181002 Avista rate mechanisms.pdf

Case No. AVU-E-18-06, AVU-E-18-07 and AVU-E-18-08
Final Order No.: 34158, 34159 and 34155
Contact: Matt Evans
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Regulators approve Avista rate
adjustments, rates decrease 5.5 percent

BOISE (Oct. 2, 2018) – Avista’s electric rates decreased Oct. 1 after state regulators
approved changes to three annual rate adjustments.
The Idaho Public Utilities Commission approved reductions to the Power Cost Adjustment
and Fixed Cost Adjustment, and slightly lowered the rate credit provided through the
Bonneville Power Administration’s (BPA) Residential Exchange Program.
Avista’s residential electric rates fell by 5.5 percent as a result.
That equates to a decrease of $4.85 per month for a residential customer using an average
of 910 kilowatt-hours (kWh) per month, lowering the bill from $88.49 to $83.64.
Here is a look at each of the rate adjustments:
Fixed Cost Adjustment
The Commission’s decision regarding the Fixed Cost Adjustment (FCA) results in a
decrease of $4.16 per month for a residential customer using a monthly average of 910
kWh.
The FCA is designed to provide the utility with a financial incentive to promote energy
efficiency and conservation among its customers.
It can be adjusted annually with Commission approval – via a surcharge when Commission-
authorized expenses exceed revenue or a rebate when FCA revenue surpasses expenses.
Fixed costs include those associated with infrastructure, including power lines and poles,
and employee salaries.
While these expenses remain relatively stable, a utility’s energy sales, and revenue, vary
due to a number of factors, including weather and efficiency measures.
In its application, Avista attributed the change to the FCA primarily to higher energy use in
2017.
All documents related to this case, including the Commission’s order and Avista’s
application, can be found here.
Power Cost Adjustment

The Commission’s decision to approve a change to the Power Cost Adjustment (PCA)
lowered rates for all customer classes by approximately 1 percent.
The PCA can be modified each fall with Commission approval, to reflect differences
between the costs included in customer rates and the actual costs Avista incurred
generating and purchasing the power needed to serve its customers over the prior 12
months.
It is a true-up mechanism in that it allows the utility to recover costs when actual expenses
exceed the amount included in rates and for a rebate when expenses are lower than PCA-
related revenue.
The new PCA is a rebate of 0.326 cents per kWh used, an increase of 0.086 cents per kWh
over the 2017 PCA.
For the average residential customer using 910 kWh per month, that equates to a 79-cent
decrease on the monthly bill.
The new rate is designed to return to customers approximately $9.8 million, due primarily
to low power prices on the wholesale energy markets over the last 12 months.
All documents in this case, including Avista’s application and the Commission’s order, can
be reviewed here.
BPA Residential Exchange Program - Residential and Small Farm Energy Rate
Adjustment Credit
The Residential and Small Farm Energy Rate Adjustment Credit provides a share of the
benefits of the Columbia River hydropower system to customers.
The Commission approved a credit of 0.069 cents per kWh used, down from a credit of
0.078 cents per kWh.
The new credit is expected to provide $840,000 in annual BPA-related benefits to the
130,000 Idahoans who receive electric service from Avista.
The company attributed the change to the fact that customer energy usage in 2017 was
higher than projected, creating an over-refunded balance.
The Residential and Small Farm Energy Rate Adjustment Credit is the result of a decades-
old agreement between Avista and BPA, which markets and distributes the wholesale
energy generated through a network of 31 hydropower projects on the Columbia and
Snake rivers.
While customers of publicly owned utilities (rural cooperatives and municipal utilities, for
example) are granted preferential access to BPA power, the Northwest Power Act of 1980
requires that customers of private, investor-owned utilities such as Avista also share in the
benefits of the federal hydro system through a rate credit as part of BPA’s Residential
Exchange Program. The amount of the credit is determined by a number of factors,
including a utility’s average system cost for producing power.
If an investor-owned utility’s average system-wide generation costs lead to rates higher
than those offered to BPA’s public utility customers, the customers of private, investor-
owned utilities are issued a credit.
Go here to review the documents in this case, including the Commission order.