20200909Comments.pdf

JOHN R.HAMMOND,JR.
DEPUTY ATTORNEY GENERAL -nu og 
IDAHO PUBLIC UTILITIES COMMISSION
PO BOX 83720
BOISE,IDAHO 83720-0074
[phone]
IDAHO BAR NO.5470
Street Address for Express Mail:
11331 W CHINDEN BLVD,BLDG 8,SUITE 201-A
BOISE,ID 83714
Attorneyfor the Commission Staff
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF AVISTA )CORPORATION'S ANNUAL FIXED COST )CASE NO.AVU-E-20-06
ADJUSTMENT MECHANISM FILING )
)COMMENTS OF THE
)COMMISSION STAFF
The Staff of the Idaho Public Utilities Commission ("Staff")submits the following
comments regarding the above referenced case.
BACKGROUND
On June 30,2020,Avista Corporation ("Company"or "Avista")applied to the
Commission for authorization to implement Fixed Cost Adjustment ("FCA")rates for electric
service customers from October 1,2020 through September 30,2021,and to approve its
corresponding modifications to Schedule 75,"Fixed Cost Adjustment Mechanism -Electric."
The Company requested that the Commission issue an order approving FCA deferrals for the
period January 1,2019 through December 31,2019,and approve separate per kilowatt-hour
("kWh")FCA surcharge rates for its residential group and non-residential group customers.The
Company's Application,if approved,would decrease its overall electric revenues by about
$3.0 million.The monthlybill of an average residential electric customer (898 kWh per month)
STAFF COMMENTS 1 SEPTEMBER 9,2020
would decrease by $1.17,from $85.30 to $84.13 (1.4%decrease).Application at 12.The
Company also proposes to update language in Schedule 75 to reflect the approved extension of
the FCA mechanism through March 31,2025.Id.at 2;see also Order No.34502.
Avista requested that its Application be processed by Modified Procedure with an
effective date of October 1,2020.
Overviewof Avista's FCA
The FCA is a rate adjustment mechanism designed to break the link between the amount
of energy a utility sells and the revenue it collects to recover the fixed costi of providing service,
thus decoupling the utility's revenues from sales.This decoupling is intended to remove a
utility's disincentive to pursue energy efficiency savings.
While the FCA is effective at shielding utility revenues from the reduction in sales
produced by energy efficiency,the mechanism has a much broader impact.Avista's FCA
removes the Company's fixed cost recovery risk from reduced sales caused by many factors
beyond energy efficiency,including weather,economic cycles,improved building codes and
standards,improved appliance standards,and behavioral responses to higher electric bills.
Addressing these risks has value from the Company's standpoint because it stabilizes revenue
and,as a result,may lower capital costs.
The Commission approved Avista's FCA as a three-year pilotprogram as part of the
settlement stipulation for Avista's 2015 general rate case.See Case Nos.AVU-E-15-05.The
Commission approved the extension of the FCA from January 1,2020 through March 31,2025,
by Order No.34502 at 4.As part of the extension,the Commission approved changing the
annual deferral period to be Julythrough June by using a one-time 18-month deferral period,
January 1,2020,through June 30,2021.Id.The effective date of electric FCA rate adjustments
is still October 1,however,the annual rate adjustment filings will be made by July 31 of each
year,beginning with next year's filing.Id;see also Application at 6.Other modifications to the
FCA include an annual revenue-per-customer true-up to the deferral calculation and quarterly
reports due by 60-days after the end of each quarter.Id.
'Fixed costs are a utility's costs to provideservice that do not vary with energy use,output,or production,andremainrelativelystablebetweenratecases,for example,infrastructure and customer service costs.
