20220907Comments.pdf

CLAIRE SHARP
DEPUTY ATTORNEY GENERAL
IDAHO PUBLIC UTILITIES COMMISSION
PO BOX 83720
BOISE, IDAHO 83720-0074
(208) 334-03s7
IDAHO BAR NO. 8026
Street Address for Express Mail:
1I33I W CHINDEN BLVD, BLDG 8, SUITE 201-A
BOISE, ID 837I4
Attorney for the Commission Staff
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
.:-- i
IN THE MATTER OF AVISTA
CORPORATION'S ANNUAL POWER COST
ADJUSTMENT (PCA) APPLICATION
CASE NO. AVU-E-Z}-II
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COMMENTS OF THE
COMMISSION STAFF
STAFF OF the Idaho Public Utilities Commission, by and through its Attorney of
record, Claire Sharp, Deputy Attorney General, submits the following comments.
BACKGROUND
On July 29,2022, 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
changes in power contract revenues and expenses." Application at2. The Company requested
the Commission approve a PCA surcharge rate of 0.150d per kWh to be effective from October
1,2022, to September 30, 2023. The Company noted that the proposed PCA surcharge is a
decrease from the 0.251i, per kWh currently approved per Order No. 35184. If approved, the
new PCA surcharge would represent an overall decrease in revenue of $3.1 million or L2%o in
Company revenues when accounting for the expiration of the existing surcharge. The Company
ISTAFF COMMENTS SEPTEMBER 7 ,2022
requested that this matter be processed by modified procedure, and that the proposed rates take
effect on October 1,2022.
STAFF REVIEW
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 audit 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 decrease the Company's revenue by $3.1 million. Staff s conclusions and rationale
are discussed in further detail below.
Review of PCA Deferral
Staff performed an audit of 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, 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
l0% for the Company. When actual costs are higher than those recovered through base rates,
Idaho customers pay 90o/o of the difference. When actual costs are lower, customers are credited
90% of the difference allowing the Company to keep l0%. This provides an incentive for the
Company to lower NPC by operating its system more efficiently. The current deferral balance is
$4,237,309 as shown on Table No. I below.
2STAFF COMMENTS SEPTEMBER7,2022
Table No. 1: Summarv of Power Supplv and Deferrals for Current PCA Year - Idaho
Description Amount
LCAI - Idaho Sales Adjustment $ (2,801,334)
Net Power Supply - Actual Minus Authorized 10,128,202
REC2 Revenues (1,945,805)
Schedule 25P Net Cost (214,68t)
EIM Incremental O&M 285)963
Total Cost (Subject to Company Sharing)5,452,345
Sharing Percentage over Authorized 90%
Total Idaho Power Cost 4,907,111
RPS3 Compliance (REC Retirement Benefit)(7t2,t87)
lnteresta 42,385
Total Idaho Deferral Balance 4,237,309
I Load Change Adjustment Rate
2 Renewable Energy Credit
3 Renewable Portfolio Standards - Washington WA I-937
a Calculated using the Authorized Customer Deposit Rate of l%o over a l2-month period
Load Change Adjustment ("LCA") - Idaho Sales Adjustment
The Idaho LCA 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 expected when
base rates were set, resulting in a credit of $2,801,334 to the ldaho deferral balance. The
Company used the correct Load Change Adjustment Rate ("LCAR") of $22.00/Megawatt-hour
("MWh") for the months of July 2021 through August 2021, and an LCAR of $24.89/MWh for
the months of September 2021to June 2022 as directed in Order No. 35156.
Net Power Supply Deferual- 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, 2022. The deferral includes 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.
JSTAFF COMMENTS SEPTEMBERT,2022
Purchased power costs reflect most of the ldaho 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
$10,128,202. Expenses for the Palouse Wind and Rattlesnake Flat ("Rattlesnake") projects are
included in the Purchased Power costs. [n Case No. AVU-E-21-01, Palouse Wind and
Rattlesnake were not included in base rates and the expenses continue to be recovered through
the PCA. This requires Avista shareholders to cover l0% of the Idaho jurisdictional costs of
Palouse Wind and Rattlesnake.
Staff confirmed the authorized amounts used to calculate the deferral were the same used
to determine base rates that were authorized in Case Nos. AVU-E-19-04 and AVU-E-21-01 for
July 2021to June 2022. Additional review is provided in the section, "Prudence 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. Idaho customers are credited $1,945,805 for REC
revenues which reduce 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
qualiffing 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
AVU-E-21-01 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
4STAFF COMMENTS SEPTEMBER7,2022
command a higher price than unbundled REC's. Idaho customers received a benefit of $214,681
from the agreement during the PCA year which helped offset the deferral balance.
Renew able P ortfu I io Standard ftTashington) C ompl ianc e
The $712,187 of REC credits were retired for the REC Retirement Benefit to meet
Washington's Renewable Portfolio Standard ("RPS";. 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. The RECs used to meet Washington RPS are tracked 100% in the PCA.
