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Home My WebLink About20020919Decision Memo.docDECISION MEMORANDUM TO: COMMISSIONER KJELLANDER COMMISSIONER SMITH COMMISSIONER HANSEN JEAN JEWELL RON LAW LOU ANN WESTERFIELD RANDY LOBB DON HOWELL TERRI CARLOCK DAVE SCHUNKE NANCY HARMAN ALDEN HOLM MICHAEL FUSS TONYA CLARK BEVERLY BARKER GENE FADNESS WORKING FILE FROM: LISA NORDSTROM DATE: SEPTEMBER 19, 2002 RE: IN THE MATTER OF THE APPLICATION OF AVISTA CORPORATION FOR AUTHORITY TO DECREASE ITS RATES FOR SERVICE. CASE NO. AVU-G-02-2. On September 16, 2002, Avista Corporation filed a Purchased Gas Cost Adjustment (PGA) Application with the Commission for authority to place new rate schedules into effect on November 1, 2002 that will decrease its annualized revenues by approximately $10 million. If its Application is approved, Avista states that customer rates will decrease on average by 15.5%. According to Avista, the proposed price reduction primarily reflects decreases in the cost of gas purchased for customer use and will not affect its earnings as a result of the proposed decrease in prices and revenues. THE APPLICATON Avista requests this rate reduction to true-up the differences between Avista’s actual weighted average cost of gas (WACOG) purchased and the WACOG embedded in rates that have been deferred since September 1999. The Company has also deferred the revenue received from Cascade Natural Gas for the release of storage capacity at the Jackson Prairie Storage Facility, various pipeline refunds or charges and miscellaneous revenue received from gas-related transactions. WACOG: To incorporate these deferred costs and credits into rates, Avista proposes to modify two rate schedules that will adjust the WACOG and the deferral surcharge. First, the Company advocates reducing the prospective natural gas cost component (the WACOG) included in the rates charged to customers via Rate Schedule 150 by 14.727 cents per therm to $0.33098. This reduction is the result of netting the WACOG reduction of 14.946 cents per them against the demand-related increase of .219 cents per therm. The chart below depicts gas prices for Avista’s Rate Schedule 101 over the past five years. Assuming the deferral is fully recovered in November 2003 and the WACOG remains as proposed, Staff estimates a cost to customers of $0.6323 - which is reflected below as the estimated price of gas in 2003. By comparison, Natural Gas Monthly lists the year-to-date average price of natural gas delivered to residential customers as 89.6 cents per therm in Idaho versus 73.2 cents per therm nationally. Deferral Surcharge: Second, Avista seeks to recover the previous timing differences accumulated in the gas cost deferral account over the 12-month period of November 2002 through October 2003 through a surcharge. When the last PGA filing was approved by Order No. 28827 on August 20, 2001, the gas deferral account totaled approximately $22.3 million and was to be collected over a two and a half year period. As depicted on the graph below, Avista estimates the remaining balance to be $8.7 million as of June 30, 2002 and expects it to be fully recovered by November 2003. The Company proposes increasing Schedule 155’s amortization rates to recover this amount. If approved, firm sales customers on Rate Schedules 101, 111, and 121 (General, Large General and Commercial) would experience a 0.79 cent per therm increase and interruptible sales customers on Rate Schedule 131 would experience a 1.098 cents per therm increase. Avista proposes that the large transportation and interruptible customers be given the option of receiving/paying their portion of the deferred gas costs either through a lump sum credit/charge or through an amortization rate as set forth in the Company’s tariffs. If these customers choose the lump sum method, Avista proposes to adjust these billings’ credits/charges by the amount of interest