STAFF COMMENTS 2 SEPTEMBER 9,2020
STAFF ANALYSIS
Avista proposes to reduce the FCA surcharges from a present level of $3,422,280 over
twelve months to a proposed level of $450,589,a reduction of $2,971,691 in electric revenue
(1.2%).The proposed FCA surcharges totaling $450,589 are comprised of $333,905 to be
recovered from the residential customer group and $116,684 from the non-residential customer
group.For the 2019 FCA year Staff recommends that the Commission approve the Company's
proposed surcharges and corresponding surcharge rates of 0.028 cents per kWh and 0.011 cents
per kWh for the residential and non-residential customer groups,respectively.The proposed FCA
rates represent decreases from the current surcharge rate of 0.158 cents per kWh for the
residential group and surcharge rate of 0.145 cents per kWh for the non-residential group.
Present and proposed surcharges are summarized in Table No.1 below:
Table No.1:Present and Proposed FCA Surcharges
Expiring Present Proposed Change in
FCA Revenue FCA Revenue FCA Revenue
Residential $1,884,176 $333,905 $(1,550,271)
Non-Residential $1,538,104 $116,684 $(1,421,420)
Total $3,422,280 $450,589 $(2,971,691)
Additionally,Staff recommends that the Commission approve the Company's proposed
revisions to Schedule 75,"Fixed Cost Adjustment Mechanism -Electric."The Company has
included revisions to the Term provision stated on tariff Sheet 75,the Calculation of Monthly
FCA Deferral mechanism description stated on tariff Sheet 75B,and the Annual Electric FCA
Rate Adjustment provision on tariff Sheet 75C.If the Commission approves the
recommendations,these modifications to the mechanism going forward will be in compliance
with the Commission Order.
Staff's recommendations are based on its review of the Company's Application,including
the supporting workpapers and responses to production requests.This review provided Staff with
reasonable assurance that the FCA deferral balance and associated rates for both residential and
non-residential classes have been correctly calculated by the Company.Staff reviewed the
amortization from the prior year's deferral balance,the kWh sales for the FCA year,new and
STAFF COMMENTS 3 SEPTEMBER 9,2020
existing customer counts,the revenue from fixed costs collections,the interest calculations,and
the submitted revenue reports.Staff verified that the authorized amounts used to calculate the
deferral were the same used to determine base rates authorizedduring the deferral period.
Furthermore,Staff conducted an examination of the internal control processes as well as the
associated internal audit documents and found these to be compliant.
Energy ConsumptionDrivers
According to the Company the proposed FCA surcharge deferrals are the result of
reductions in use-per-customer from 2016 test-year levels used to establish the FCA base period.
The Company asserted that monthlyuse-per-customer in 2019 declined by 5 kWh and 106 kWh
for the residential and non-residential groups,respectively,when compared to the base period.
Avista estimated the impact of three primary drivers of FCA revenue deferrals:(1)Weather,(2)
Energy Efficiencyand (3)"Other."The Company identifies the "Other"drivers as items that are
more difficult to quantify,such as the effects of non-programmatic energy efficiency and the
business cycle.The "Other"drivers have a more significant impact on the non-residential group
than on the residential group.Weather is a more significant driver for residential group than for
non-residential group.This is expected because residential energy usage is relativelysensitive to
weather fluctuations.The followingtable shows Avista's estimates of these drivers on use-per-
customer ("UPC")in kWh and FCA revenue in million dollars (MM$).The results demonstrate
that energy efficiency is not the sole driver of declining energy sales,and that the FCA
mechanism provides fixed cost recovery for a wide range of factors.
Table No.2:Effects of the Drivers on Use-per-Customerand FCA Revenue in Million
Dollars (MM $)
Resid Non-Resid
Resid FCA Non-Resid FCA
UPC Revenue UPC Revenue
Source (kWh)(MM$)(kWh)(MM$)
Weather +13 +$1.2 +15 +$0.3
Energy Efficiency -23 -$2.0 -278 -$4.6
Other +5 +$0.5 +157 +$4.2
Total -5 -$0.3 -106 -$0.1
STAFF COMMENTS 4 SEPTEMBER 9,2020
Risk Reduction Attributable to the FCA
The FCA helps stabilize revenue lowering risk to the Company,thus,potentially lowering
its cost of capital.However,it is less clear how customers benefit from FCA rate adjustments.
