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Home My WebLink About990825_sw.docMEMORANDUM TO: COMMISSIONER HANSEN COMMISSIONER SMITH COMMISSIONER KJELLANDER BILL EASTLAKE FROM: SCOTT WOODBURY DATE: AUGUST 25, 1999 RE: CASE NO. WWP-E-98-11 (AVISTA) PETITIONS FOR RECONSIDERATION ORDER NO. 28097 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. (Attached) Specifically, the Company requests reconsideration of the Commission’s decision to deny 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 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. 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 Becker) 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 kw/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. Becker questions why cost-of-service should all of a sudden be a major relevant criterion in determining rates. Commission Decision The Commission has until September 16, to issue its Order determining whether or not it will grant reconsideration. Scott D. Woodbury Deputy Attorney General bls/M:wwpe9811_sw5 MEMORANDUM 1