that accumulates from the end of the test period used in this filing to the date of actual settlement. The Company states that this proposal would clear out the small residual balances related to interest charges that are carried forward between PGA filings for large customers. If the Application is approved, Avista states that the Company’s estimated annual natural gas revenue will decrease by approximately $10,030,000 (15.5%). Avista estimates that the average residential customer using 75 therms per months would see their monthly bill decrease by approximately $10.45 (14.8%). Larger commercial customers would experience an average decrease between 16.4% and 17.3%, with the higher decrease percentages due to lower base rates. Incorporating its proposed changes to Rate Schedules 150 and 155, Avista recommends the following annualized change in rates per customer class: Customer Class Schedule Proposed Average Decrease $/Therm Estimated Average Decrease % Change Proposed Average Price $/Therm General Large General Commercial 101 111 121 $0.13937 $0.13937 $0.13937 14.8% 16.4% 17.3% $0.75816 $ 0.7089 $ 0.6654 Large General 112 $0.14727 21.2% $ 0.5484 Interruptible 131 $0.13848 19.1% $0.58661 Interruptible 132 $0.14946 25.3% $0.44127 Transportation 146 none none $0.10574 The Company requests these rates be approved to become effective November 1, 2002 and that this matter be handled under Modified Procedure pursuant to Rules 201-210 of the Commission’s Rules of Procedure. STAFF RECOMMENDATION Avista has informed Staff that all of its customers will have received individual notice (i.e., bill stuffers) of the proposed rate decrease by October 15, 2002. Staff recommends the Commission issue a final order utilizing the November 1, 2002 effective date proposed by Avista to allow customers the benefits of the proposed decrease as soon as possible in the winter heating season. Anticipating that this case will be on the October 28 decision agenda, Staff recommends that the Commission process the case under Modified Procedure and establish an October 23 comment deadline. To allow Avista an opportunity to respond to its comments without delaying the Application’s effective date, Staff intends to file its comments no later than October 18, 2002. COMMISSION DECISION Does the Commission wish to process this case under Modified Procedure and establish an October 23, 2002 comment deadline? ___________________________ Lisa Nordstrom M: AVUG0202_ln Energy Information Administration, Nartural Gas Monthly August 2002. DECISION MEMORANDUM 1 Sheet3 Sheet2 Graphs Chart1 AVU-G-02-2 Workpapers Avista 2002 PGA Filing Date Rate Deferral Amount ?11?/?1?/?2004 ?11?/?1?/?2003 $0.63 0.13 ?11?/?1?/?2003 $0.00 ?11?/?1?/?2002 $0.76 ?7?/?1?/?2002 $8,700,000.00 ?8?/?20?/?2001 $0.90 ?8?/?20?/?2001 $22,340,517.00 ?2?/?8?/?2001 $0.81 ?2?/?8?/?2001 $13,000,000.00 ?9?/?1?/?2000 $0.62 ?9?/?1?/?2000 $4,890,000.00 ?11?/?1?/?1999 $0.48 ?11?/?1?/?1999 $2,377,457.00 ?11?/?1?/?1998 $0.44 ?11?/?1?/?1997 Avista Gas Residential and Small Business Gas Prices $/Therm Avista Deferral Account Avista Deferral Account 37926.00 37438.00 37123.00 36930.00 36770.00 36465.00 0.00 8700000.00 22340517.00 13000000.00 4890000.00 2377457.00 Sheet3 Sheet2 Graphs Chart1 AVU-G-02-2 Workpapers Avista 2002 PGA Filing Date Rate Deferral Amount ?11?/?1?/?2004 ?11?/?1?/?2003 $0.63 0.13 ?11?/?1?/?2003 $0.00 ?11?/?1?/?2002 $0.76 ?7?/?1?/?2002 $8,700,000.00 ?8?/?20?/?2001 $0.90 ?8?/?20?/?2001 $22,340,517.00 ?2?/?8?/?2001 $0.81 ?2?/?8?/?2001 $13,000,000.00 ?9?/?1?/?2000 $0.62 ?9?/?1?/?2000 $4,890,000.00 ?11?/?1?/?1999 $0.48 ?11?/?1?/?1999 $2,377,457.00 ?11?/?1?/?1998 $0.44 ?11?/?1?/?1997 Avista Gas Residential and Small Business Gas Prices $/Therm Avista Deferral Account Avista Gas Residential and Small Business Gas Prices at Year-End in $/Therm 37926.00 37561.00 37123.00 36930.00 36770.00 36465.00 36100.00 0.63 0.76 0.90 0.81 0.62 0.48 0.44