20210909Comments.pdf

JOHN R. HAMMOND, JR.
DEPUTY ATTORNEY GENERAL
IDAHO PUBLIC UTILITIES COMMISSION
PO BOX 83720
BOTSE, IDAHO 83720-0074
(208) 334-03s7
IDAHO BAR NO. 5470
IN THE MATTER OF AVISTA
CORPORATION'S ANNUAL POWER COST
ADJUSTMENT (PCA) RATE APPLICATION
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Street Address for Express Mail:
I I331 W CHINDEN BVLD, BLDG 8, SUITE 2OI-A
BOISE, TD 83714
Attorney for the Commission Staff
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
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CASE NO. AVU.E.21.O9
COMMENTS OF THE
COMMISSION STAFF
The Staff of the Idaho Public Utilities Commission submits the following comments
regarding the above referenced case.
BACKGROUND
On July 30,2021, 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.
The Company reports higher overall actual power supply expense than amounts included
in retail rates. The Company noted increased power supply expense driven primarily by increased
thermal generation costs and issues with gas-fired generation of about $12.5 million that was
offset by $4.7 million in favorable net purchases and transmission expense. Direct Testimony of
Annette M. Brandon at p. 9. The Company states this results in a proposed net surcharge for
Idaho.
STAFF COMMENTS SEPTEMBEP.9,2O2I
Last year, the Company's PCA application resulted in a surcharge to customers of 0.0151
per kilowatt hour ("kwh"). Application at 6. The Company proposes a0.25lp PCA surcharge
for all customers beginning October 1,2021. Id. The proposed rate adjustment would surcharge
customers about $7.6 million. Id. at 5. The net effect of the expiring surcharge and the proposed
surcharge is an overall increase in revenue of about $7.2 million. Id. The Company states the
new rate would increase the Company's revenue by about 2.8%. Id. 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. 1d.
STAFF ANALYSIS
Staff reviewed the Company's Application and direct testimony of Company witnesses
Annette Brandon and Kaylene Schultz, along with additional information received during the
ensuing auditl and production requests. Based on its review, Staff recommends approval of the
Company's Application updating Schedule 66, Temporary Power Cost Adjustment - Idaho,
which will increase the Company's revenue by $7.2 million. Staff s conclusions and rationale are
discussed in further detail below.
Review of PCA Deferral
Staff performed an auditof the Company's Net Power Costs ("NPC") reviewing 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.
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 is 90o/o for ratepayers and
llYo for the Company. When actual costs are higher than those recovered through base rates,
Idaho customers pay 90oh of the difference. When actual costs are lower, customers are credited
I An onsite audit was not possible due to restrictions related to the COVID- I 9 public health emergency. Staff was
unable to review risk management policies and had less contact with the Company personnel than previous PCA
audits. These limitations do not materially affect Staff s assertions. Additional review will resume with the 2022
PCA filing.
2STAFF COMMENTS SEPTEMBER9,2O2I
90% of the difference allowing the Company to keep 10%. This provides an incentive for the
Company to lower NPC by operating their system more efficiently.
The current deferral balance is $7 ,469,770 as shown on Table No. 1 below. This amount
represents the under recovery of NPC through base rates during the deferral period and thus is a
surcharge to customers.
Table No. 1: Summary of Power Supplv and Deferrals for Current PCA Year - Idaho
Load Change Adjustment Rate - Idaho Sales Adjustment
The Idaho Load Change Adjustment Rate ("LCAR") 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 more sales
than was used to set base rates. This adjustment is a credit of $933,482 to the Idaho deferral
balance. The Company used the correct LCAR of $22.00/Megawatt-hour ("MWh"), for the
months of July 2020 through June 2021.
Net Power Supply - Actual Minus Authorized
The net power supply deferral captures the difference between actual NPC and the NPC
embedded in base rates for the twelve months ending June 30, 2021. The deferral includes the
following Federal Energy Regulatory Commission ("FERC") Uniform System of Accounts; 555 -
-)
Description Amount
LCART - Idaho Sales Adjustment $ (933,482)
Net Power Supply - Actual Minus Authorized 10,848,821
REC2 Revenues (970,811)
Schedule 25P Net Cost (166,974)
Total Cost (Subject to Company Sharing)9,777,554
Sharing Percentage over Authorized 90%
Total Idaho Power Cost 7,899,798
RPS3 Compliance (REC Retirement Benefit)(446,075)
Interesta 16,047
Total Idaho Deferal Balance 7,469,770
r Load Change Adjustment Rate
2 Renewable Energy Credit
3 Renewable Portfolio Standards - Washington WA I-937
a Calculated using the Authorized Customer Deposit Rate
STAFF COMMENTS SEPTEMBER 9,2021
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 reflect most of the Idaho jurisdictional share of the difference in
costs the Company incurred for power purchases during the deferral period and the authorized
power costs included in base rates. During the PCA year, Avista incurred additional NPC greater
than what was included in base rates. The Idaho jurisdictional share of the excess NPC is
$10,848,821. Expenses for the Palouse Wind and Rattlesnake Wind projects are included in the
Purchased Power costs. In Case No. AVU-E-19-04, Palouse Wind and Rafflesnake Wind was not
included in base rates and the expenses continue to be recovered through the PCA. This expense
treatment requires Avista shareholders to cover l0% of the Idaho jurisdictional costs of Palouse
Wind and Rattlesnake Wind.
