20200915Comments.pdf

DAYN HARDIE
DEPUTY ATTORNEY GENERAL
IDAHO PUBLIC UTILITIES COMMISSION
PO BOX 83720
BOISE, IDAHO 83720-007 4
(208) 334-03t2
IDAHO BAR NO. 9917
IN THE MATTER OF AVISTA
CORPORATION'S ANNUAL POWER COST
ADJUSTMENT (PCA) RATE APPLICATION
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Street Address for Express Mail:
II33I W CHINDEN BLVD, BLDG 8, SUITE 2OI-A
BOISE, D 83714
Attorney for the Commission Staff
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
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CASE NO. AVU.E,-20.O7
COMMENTS OF THE
COMMISSION STAFF
STAFF OF the Idaho Public Utilities Commission, by and through its Attorney of
record, Dayn Hardie, Deputy Attorney General, submits the following comments.
BACKGROUND
On July 3I,2020, Avista Corporation ("Company") filed its annual Power Cost
Adjustment ("PCA") Application. The PCA is an annual adjustment mechanism that tracks
changes in the Company's hydroelectric generation, secondary prices, thermal fuel costs, and
other changes in power contract revenues and expenses.
This year, the Company asks the Commission to approve a PCA surcharge rate of 0.0150
per kilowatt-hour ("kwh"). Under the Company's proposal, the PCA surcharge rate for all
customers, including residential customers, would increase rates from the current rebate of
0.058P per kWh to a proposed surcharge of 0.0159 per kWh (aO.O73(, per kWh increase in the
customer rate). The Company requests an effective date of October I,2020.
1STAFF COMMENTS SEPTEMBER 15,2020
The Company reports higher overall power supply expenses than are included in retail
rates' The Company noted increased power supply expenses from changes in hydro generation,
Palouse Wind power purchase agreement net expense, Colstrip and Kettle Falls generation and
fuel expense, net power purchase expense, and change in retail load. The Company states these
higher power supply, generation, fuel, and transmission expenses are partially offset by lower
gas generation and natural gas prices, net transmission expenses, and miscellaneous expense.
Last year, the Company's PCA application resulted in a rebate to customers of 0.05g@
per kWh' The Company proposes a 0.0150 PCA surcharge for all customers beginning
October 1,2020. The proposed rate adjustment would surcharge customers about $0.5 million.
The net effect ofthe expiring rebate and the proposed surcharge is an overall increase in revenue
of about $2.2 million. The Company states the new rate would increase the Company's revenue
by about 0.9Vo. The Company asserts the resulting percentage increases will vary by customer
rate schedule because the PCA rate changes are spread on a uniform cents-per kWh basis.
STAFF ANALYSIS
Staff has reviewed the Company's Application and direct testimony of Company
witnesses Annette Brandon and Scott Reid, along with additional information received during
the ensuing audit. Based on its review, Staff recommends approval of the Company,s
Application to update Schedule 66, Temporary Power Cost Adjustment - Idaho, which will
increase the Company's revenue by $2.2 million. Details of Staff s conclusions are discussed in
the comments below.l
Review of PCA Deferral
Staff performed a desk audit of the Company's Net Power Costs ("NpC,,) reviewing a
sample of the Company's natural gas purchases, market purchases, transmission revenue and
expenses, and other deferral items. Based on review of the transactions, Staff is reasonably
assured that the various power cost transactions are reasonable and prudently incurred and
comply with previous Commission orders and the Company's risk management policies.
I An onsite audit was not possible due to travel restrictions related to the COVID-19 public health emergency. Staffwas unable to review risk management policies and had less contact with the Company personnel than f,reviousPCA audits. These limitations do not materially affect Staff's assertions. Additional i"ri"* will resume with the2021 PCA filing.
STAFF COMMENTS 2 SEPTEMBER 15, 2O2O
The amount represents the under-recovery of Net Power Cost ("NPC") through base rates
during the deferral period and thus is a surcharge to customers.
Under Avista's PCA, the Company and its ratepayers share the difference between actual
NPC and the NPC embedded in base rates. The sharing percentage is90Vo to ratepayers and
lOVo to the Company. When actual costs are higher than those recovered through base rates,
Idaho customers pay 90%o of the difference and the Company pays the remaining 102o. When
actual costs are lower, customers are credited 90Vo of the difference allowing the Company to
keep IOVo. This provides an incentive for the Company to lower NPC by operating their system
more efficiently. The current deferral balance is $197,466 as shown on Table No. 1 below.