Energt Imbalance Market
Staff recommends that the Commission authorize EIM incremental expenses to be
included in the PCA up to the benefits realized from the EIM until the Company's next rate case
when these costs can be reviewed and included in base rates. In addition, Staff recommends the
Commission order the Company to provide Staff an explanation of the Company's method for
measuring EIM benefits and how it differs from the California Independent System Operator
(CAISO) method.
In March of 2022, the Company went live in the EIM. Staff reviewed the Company's
EIM procedures and controls, which included the process and controls on bidding in its
resources, dispatching, and reviewing invoices. Staff believes these processes and procedures
are adequate but expects its processes and procedures will evolve and improve over time.
The Company included $258K in incremental EIM O&M expenditures for recovery in
the PCA. Order No. 34606 authorized the Company to defer the costs for implementation of the
EIM until the go-live date but was silent on expenses after that time. Normally these expenses
are operation and maintenance (O&M) costs and therefore not included in the PCA. In the past
the Commission has authorized some non-net power costs in the PCA. In Case No. IPC-E-16-
19, the Commission authorized Idaho Power to include EIM costs in their PCA up to the EIM
benefits received. Also, in Cases Nos. PAC-E-I7-06 and PAC-E-17-07, the Commission
authorized PacifiCorp to include costs for new wind plants, repowered wind plants, and
transmission into the Energy Costs Adjustment Mechanism up to the amount of benefits
received. The principle for these authorizations was to match the benefits with the timing of
costs.
5STAFF COMMENTS SEPTEMBER 7 ,2022
CAISO estimates that the Company has received $7.11 million in benefits from the
March 2022ElM go-live. The Company believes that CAISO has overstated the benefits the
Company has received. The Company is still developing their own method for measuring EIM
benefits received. Staff agrees that the amount CAISO had estimated is likely overstated, but
also believes that the benefits are higher than the $258K included in the PCA.
Prudence of Net Power Cost (NPC)
Staff believes that the Company's actual NPC during the PCA year (July 2021 through
June2022) 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. Summary of the analysis
is provided in Table No. 2 below:
Table No. 2: Actual versus Authorized Net Power Supply Expense Difference
The three major drivers affecting NPC in this year's PCA were: (1) an increase in thermal
and natural gas fuel cost; (2) lower amounts of hydro generation; and (3) an increase in market
purchases and off-system sales when compared to amounts assumed in base rates.
An increase in fuel cost for thermal and natural gas resources was a major driver
increasing NPC. The Company paid 16.9% and49% more for thermal fuel and natural gas
resources respectively when compared to base rates. Normally with increased fuel cost, Staff
would expect to see lower generation from these resources. Lower than normal hydro conditions
forced the Company to rely more on its thermal and natural gas resources. In addition, higher
6
Expense Category NTWh
Change
NTWh %
Chanqe
$/lvlwh
Chanqe
$/lvlwh %
change
Avista Hydro (81.196)-2.t%nla nla
Acct 555 Purchases 1.308.9s3 64.4%$4.33 tt.3%
Acct 447 Sales 59,463 2.0%$27.09 t72.2%
Acct 501 Thermal Fuel (Coal & Wood)82.604 4.5%$2.81 t6.9%
Acct 547 CT Fuel (Natural Gas)249.132 7.0%$10.s0 49.0%
STAFF COMMENTS SEPTEMBER7,2022
than expected market prices allowed the Company to use these resources to sell into the Market
when beneficial.
The Company generated 81,196 MWh or2.lo/o less with its hydro resources during the
past PCA year as compared to authorized amounts. Because hydro generation accounts for a
large portion of Company-owned generation and has zero fuel cost, the reduction in hydro
generation increases net power costs. The Company testified that the reduction in hydro was due
to high temperatures and lower-than-normal precipitation, resulting in early seasonal runoff.
Brandon Direct at 12. This reduction in hydro generation also forced the Company to rely on
market purchases and fueled resources to replace it.
The Company purchased 64.4oh more market purchases (1.3 million MWhs) during the
past PCA year as compared to amounts reflected in base rates. However, these additional market
purchases were offset by an increase in the amount and price of off-system sales. Off-system
sales increased by 59,463 MWhs and the average sales price was $27.09 per MWh more than the
authorized amount. Staff believes that selling more into the market could have further mitigated
losses from additional market purchases; however, reduced hydro generation and increased fuel
cost limited the amount the Company could sell into the market.
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 0.1501 per kwh, residential customers with monthly
average energy usage of 892 kWh would see their monthly bills decrease $0.90 per month from
$86.29 to $85.39, a decrease of l%o. Table No. 3 provides a sunmary of the PCA rate
calculation to be effective October 1,2022, if authorized and Table No. 4 provides the percent
increase by rate schedule to show the impact to each schedule.
