28155.doc

BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION

IN THE MATTER OF THE APPLICATION OF
THE WASHINGTON WATER POWER COMPANY (NOW AVISTA CORPORATION DBA AVISTA UTILITIES—WASHINGTON WATER POWER DIVISION) FOR AN ORDER APPROVING INCREASED RATES AND CHARGES FOR ELECTRIC SERVICE IN THE STATE OF IDAHO. )
)
)
)
)
)
)
)
CASE NO. WWP-E-98-11

ORDER NO. 28155

On July 29, 1999, the Idaho Public Utilities Commission (Commission) issued final Order No. 28097 in the general rate case of Avista Corporation dba Avista Utilities — Washington Water Power Division (Avista; Company), Case No. WWP-E-98-11. On August 19, 1999, Avista filed a Petition for Reconsideration. Reference Idaho Code § 61-626. Specifically, the Company requests reconsideration of the Commission’s decision to deny the Company a requested equity adder of 25 basis points. The Company notes that the impact of the Commission’s decision in this regard was to reduce on annual basis the Company’s revenue requirement by approximately $532,000. Avista does not believe that the record supports such a harsh result.
The following language from the Commission’s Order pertains to the equity adder:

The Company in this case recommends that an equity adder of 25 basis points be added to the equity return of Avista to recognize innovative management and strategic initiatives. Tr. pp. 124-126, 214. Without such an award, the Company contends that there is not sufficient differentiation in rate setting between a well-managed and a poorly-managed utility. Tr. p. 112.

Commission Staff agrees to the Company proposed equity adder. In doing so, Staff contends that the adder should not necessarily be viewed as a reward for past exemplary performance but as an incentive to continue programs and processes that lead to noted qualities and initiatives with continued betterment of performance as the goal. Avista is making improvements, Staff contends, and deserves recognition for those improvements. Tr. p. 1128. In determining the appropriateness of such an award, however, areas of noted concern that must also be weighed by the Commission, Staff contends, are: 1) the Company’s failure to comply with Commission Order No. 23071 (1990) by not providing annual updated line extension costs for Schedule 51 construction; and 2) the Company’s failure to comply with the Customer Information Rules requirement of individual customer notice of rate changes (e.g., PCA tracker adjustments). Reference IDAPA 31.21.02.102; Tr. p. 1129. The Company characterizes its omissions as administrative oversights. Tr. pp. 140, 152, 901, 902, 904.

Findings: . . .

The Commission recognizes that Avista has achieved excellence in many areas of utility performance including competitive efficiency, business excellence and innovation, and customer service. The Company has also pioneered industry activities including pilot customer choice programs, a non-bypassable distribution charge for conservation, a fuel-switching program, and a collaborative model for hydro relicensing.

However, while it is obvious that the Company is doing many things well and receiving deserved recognition within the industry, as regulators we cannot ignore the instances cited in this Order where the Company has failed to follow its tariffs and has ignored express Commission directives and/or rules. The Company notes that “the regulatory compact expects management competency.” Tr. p. 113. It is suggested that a minimum standard of management competency is compliance with Company tariffs and Commission Orders and rules. We encourage the Company to pay greater attention to the details of regulatory compliance. The Company should consider such compliance as a threshold qualification for any adder consideration. In this case we decline to include an equity adder.

The Company states that it was prompt in remedying the notice deficiencies, once brought to its attention and was forthright in acknowledging its inadvertent failure to provide annual reports of line extension costs. Indeed the Company has pledged future cooperation. In accepting Staff’s CIAC adjustment, the Company calculates that it was deprived of approximately $118,000 in revenue requirement on an annual basis. In granting this adjustment, the Company contends, that the Commission has already effectively penalized the Company. It is unduly punitive, the Company contends, for the Commission to also penalize the Company a second time by using this unintentional omission to file annual reports as a basis for denying the $532,000 of annual revenue requirement associated with the equity adder.
The Company states that it takes seriously the Commission’s stern admonition to comply with applicable rules and regulations. The Company states that it also pledges to redouble its efforts in that regard. Nevertheless, and without otherwise excusing its prior conduct, the Company believes that the denial of the equity adder produces an unduly harsh result and urges the Commission to accept on reconsideration the Company’s proposal for a 25 basis point equity adder. In the event that the Commission remains unpersuaded, the Company states that it would view as an acceptable alternative, a delay in the implementation of the equity adder for a period of one year. The $532,000, the Company calculates, would represent an increase in annual revenue of 0.40%.
Also filed with the Commission is a customer (David Baker) Petition for Reconsideration protesting the cost-of-service adjustment and resultant 30% increase in his monthly electric bill from $8.50/month to $11.29/month based on average consumption of 170 kwh/month at .0422 cents (after PCA adjustment). The effect of such a significant cost-of-service adjustment, he contends, is unfair and unjust to him and all low consumption residential electric customers. Mr. Baker questions why cost-of-service should all of a sudden be a major relevant criterion in determining rates.