Thus far,Staff has not recommended a lower cost of equity to recognize the lower risk to the
Company,but Staff may consider such a proposal in the future.
Overall Impactof Three Filings Effective October 1,2020
The Company has made two other rate adjustment filings,also effective October 1,2020.
Avista's proposed Power Cost Adjustment ("PCA")filing (AVU-E-20-07),if approved,will
increase electric revenues by about $2.2 million (0.9%increase)and its proposed Residential and
Small Farm Energy Rate Adjustment (BPA)filing (AVU-E-20-08),if approved,will increase
electric revenues by $0.6 million (0.2%increase).The $3.0 million decrease in electric revenues
from the proposed FCA represents a 1.2%revenue decrease.The net effect of Avista's three
filings (FCA,PCA,and BPA)is to decrease electric revenues by $0.2 million (0.1%decrease).
The net effect of the three filings on the average residential electric customer's monthlybill is a
decrease of 6 cents (0.1%decrease).Table No.3 below summarizes the impact to electric
revenues of the three filings.
Table No.3:Summaryof Overall Impact to Idaho Electric Revenues
Filing 2019 2020 Net Effect %Change
PCA $(1,735,996)$459,391 $2,195,387 0.9%
BPA (4,769,359)(4,188,620)580,739 0.2%
FCA 3,422,280 450,589 (2,971,691)-1.2%
Total (3,083,075)(3,278,640)(195,565)-0.1%
CUSTOMER NOTICE AND PRESS RELEASE
The Company's press release and customer notice were included with its Application.
Each document addresses three cases:this case (AVU-E-20-06),the natural gas Fixed Cost
Adjustment (AVU-G-20-5),and the Purchased Gas Cost Adjustment (AVU-G-20-04).Staff
reviewed the documents and determined that both meet the requirements of Rule 125 of the
Commission's Rules of Procedure.The notice was included with bills mailed to customers
STAFF COMMENTS 5 SEPTEMBER 9,2020
beginning July 6,and ending August 3,2020,providing customers with a reasonable opportunity
to file timely comments with the Commission by the September 9,2020,deadline.As of
September 8,2020,no customer comments had been filed.
STAFF RECOMMENDATION
Staff recommends that the Commission approve the Company's FCA filing with
corresponding modifications to Schedule 75,Fixed Cost Adjustment Mechanism-Electric.
Specifically,Staff recommends that the Commission approve:
1.The proposed FCA residential surcharge rate of 0.028 cents per kWh,which is
designed to recover $333,905 from the Company's residential electric
customers;and
2.The proposed FCA non-residential surcharge rate of 0.011 cents per kWh,which
is designed to recover $116,684 from the Company's non-residential electric
customers.
Respectfully submitted this 7 day of September 2020.
Joh /Hammond,Jr.
D ut AttorneyGeneral
Technical Staff:Bentley Erdwurm
Johan Kalala-Kasanda
Curtis Thaden
i:umisc:comments/avue20.6jhbejkctcomments
STAFF COMMENTS 6 SEPTEMBER 9,2020
CERTIFICATE OF SERVICE
I HEREBY CERTIFY THAT I HAVE THIS 9th DAY OF SEPTEMBER 2020,SERVED THE FOREGOING COMMENTS OF THE COMMISSION STAFF,INCASENO.AVU-E-20-06,BY E-MAILING A COPY THEREOF,TO THE
FOLLOWING:
PATRICK EHRBAR DAVID J MEYER
DIR OF REGULATORY AFFAIRS VP &CHIEF COUNSELAVISTACORPORATIONAVISTACORPORATION
PO BOX 3727 PO BOX 3727
SPOKANE WA 99220-3727 SPOKANE WA 99220-3727E-MAIL:[e-mail] E-MAIL:[e-mail]
avistadockets @ avistacorp.com
SECR ARY
CERTIFICATE OF SERVICE