Staff confirmed the authorized amounts used to calculate the deferral were the same used
to determine base rates that were authorized in Case No. AVU-E-19-04 for July 2020 to June
2021. Additional review is provided in the section, "Prudency of Net Power Cost" below.
Renewable Energy Credit Revenue
The Company books Renewable Energy Credit ("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 $970,811 for REC
revenues which offset the deferral balance.
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
qualifuing 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 actual Clearwater
power purchase expense and the amount embedded in the base retail rates developed in
4STAFF COMMENTS SEPTEMBER 9,2027
AVU-E-19-04 general rate case, is tracked 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 $166,974
from the agreement during the PCA year which helped offset the deferral balance.
Renew able P ortfolio Standar d ()[/as hingt on) C ompl iance
The $446,075 credit for REC Retirement Benefit to the renewable energy credits retired to
meet Washington's Renewable Portfolio Standard ("RPS"). The RECs used to meet Washington
RPS are tracked 100% in the PCA. The credit is based on the Idaho allocation of RECs that were
retired to meet Washington RPS (WA I-937) that otherwise, would have been sold.
Prudency of Net Power Cost
Staff believes that the Company's actual NPC during the PCA year (July 2020 through
June 2021) 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 differences between authorized and 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:
Table No. 2: Actual versus Authorized Net Power Supply Expense Difference
Expense Category MWh
Change
MWh %
Change
$/MWh
Change
$/MWh %
change
Avista Hydro (33,746)-0.90%nla nla
Acct 555 Purchases 1,608,269 95.00%($4.30)-9.00%
Acct 447 Sales (35,840)-1.00%$9.10 46.00%
Acct 501 Thermal Fuel (Coal & Wood)(160,011)-8.00%$1,12 8.00%
Acct 547 CT Fuel Natural Gas)(61 ,338)-2.00%$0.01 0.00%
The three major drivers affecting NPC in this year's PCA were: (1) planned maintenance
downtime for Coyote Springs 2 from March 2021 throngh June 2021; (2) an increase in market
5STAFF COMMENTS SEPTEMBER9,2O2I
purchases and a reduction in off-system sales; and (3) an increase in thermal fuel costs when
compared to amounts assumed in base rates.
Coyote Springs 2 was down from March to June 2021 for maintenance to replace the
three-phase transformer which failed in 2018. Brandon, Di at 10. The Company scheduled
planned plant downtime in advance during a period that the system normally experiences lower
demand and surplus hydro capacity. However, this year during this period, the Company's
service area and most of the Northwest experienced higher than normal temperatures along with
drought leading to increased demand and lower hydro availability. These factors resulted in the
Company having to rely on market purchases and its fueled resources to replace Coyote Springs 2
and zero-fuel cost hydro generation.
The Company purchased95%o more market purchases (1.6 million MWhs) during the past
PCA year as compared to amounts reflected in base rates. However, power purchases were
approximately $4.30 less than authorized amounts, which helped offset some of the losses due to
Coyote Springs 2 downtime and poor hydro conditions. In addition, losses were also mitigated by
off-system sales prices being approximately $9.10 more than the authorized amounts. Staff
believes that selling more into the market could have further mitigated losses; however, reduced
hydro generation and the loss of Coyote Springs 2 capacity limited the amount the Company
could sell into the market.
Colstrip fuel costs increased in2020 because of a new coal contract that was finalized
after current base rates were set in Case No. AVU-E-19-04. This change in fuel cost was a major
driver increasing the cost of thermal generation by about 8%. Although Staff believes the
Company appropriately reduced the amount of thermal generation due to higher fuel costs,
needing to maintain generation from Colstrip to meet load was a contributor to higher NPC during
the PCA year.
Analysis of PCA Rates
Based on its review of the Company's proposed PCA rate, Staff verified that the result is
accurate and will reasonably charge customers for under-collection of actual net power costs.
Using the Company proposed PCA rate of 0.25l(, per kwh, residential customers with monthly
average energy usage of 892 kWh would see their monthly bills increase $2.1 I per month from
$85.63 to $87 .74, an increase of 2.5%o. Table No. 3 provides a summary of the PCA rate
6STAFF COMMENTS SEPTEMBER9,2021
calculation to be effective October I , 2021, if authorized and 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
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 rate schedule.