7STAFF COMMENTS SEPTEMBERT,2022
Description Amount
Total Idaho Defenal Balance $ 4,237,309
Remaining Amortization Balance - Prior PCA Year 2,122,023
July 2022 - September 2022 Amortization Balance (1,772,758)
Total Summation of Balance for Deferral and Amortization $ 4,586,574
Applied Conversion Factorl .995646
Surcharge Balance Effective October 1,2020 $ 4,606,6312
Forecasted kWh's - October 1,2021, to September 30,2022 3,069,449,000
Proposed Surcharge Rate 0.1 sol
rSet in AVU-E-21-01
2 Total Balance for Deferral and Amortization divided by Conversion Factor
Table No. 3: Summary of Proposed Surcharse 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 Percentase Increase by Rate Schedule
Rate Schedule Description Schedule
Number
Proposed Percent
Change
Residential I -l.t%
General Service ll, 12 -t.t%
Large General Service 21 )22 -t.0%
Extra Large General Service 25 -1.8%
Clearwater 25P -2.0%
Pumping Service 31,32 -t.0%
Street and Area Lights 4t-49 -03%
Overall Total -1.2o/"
Overall Impact of four filinss Effective October 1. 2022
The Company proposed four electric rate adjustments effective October 1,2022. In this
case, the PCA, if approved, will decrease the Company's electric revenues by $3.1 million
(1.2%). The Company's proposed Fixed Cost Adjustment ("FCA") filing, AVU-E-22-I2,if
approved, will decrease electric revenues by about $5.1 million (2.0% decrease). The third
proposed filing, Residential and Farm Energy Rate Adjustment or Residential Exchange Program
("ResEx"), AYU-E-22-10, if approved, will decrease electric revenues by $0.1 million (0.1%
decrease). The final proposed filing, Schedule 91, Energy Efficiency Rider Adjustment ("EE
8STAFF COMMENTS SEPTEMBER7,2022
Rider"), AVU-E-22-09, if approved, will decrease electric revenues for participants by $3.6
million (1.4% decrease). The net effect of Company's four filings (PCA, FCA, ResEx, and EE
Rider) will decrease electric revenues by about $12.0 million (4.7% decrease). The average
residential electric customer's monthly bill may decrease by $4.10 or 4.8oh. Table No. 5
summarizes the overall impact to electric revenues of the four filings:
Table No. 5: Summarv of Overall Impact to Electric Revenues
Filing Change in Revenues 7, Change
PCA ($3,099,000)-t.2%
FCA ($5,122,171)-2.0%
ResEx Credit ($129,655)-0.1%
EE Rider ($3,626,534)-t.4%
Total ($11,977,360)-4.7"h
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 (AW-E-22-11), the natural gas Fixed
Cost Adjustment (AVU-G-22-04), the electric Fixed Cost Adjustment (AVU-E-22-12), the BPA
Residential and Small Farm credit (AYU-E-22-10), and the Electric Energy Efficiency
Adjustment (AVU-E-22-09). Staffreviewed 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 11,2022, and ending
September 9,2022
The Commission set a comment deadline of September 7,2022. Some customers in the
last billing cycles will not have received 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. Staffrecommends that the Commission accept late-filed
comments from customers. As of September 6,2022, no customer comments had been filed.
9STAFF COMMENTS SEPTEMBER7,2022
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, reducing the Company's annual revenue by $3.1 million,
with an effective date of October l, 2022.
o Authorize the Company to recover EIM incremental expenses in the PCA up to the
benefits realized from the EIM until its next general rate case where these costs can be
reviewed and included in base rates.
o Order the Company to provide Staff an explanation of the Company's method for
measuring EIM benefits and how it differs from CAISO's method.
o Accept late-filed comments from customers.
Respectfully submitted this
Technical Staff: Michael Eldred
Laura Conilogue
Travis Culbertson
Joseph Terry
Curtis Thaden
i:umisc/commentVavug22. I I csme comments revised
r14.
-duy of September 2022
Sharp
Deputy Attorney General
?
STAFF COMMENTS l0 SEPTEMBERT,2022
CERTIFICATE OF SERYICE
I HEREBY CERTIFY THAT I HAVE THIS I3TH DAY OF SEPTEMER 2022,
SERVED THE FOREGOING COMMENTS OF TIIE COMMISSTON STAF'X', IN
CASE NO. AVU-F.ZZ-II, BY E.MAILING A COPY THEREOF, TO THE
FOLLOWING:
PATRICK EHRBAR
DIRECTOR REGULATORY AFFAIRS
AVISTA CORPORATION
PO BOX3727
SPoKANE WA99220-3727
E-mail: [e-mail]
[e-mail]
DAVID J MEYER
VP & CHIEF COUNSEL
AVISTA CORPORATION
PO BOX3727
SPoKANE WA99220-3727
E-mail: [e-mail]
CERTIFICATE OF SERVICE