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Home My WebLink About28916.mod.docBEFORE THE IDAHO PUBLIC UTILITIES COMMISSION IN THE MATTER OF AVISTA UTILITIES’ APPLICATION FOR APPROVAL OF MODIFICATIONS TO ITS NATURAL GAS BENCHMARK MECHANISM ) ) ) ) ) ) ) ) CASE NO. AVU-G-01-3 NOTICE OF APPLICATION NOTICE OF MODIFIED PROCEDURE ORDER NO. 28916 NOTICE OF APPLICATION YOU ARE HEREBY NOTIFIED that on November 8, 2001, Avista Utilities (Avista) petitioned for Commission approval to continue its current Natural Gas Benchmark Incentive Mechanism with several proposed modifications. Avista is NOT proposing a change in rates or annual revenue in this filing. YOU ARE FURTHER NOTIFIED that Avista is an investor-owned utility engaged in the generation, transmission and distribution of electricity, and the distribution of natural gas in portions of eastern Washington and northern Idaho. YOU ARE FURTHER NOTIFIED that the Benchmark Mechanism was originally approved in February 1999 and works in conjunction with the existing Purchased Gas Adjustment (PGA) mechanism. Deferrals for the PGA are calculated each month based on the costs and revenues from the Benchmark Components, as well as other costs normally included in the PGA. According to Avista’s petition, the Benchmark Mechanism provides: 1) a relative simple and objective determination of the gas costs to be charged to customers, 2) additional gas cost savings to customers, and 3) a significant shift of risk to Avista Energy associated with gas procurement and management. YOU ARE FURTHER NOTIFIED that the current Benchmark Mechanism is comprised of three major components. The Commodity Component consists of a calculated Weighted Average Index Price for natural gas based on published index prices for three supply basins, plus an Index Adder of $0.05 per dekatherm. According to Avista, the Jackson Prairie (JP) Storage Component provides additional savings to customers from the operation of the JP Storage Project. The final component is the Capacity Release/Off-System Sales Component, which provides a guaranteed level of savings to customers, related to the release of pipeline capacity and off-system sales. This current Benchmark Mechanism expires March 31, 2002. YOU ARE FURTHER NOTIFIED that for the 24-month period ending August 31, 2001, Avista asserts that the Benchmark Mechanism provided a $4,038,000 benefit to Idaho customers from capacity releases and off-system sales. Avista’s petition notes that these savings are in addition to the $35,300 in annual administrative cost savings for Idaho customers that Avista Energy has absorbed in managing the gas procurement operation for the utility. YOU ARE FURTHER NOTIFIED that Avista’s Application asserts that Avista Energy’s costs and risks of managing gas procurement for the utility have increased significantly during the past year. Under a proposed modification, Avista Energy would shift some of the risk of significant price fluctuations (both increases and decreases) from the affiliate to the utility by using day-of prices for purchases and sales instead of the first-of-month price for very warm or very cold days. YOU ARE FURTHER NOTIFIED that the Application proposes Avista Energy implement a hedging program for the utility intended to reduce the level of gas cost volatility and risk using fixed-price market purchases. YOU ARE FURTHER NOTIFIED that under a proposed modification, Avista Energy would use the utility’s storage facilities for price protection in addition to the advantage of the summer/winter price differential. YOU ARE FURTHER NOTIFIED that the Application suggests implementation of a sharing mechanism in conjunction with a lower fixed credit for the utility’s off-system sales and capacity releases than is currently authorized. YOU ARE FURTHER NOTIFIED that Avista proposes the Gas Benchmark remain in effect for a three-year period, until March 31, 2005. The Mechanism would then continue in effect year-to-year thereafter subject to modification or termination upon six-month prior notice by the Company, Avista Energy, or any state commission. YOU ARE FURTHER NOTIFIED that Avista requests that the Commission approve the proposed natural gas Tariff Schedule 163 as modified on or before February 1, 2002 to become effective April 1, 2002. NOTICE OF MODIFIED PROCEDURE YOU ARE FURTHER NOTIFIED that the Commission has determined that the public interest may not require a formal hearing in this matter and will proceed under Modified Procedure pursuant to Rules 201 through 204 of the Idaho Public Utilities Commission's Rules of Procedure, IDAPA 31.01.01.201 through .204. YOU ARE FURTHER NOTIFIED that the Commission may not hold a hearing in this proceeding unless it receives written protests or comments opposing the use of Modified Procedure and stating why Modified Procedure should not be used. Reference IDAPA 31.01.01.203. YOU ARE FURTHER NOTIFIED that any person desiring to state a position on this Application may file a written comment in support or opposition with the Commission on or before Friday, January 11, 2002. The comment must contain a statement of reasons supporting the comment. Persons desiring a hearing must specifically request a hearing in their written comments. Written comments concerning this Application shall be mailed to the Commission and the Applicant at the addresses reflected below: Commission Secretary Idaho Public Utilities Commission PO Box 83720 Boise, ID 83720-0074 Street Address for Express Mail: 472 W. Washington Street Boise, ID 83702-5983 Kelly O. Norwood David J. Meyer Avista Corporation 1411 E. Mission Avenue P.O. Box 3727 Spokane, WA 99220 Email: dmeyer@avistacorp.com These comments should contain the case caption and case number shown on the first page of this document. Persons desiring to submit comments via e-mail may do so by accessing the Commission’s homepage located at www.puc.state.id.us under the “Comments and Questions” icon. Once at the “Comments and Questions” icon, fill in the case number as it appears on the front of this document, and enter your comments. These comments must also be sent to the Applicant at the e-mail addresses listed above. YOU ARE FURTHER NOTIFIED that if no written comments or protests are received within the deadline, the Commission will consider the matter on its merits and enter its Order without a formal hearing. If comments or protests are filed within the deadline, the Commission will consider them and in its discretion may set the matter for hearing or may decide the matter and issue its Order on the basis of the written positions before it. Reference IDAPA 31.01.01.204. YOU ARE FURTHER NOTIFIED that the deadline for Avista to file written reply comments with respect to their Application in this case is Wednesday, January 16, 2002. YOU ARE FURTHER NOTIFIED that the Application together with supporting workpapers and exhibits, have been filed with the Commission and are available for public inspection during regular business hours at the offices of the Commission or Avista Corporation. YOU ARE FURTHER NOTIFIED that all proceedings in this case will be held pursuant to the Commission's jurisdiction under Title 61 of the Idaho Code and that the Commission may enter any final Order consistent with its authority under Title 61. YOU ARE FURTHER NOTIFIED that all proceedings in this matter will be conducted pursuant to the Commission's Rules of Procedure, IDAPA 31.01.01.000 et seq. O R D E R IT IS HEREBY ORDERED that this matter be processed under our rules of Modified Procedure. IPAPA 31.01.01.201-204. IT IS FURTHER ORDERED that the Commission does hereby solicit written comment on this Application from the public, Avista and Commission Staff in accordance with the foregoing schedule. DONE by Order of the Idaho Public Utilities Commission at Boise, Idaho, this day of December 2001. PAUL KJELLANDER, PRESIDENT MARSHA H. SMITH, COMMISSIONER DENNIS S. HANSEN, COMMISSIONER ATTEST: Jean D. Jewell Commission Secretary O:AVUG013_ln NOTICE OF APPLICATION NOTICE OF MODIFIED PROCEDURE ORDER NO. 28916 -5- Office of the Secretary Service Date December 13, 2001