20020201ln.doc

DECISION MEMORANDUM

TO: COMMISSIONER KJELLANDER
COMMISSIONER SMITH
COMMISSIONER HANSEN
JEAN JEWELL
RON LAW
LOU ANN WESTERFIELD
BILL EASTLAKE
DON HOWELL
RANDY LOBB
ALDEN HOLM
MICHAEL FUSS
DAVE SCHUNKE
TERRI CARLOCK
GENE FADNESS
TONYA CLARK
BEV BARKER
WORKING FILE

FROM: LISA NORDSTROM

DATE: FEBRUARY 1, 2002

RE: IN THE MATTER OF THE APPLICATION OF AVISTA UTILITIES FOR APPROVAL TO CHANGE ITS NATURAL GAS TARIFFS TO INCLUDE DEFERRED GAS COST ASSESSMENTS. CASE NO. AVU-G-02-1.

On January 17, 2002, Avista Utilities (Avista) petitioned for Commission approval to change its natural gas tariffs to include deferred gas cost assessments. Avista asserts that if their Petition is approved as filed, existing rates and annual Company revenues will not change. Petition at 1. Avista requests that this case be processed under Modified Procedure and that the proposed tariff sheets be effective for gas service rendered on and after March 1, 2002. Id. at 3-4.
Background
In its petition, Avista explains that there is currently a significant cost/price incentive for qualifying sales customers to change to transportation service with the recent decline in market natural gas services. Id. at 2. To switch between sales and transportation service, customers must have a minimum annual usage of 250,000 therms and provide 90 days prior notice. Two Idaho customers have recently provided notice to change to transportation service and six additional sales customers could potentially make the same change. Id.
Avista’s present gas sales rates include an amortization charge of 11.8 cents per therm, which was approved by Commission Order No. 28827 in the Company’s last PGA filing. The amortization rate was designed to recover the balance of deferred gas costs over a 2.5 year period. Avista estimates the deferred gas costs to be collected from these eight customers during this period to be approximately $1 million. Id. If these qualifying sales customers are allowed to switch to transportation service without paying their share of these deferred costs, the rates of remaining sales customers could be significantly impacted.
Proposed Changes to Gas Tariff Language
If approved as filed, the proposed Tariff Schedule 146B changes will allow for an appropriate assessment of deferred gas costs for natural gas customers that switch from a sales service schedule to transportation service. Id. Avista proposes to calculate deferred gas costs for customers that switch to transportation service by multiplying the difference between what they paid for gas (included in tariff rates) and the Company’s actual gas costs by their actual usage for each month of the deferral period. Id. The deferral period begins with the month of July 1999, which is the first month of the deferral period from the Company’s last PGA filing, and ends with the most current month. The Petition states that this calculation would capture their share of the present deferral balance based on their usage. Id. Avista proposes to transfer these costs with the customer’s account through revised Schedule 146B. The customer could then choose to pay this amount by: 1) a lump-sum refund or surcharge to eliminate the deferred gas cost balance; or 2) an amortization rate per therm to reduce the deferred gas cost balance prospectively. Id.
The Company’s present tariff schedules address the reverse situation – when transportation service customers choose to switch back to sales service. Id. at 3. Tariff Schedules 112, 122 and 132 are available to previous transportation service customers and the rates do not include the present amortization rate applied to other sales service customers. These tariffs were created when gas prices were falling so a transportation service customer could not receive a deferred cost refund by switching back to sales service. Although these tariffs were not intended for use by previous sales customers, these tariffs do not currently contain language prohibiting their use. Avista proposed to change this situation by adding restrictive language to Tariff Schedules 112, 122 and 132.
Avista currently has no customers served by Schedules 112 and 122, and only two customers served under Schedule 132. Id. The Petition states that the deferred gas costs (surcharges or refunds) for these two customers have been determined on an individual basis and approved by the Commission in prior PGA filings. Id. Avista’s proposed tariff revisions for these schedules add the following language to make it clear that only prior transportation service customers may be served under those schedules in the future: “Customers beginning to take service under the Schedule on and after March 1, 2002 must have been previously served under Schedule 146 – Transportation Service for Customer-Owned Gas.” Id.
The proposed language changes to Tariff Schedules 131A and 132A remove the application of Tariff Schedule 149. Tariff Schedule 149 is no longer applicable and will be removed or the rate set to zero in the next PGA filing. Id.
Staff Recommendation
Staff is currently working with at least one customer regarding the issues addressed in this Petition. Staff recommends the Commission process this case under Modified Procedure with a 21-day comment period.
Commission Decision
Does the Commission wish to process this case under Modified Procedure with a 21-day comment period?

__________________________
Lisa Nordstrom
M: AVUG0201_ln
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