in a 3.6%increase in the residential consumer group bills.Id.However,
Staff verified the Company's proposal would not violate the 3%rate increase cap because the cap
is calculated based on the FCA resetting every year.Id.Only the proposed surcharge for 2018 is
subject to the 3%cap provision.The increase for residential customers'FCA rates using 2018
deferred revenues is 1.7%.Id.Non-residential customers will see a 1.0%increase in their bills.Id.
Staff observed that the FCA helps to stabilize and lower risk to the Company,
potentiallylowering its cost of capital.Id.at 5.But Staff was unsure how FCA adjustments might
benefit customers.Id.Staff noted that it was not recommending a lower cost of equity at this time,
but that it may do so in the future to recognize the reduced risk to the Company through the FCA
mechanism.Id.
Regarding the Company's customer notice and press release,Staff expressed that the
Company satisfied Commission Rule of Procedure 125.Id.at 5.The Company filed its Application
with the Commission on July 1,2019,and included its draft customer notice and press release,
complying with Commission Rule of Procedure 125.04 and .05,IDAPA 31.01.01.125.04-.05.Id.
The Company mailed its customer notice during its regular billing cycle to affected customers
between July 17,2019 and August 16,2019.Id.at 5.Staff believed this gave customers reasonable
opportunityto file timely comments.Id.at 5-6.
ORDER NO.34451 3
DISCUSSION AND FINDINGS
The Commission has jurisdiction over the Company and this matter under Title 61 of
the Idaho Code,and specifically Idaho Code §§61-336,61-502,and 61-622.The Commission
has reviewed the record and finds the Company's requested FCA residential consumer group
surcharge rate of 0.158 cents per kWh,and FCA non-residential consumer group surcharge rate of
0.145 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 the Company's proposed surcharge rates do not reach the cap for either residential or non-
residential consumer groups.The Commission thus approves the Company's Application and
proposed Tariff Sheet 75,as filed,effective October 1,2019.
ORDER
IT IS HEREBY ORDERED that the Company's Application is approved.The
Company's FCA Filing for Electric Service from October 1,2019 through September 30,2020 is
granted as requested,effective October 1,2019.The Commission 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.
ORDER NO.34451 4
DONE by Order of the Idaho Public Utilities Commission at Boise,Idaho this
day of September 2019.
PAUL KJELLANDER,PRESIDENT
KRI$TINÌ RÁPER,C MMÌSSIONER
ERIC ANDERSON,COMMISSIONER
ATTEST:
Diane M.Hanian
Commission Secretary
I:\Legal\ELECTRIC\AVU-E-19-0AOrders\AVUE1907final_dh.doex
ORDER NO.34451 5