Table No. 1: Summary of Power Supply and Deferrals for Current PCA Year - Idaho
LCAR - Idaho Sales Adjustment
The Idaho Load Change Adjustment captures the over or under recovery of net power
supply expense through base rates attributable to the difference between actual sales and sales
used to set base rates. During the deferral period, the Company experienced less in sales than
was used to set base rates. This adjustment adds $471,080 to the Idaho deferral balance. The
Company used the correct LCAR of $24.84/Megawatt-hour (,.MWh,,), for the months of July
2019 through November 2019, and $22.001MWh, for December ZOlg to June 2020.
STAFF COMMENTS SEPTEMBER 15,20203
Description Amount
LCARI - Idaho Sales Adjusrment $ 471,080
Net Power Supply - Actual Minus Authorized r,088,477
Revenues (159,661)
Schedule 25P Net Cost (245,956)
Total Cost (Subject to Company Sharing)r,r53,940
Sharing Percentage over Authorized 9UVo
Total Idaho Power Cost 1,039,549
RP Compliance (REC Retirement Benefit)(857,010)
Interesta 15,928
Total Idaho Deferral Balance 197,466I Load Change Adjustment Rate
2Renewable Energy Credit
3 Renewable Portfolio Standards - Washington WA I-937
4 Calculated using the Authorized Customer Rate of 2Vo over a 12-month period
Net Power Supply - Actual Minus Authorized
The net power supply deferral captures the difference between actual NPC and NPC
embedded in base rates for the 12 months ending June 30, 2020. The deferral includes costs and
revenues for the following Federal Energy Regulatory Commission ("FERC") Uniform System
of Accounts; 555 - Purchased Power, 447 - Sale for Resale, 501 - Thermal Fuel,547 - CT Fuel,
456 - Transmission Revenue, 565 - Transmission Expense, 557 - Resource Optimization, 537 -
MT Invasive Species Expense, and 557 - Expense Broker Fees.
Purchased power costs made up the largest share of the difference between actual costs
and costs authorized in base rates in calculation of the deferral. During the PCA year, Idaho's
jurisdictional share of purchased power was $1,088,477 greater than purchased power authorized
in base rates.
Expenses for the Palouse Wind project are included in the Purchased Power costs. In the
most recent general rate case (Case No. AVU-E-19-04), Palouse Wind was not included in base
rates, so the expenses continue to be recovered through the PCA. This expense treatment
requires Avista shareholders to cover lOVo of the Idaho jurisdictional costs of Palouse Wind.
During the PCA year, Palouse Wind was curtailed for a total of 42 hours in June 2020. The
Company clarified that of the 42 hours, 19 hours were at no cost to the Company based on the
curtailment provisions in the contract. The other 23 hours the Company compensated Palouse
Wind $119,000 (system) for taking the power out of service. The Company purchased power on
the market for less than the contract price, therefore providing benefits to customers.
Due to a base rate change that occurred in December 2019, Staff confirmed two sets of
authorized NPCs used in the deferral calculation: NPC authorized in Case No. AVU-E-17-01 for
July 2019 to November 2019, and NPC authorized in Case No. AVU-E-19-O4 for December
2019 to lane 2020. Additional review is provided in the Prudency of NPC section.
REC Revenue
The Company books REC revenue in FERC Account No. 557. Based on Order No.
33605, the Company has separately reported actual and authorized REC revenue and expenses in
its PCA filing. The revenue generated from Avista's sales of RECs was more than the amounts
authorized in base rates. Idaho customers are credited $159,661 for REC revenues which offset
the deferral balance.
4STAFF COMMENTS SEPTEMBER 15,2020
Schedule 25P Net Cost - Idaho
In Order No.34252, the Commission authorized a Power Purchase and Sale Agreement
between the Company and Clearwater Paper Corporation ("Clearwater"). Clearwater owns and
operates four thermal electric generating units rated at 132.2 MW. The units are cogeneration
qualifying facilities ("QF") under the Public Utility Regulatory Policies Act of 1978 ("PURPA").
The agreement allows the Company to purchase the energy and capacity from Clearwater and
directly assign it to the Idaho jurisdiction. Any monthly difference between the actual
Clearwater power purchase expense and the amount embedded in the base retail rates developed
in AVU-E- 19-04 general rate case, is tracked at 1007o through the PCA. Parties and ratepayers
benefit from the Company selling bundled RECs under the new agreement. Bundled RECs
generally command a higher price than unbundled REC's. Idaho customers received a benefit of
$245,956 from the agreement during the PCA year which helped offset the deferral balance.