Table No. 4: Proposed Percentage Increase by Rate Schedule
Rate Schedule Description Schedule
Number
Proposed Percent
Change
Residential I 2.4%
General Service 11,I 2 2.4%
Large General Service 27,22 2.8%
Extra Large General Service 25 4.6%
Clearwater 25P 4.7%
Pumping Service 31,32 2.6%
Street and Area Lights 4t -49 0.6%
Overall Total 2.80/"
Overall fmnact of three fili Effective October l. 2020
The Company has proposed two other rate adjustments, also effective October 1,2021
The Company's proposed Fixed Cost Adjustment ("FCA") filing, AVU-E-21-08, if approved,
will decrease electric revenues by about $0.7 million (02% decrease). The second proposed
7
Description Amount
Total Idaho Deferral Balance $ 7,469,770
Remaining Amortization Balance - Prior PCA Year 233,102
July 2021 - Septemb er 2021 Amortization Balance (89,362)
Total Summation of Balance for Deferral and Amortization $ 7,613,510
Applied Conversion Factorr .995646
Surcharge Balance Effective October 1,2020 $ 7,646,8042
Forecasted kWh's - October 1,2021to September 30,2022 3,048,421,000
Proposed Surcharge Rate 0.zstf
'Set in AVU-E-21-01
2 Total Balance for Deferral and Amortization divided bv Conversion Factor
STAFF COMMENTS SEPTEMBER9,2O2I
filing, Bonneville Power Administration Residential ("BPA") and Small Farm Energy Rate
Adjustment, AVU-E-21-10, if approved, will increase electric revenues by $0.1 million (0J%
increase). The $7.2 million increase in electric revenues from the proposed PCA filing represents
a2.8Yo revenue increase. The net effect of Company's three filings (FCA, PCA, and BPA) will
increase electric revenues, in total, by $6.6 million (2.7% increase). Table No. 5 summarizes the
overall impact to electric revenues of the three filings.
Table No. 5: Summarv of Overall Impact to Electric Customers2
Filing 2020 2021 Net Effect "h Change
PCA $ 459,391 $ 7,646,804 $ 7,187,413 2.8%
BPA (4,1 88,620)(4,057,099)131,522 0.r%
FCA 458,638 (274,078)(732,7t6)-0.2%
Total (3,270,591)3,315,628 6,586,219 2,70h
CUSTOMER NOTICE AND PRESS RELEASE
The Company's press release and customer notice were included with its Application.
Each document addresses the following cases: this case (AVU-E-21-09), the natural gas Fixed
Cost Adjustment (AVU-G-2l-06), the electric Fixed Cost Adjustment (AVU-E-21-08), the BPA
Residential and Small Farm credit (AVU-E-21-10), and the Electric Energy Efficiency
Adjustment (AVU-E-21-11).3 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 notice was included with bills mailed to customers beginning August 12,2021and ending
September 9,2021.
The Commission set a comment deadline of September 9, 2021. Some customers in the
last billing cycles will not have received/and or had adequate time to submit comments before the
deadline. Customers must 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 8,2021, no customer comments had been filed.
2 The amounts in the column labeled *2020" are revenues being replaced by revenues in the column labeled *2021"
as a result ofthe three cases.
3 On August 19,2021, Avista filed a request to withdraw its Application for Case No. AVE-E-21-l I (Electric Energy
Effi ciency Adj ustment).
8STAFF COMMENTS SEPTEMBER 9,202I
STAFF RECOMMENDATION
Based on its review of the Application and an 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 0.251 cents per kwh. Additionally, 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 day of September 20211L
Hammond, Jr.
Attorney General
Technical Staff: Michael Eldred
Travis Culbertson
Curtis Thaden
i:umisc/comments/avue2 l.9jhmetncct comments
9STAFF COMMENTS SEPTEMBER9,2O2I
CERTIFICATE OF SERVICE
I HEREBY CERTIFY THAT I HAVE THIS 9TH DAY OF SEPTEMBER 2021,
SERVED THE FOREGOING COMMENTS OF THE COMMISSION STAFF, IN
CASE NO. AVU-E-21-09, BY E-MAILING A COPY THEREOF, TO THE
FOLLOWING:
PATRICK EHRBAR
DIR OF REGULATORY AFFAIRS
AVISTA CORPORATION
PO BOX3727
SPOKANE WA99220-3727
E-MAIL: [e-mail]
dockets@avi stacorp. com
PETER J zuCHARDSON
RICHARDSON ADAMS PLLC
5I5 N 27TH ST
PO BOX 7218
BOISE ID 83702
E-MAIL: [e-mail]'l
ELECTRONIC ONLY
caro l. hauqen@c learwaterpaper.conl
terr.v. [e-mail]
DAVID J MEYER
VP & CHIEF COUNSEL
AVISTA CORPORATION
PO BOX3727
SPOKANE WA99220-3727
E-MAIL: [e-mail]
DR DON READING
6070 HILL ROAD
BOISE ID 83703
E-MAIL : dreading@mindsprin g.com
SECRET
CERTIFICATE OF SERVICE