COMMISSION FINDINGS
The Commission has reviewed and considered the filed Petitions for Reconsideration, our related Order No. 28097 in Case No. WWP-E-98-11 and the underlying record in the case. We find it reasonable to deny both Petitions.
Regarding Avista’s Petition, while the Company chooses to characterize our decision denying it an equity adder as punitive or unduly harsh, we read it as simply acknowledging the Company’s failure in the enumerated instances to comply with Company tariffs, Commission Orders and Rules. The Company in its Petition addresses only the two areas cited by Staff in its testimony (i.e., failure to provide annual update reports (Order No. 23071) and failure to comply with customer notice requirements) as reason for the Commission’s denial of the equity adder. In fact, as reflected above, the Commission’s language was broader, including other instances cited in the Order — i.e.,
Commission notice of $75,000 civil penalty assessed by Commission in 1974 for Company violation of Schedule 51 Line Extension Tariffs. Reference Case No. WWP-E-94-9, Order No. 25838. In its comments on this matter the Commission indicated “apparently nothing was learned from that experience and Company practices have not changed.”

DSM

Re: non-compliance with representations and commitments regarding interest accrual on DSM deferred balances and required annual notice to customers.

We find that we have taken away nothing to which the Company is otherwise entitled. An award of an equity adder lies within the exclusive and sole discretion of the Commission. The Company has no statutory entitlement to same. In this case we found that the Company failed to satisfy the minimum threshold qualification for equity adder consideration, i.e., compliance with Company tariffs and Commission Orders and Rules. We find no reason to revisit this matter.
Regarding the Petition of the Company’s customer, Mr. David Baker, we note that the underlying record in this case contained significant testimony and evidence with respect to the impact of cost of service adjustments and rate changes on low consumption customers. The percentage revenue increase authorized in this case is a percentage increase that varies by class. Within each class the percentage increase realized by individual customers varies according to their usage. We recognize that the relative percentage increase is largest for those customers with low consumption. While we appreciate that the effect of the increase may be a hardship to some customers, we have endeavored as reflected in our Order to soften the effect by adopting an incremental approach to rate change. In our Order we noted that a cost of service allocation study provides only an indication of the relative cost responsibilities of each class of customers. As we stated, it is only one of many factors considered by the Commission in tariff design and there is no required correlation. Nevertheless, we recognize that to the extent a customer class does not bear its full cost of service, what takes place is a subsidization of one class by another. The issue presented is one of equity. We continue to find our Order in this regard to be reasonable. We find no reason to revisit this issue.

CONCLUSIONS OF LAW
The Idaho Public Utilities Commission has jurisdiction over this Application, Avista Corporation dba Avista Utilities—Washington Water Power Division, an electric utility, and the Petitions for Reconsideration filed by Avista and Mr. David Baker, pursuant to the authority and power granted under Title 61 of the Idaho Code and the Commission’s Rules of Procedure, IDAPA 31.01.01.000 et seq.

O R D E R
In consideration of the foregoing and as more particularly described above, IT IS HEREBY ORDERED and the Commission does hereby deny the Petitions for Reconsideration filed in this case by Avista Corporation dba Avista Utilities—Washington Water Power Division and the Company’s customer, Mr. David Baker.
THIS IS A FINAL ORDER ON RECONSIDERATION. Any party aggrieved by this Order or other final or interlocutory Orders previously issued in this Case No.  may appeal to the Supreme Court of Idaho pursuant to the Public Utilities Law and the Idaho Appellate Rules. See Idaho Code § 61-627.
DONE by Order of the Idaho Public Utilities Commission at Boise, Idaho this _______ day of September 1999.

DENNIS S. HANSEN, PRESIDENT

MARSHA H. SMITH, COMMISSIONER

PAUL KJELLANDER, COMMISSIONER

ATTEST:

Myrna J. Walters
Commission Secretary

vld/O:WWP-E-98-11_sw7

ORDER NO. 28155 1

Office of the Secretary
Service Date
September 16, 1999