RPS Compliance
The $857,010 credit for REC Retirement Benefit to the renewable energy credits retired
to meet Washington's RPS. The RECs used to meet Washington RPS are tracked IOO%o in the
PCA. The credit is based on REC market prices and the Idaho allocation of RECs that were
retired to meet Washington RPS (WA I-937) that would have been otherwise sold.
Prudencv of Net Power Cost
Staff believes that the Company's actual NPC during the PCA year (July 2019 through
June 2020) is reasonable. For each of the accounts that make up NPC, Staff compared the actual
amount of generation and unit cost to amounts used to determine base rates. Because the PCA
deferral consists primarily of authorized versus actual NPC, the analysis also explains reasons for
this year's surcharge. Based on the analysis, Staff believes that the Company dispatched its
available resources, purchased power from the wholesale market, and transacted off-system sales
to serve customer load in a prudent manner. A summary of the analysis is provided in the Table
No. 2 below:
STAFF COMMENTS SEPTEMBER 15,20205
Table No.2: Actual versus Authorized Net Power Supply Expense Difference
The two major drivers affecting NPC in this year's PCA were lower amounts of available
hydro generation, and lower natural gas prices when compared to amounts assumed in base rates.
The Company generated 408,345 MWhs or IO.7Vo less with its Hydro resources during
the past PCA year as compared to authorized amounts. Since hydro generation accounts for
about 50Vo of Company-owned generation and has zero fuel cost, the reduction in hydro was a
major driver increasing net power costs. The reduction in hydro is mostly due to a lower than
normal water year, but a small portion is also due to Unit 1 of the Cabinet Gorge hydro facility
being down for approximately 3 months.
To make up for reduced hydro generation to meet customer load, the Company had to
increase the amount of electricity it purchased and increase the amount of generation from its
natural gas plants. Lower gas prices moderated the reduction in hydro generations effect on the
Company's NPC in two ways. First, it put downward pressure on wholesale electricity prices
reducing the price the Company paid for purchased electricity by lgVo below prices assumed in
base rates. As a result, the Company sourcedSTVo more electricity from purchases to serve
customer load. Second, lower gas prices also reduced the cost of generation from the
Company's gas-fired units. This allowed the Company to increase the amount of generation
from its gas-fired units by 8Vo and allowed the Company to sell 613,048 MWh into the wholesale
market receiving approximately $6.67 per MWh more than authorized amounts.
6
Expense Category MWh
Chanqe
Nfiitlh Vo
Chanse
$nvrwh
Change
$lMWh Vo
change
Avista Hydro (408,345)-I0.7OVo nla nla
Acct 555 Purchases 1,405.909 87.OOVo $9.27\-l9.$OVo
Acct 447 Sales 673,049 3l.00Vo $6.67 32.00Vo
Acct 501 Thermal Fuel (Coal & Wood)(48,512)-3.00%o $1.79 L2.OOVo
Acct 547 CT Fuel (Natural Gas)289,745 8.007o ($2.6s)-15.007o
STAFF COMMENTS SEPTEMBER 15, 2O2O
Analvsis of PCA Rates
Reviewing the Company's calculation of its proposed PCA rate, Staff verified that the
result is accurate and will reasonably charge customers for under-collection of actual NPC.
Using the Company's proposed PCA rate of 0.015p per kWh, residential customers with monthly
average energy usage of 898 kWh would see their monthly bills increase $0.66 (o.8OTo) per
month from $86.27 to $86.93. Table No. 3 provides a summary of the PCA rate calculation to be
effective October 1,2020. Table No. 4 provides the percent increase by rate schedule to show
the impact to each schedule.
Table No.3: Summary of Proposed Surcharge Rate
Description Amount
Total Idaho Deferal Balance $ 197,466
Remaining Amortization Balance - Prior PCA Year (15 1,386)
July 2O20 - September 202L Amortization Balance 4r3,3ll
Total Summation of Balance for Deferral and Amortization $ 459,391
Applied Conversion Factorl 994549
Surcharge Balance Effective October I,2020 $ 461,9092
Forecasted kWh's - October I,2020 to September 30,2021 3,020,911,000
Proposed Surcharge Rate 0.0150
tset in AVU-E-19-04
2 Total Balance for Deferral and Amortization divided by Conversion Factor
Because the PCA rate adjustments are spread on a uniform cents-per-kWh basis, the
resulting percentage increase varies by customer class. Table No. 4 provides the percentage
change of billed revenue for each customer group.
Table No.4: Proposed Percentage Increase by Rate Schedule
Rate Schedule Description Schedule
Number
Proposed Percent
Change
Residential 1 0.8OVo
General Service 11 12 0.8OVo
Large General Service 21,22 O.9OVo
Extra Large General Service 25 L40Vo
Clearwater 25P t.30vo
Pumping Service 31,32 0.70Vo
Street and Area Lights 4t-49 0.20Vo
Overall Total 0.9Vo
STAFF COMMENTS SEPTEMBER 15,20207
Overall I of three filinps Effective t-2020
The Company proposed two other rate adjustments, also effective October l,2O2O. The
Company's proposed Fixed cost Adjustment ("FCA") filing, AVU-E-20-06, if approved, will
decrease electric revenues by about $3.0 million (l.ZVo decrease). The second proposed filing,
Bonneville Power Administration Residential ("BPA") and Small Farm Energy Rate
Adjustment, AVU-E-20-08, if approved, will increase electric revenues by $0.6 million (O.2Vo
increase). The $2.2 million increase in electric revenues from the proposed PCA filing
represents aO.9Vo revenue increase. The net effect of Company's three filings (FCA, BPA, and
PCA credit) will decrease electric revenues by $0.2 million (O.lVo decrease). The average
residential electric customer's monthly bill will decrease by $0.06. Table No. 5 summarizes the
overall impact to electric revenues of the three filings.
Table No. 5: Summary of Overall Impact to Electric Customers
Filing 2019 2020 Net Effect Vo Change
FCA 3,422,290 450,599 (2,911,691)-l.20Vo
BPA (4,769,359)(4,189,620)5go,739 O.2OVo
PCA $ (t,735,996)$ 459,391 $ 2,195,387 0.907o
Total (3,083,075)(3,278,640\(195,565)-0.l0Vo
CUSTOMER NOTICE AND PRESS RELEASE
The Company's press release and customer notice were included with its Application.
Each document addresses two cases: this case (AVU-E-20-07) and BPA Residential and Small
Farm credit (AVU-E-20-08). Staff reviewed the documents and determined both meet the
requirements of Rule 125 of the Commission's Rules of Procedure. See IDAPA 31.01.01.125.
The Commission set a comment deadline of September 15, 2020. Because customer
notices were inserted into bills beginning August 3,2020 through September l, 2020, some
customers in the last billing cycle may not have adequate time to submit comments before the
deadline. Customers should have the opportunity to file comments and have those comments
considered by the Commission. Staff recommends that the Commission accept late-filed
comments from customers. As of September 15, 2020, no customer cornments had been filed.
STAI]F COMMENTS SEPTEMBER 15,20208
STAFF RECOMMENDATION
Based on its review of the Application and audit of the PCA components, Staff
recommends that the Commission approve the Company's request to revise its tariff Schedule
66, Temporary Power Cost Adjustment - Idaho, as filed in Exhibit A of the Application, which
will allow the Company to collect a surcharge of 0.015 cents per kwh. Additionatly, Staff
recommends that the Company continue to file monthly PCA expense reports. Lastly, Staff
recommends the Commission accept late-filed comments from customers.
Respectfully submitted this ltlb day of September 2020.
Deputy Attorney General
Technical Staff: Travis Culbertson
Michael Eldred
Bentley Erdwurm
Curtis Thaden
i :umisc/comments/avue20.Tdhtncmectbe comments
9STAFF COMMENTS SEPTEMBER 15, 2O2O
CERTIFICATE OF SERVICE
I HEREBY CERTIFY THAT I HAVE THIS IsTH DAY OF SEPTEMBER 2020,
SERVED THE FOREGOING COMMENTS OF THE COMMISSION STAFF, IN
CASE NO. AVU-E-20.O7, BY E-MAILING A COPY TIIEREOF TO THE
FOLLOWING:
PATRICK EHRBAR
DIR OF REGULATORY AFFAIRS
AVISTA CORPORATION
PO BOX3727
SPOKANE WA99220-3727
E-MAIL: patrick.ehrbar@ avistacorp.com
DAVID J MEYER
VP & CHIEF COUNSEL
AVISTA CORPORATION
POBO){3727
SPOKANE WA99220-3727
E-MAIL: david.meyer@ avistacorp.com
avistadockets@ avistacorp.com
SECRETAR
CERTIFICATE OF SERVICE