HomeMy WebLinkAbout20030915Comments.pdfJOHN R. HAMMOND
DEPUTY ATTORNEY GENERAL
IDAHO PUBLIC UTILITIES COMMISSION
PO BOX 83720
BOISE, IDAHO 83720-0074
(208) 334-0357
IDAHO BAR NO. 5470
r'r r'
:" !
1',_1.
!! '~n
(.",'- .
t,,
"r.n') r.p PH 2: 09l.i.iIJ J 1...1
; .' '" ,.. ~
i l,
UTlL \YIES' C~~H\;'l(SS\OH
Street Address for Express Mail:
472 W. WASHINGTON
BOISE, ID 83702-5983
Attorney for the Commission Staff
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE APPLICATION OF
AVISTA UTILITIES, A UNIT OF AVISTA
CORPORATION, FOR AUTHORITY TO
INCREASE ITS RATES FOR NATURAL GAS
SERVICE.COMMENTS OF THE
COMMISSION STAFF
CASE NO. AVU-O3-
COMES NOW the Staff of the Idaho Public Utilities Commission, by and through its
Attorney of record, John R. Hammond, Deputy Attorney General, and submits the following
comments in response to Order No. 29325, the Notice of Application, Notice of Public
Workshops, Notice of Modified Procedure, and Notice of Comment Deadlines issued on
August 20 2003.
THE APPLICATION
On August 5, 2003, Avista Utilities, a unit of Avista Corporation (A vista; Company),
filed its annual Purchased Gas Cost Adjustment (PGA) Application with the Commission for
authority to place into effect new rate schedules that will result in an overall increase of
approximately $1.2 million or 2.4% in revenues. The Company supplies natural gas service to
approximately 59 500 customers in northern Idaho. The Company requested an effective date of
September 15 , 2003 for its proposed rate schedules. The Commission suspended the effective
ST AFF COMMENTS SEPTEMBER 15 2003
date for 60 days or until it issues an Order approving, rejecting or modifying it, whichever date is
earlier. Order No. 29325. The suspension allowed Staff and the customers sufficient time to
prepare responses to the Company s Application.
ST AFF ANALYSIS
Staff has reviewed the Application, performed an audit of the gas purchases from July
2002 through June 2003, and reviewed additional market information supplied by the Company
and third parties. A vista requests recovery of approximately $2.25 million that has accrued
through June 2003 in its Idaho deferred accounts. The $2.25 million in deferred costs consists of
the following:
Total Amount Owed b Customers
Amount
Through
June 2003
682 775
106 011
242 114
617 525
581 032
15,4 76
178 133
561 ,230
144 147
057 000
247 356
300)
395 139
789)
250,374
In addition to collecting the $2.25 million listed above, the Company proposes a change
in the weighted average cost of gas (W ACOG) 1 it collects from customers. These two requests if
authorized by the Commission would require changes to the Company s tariff components
Schedule 150 and Schedule 155.
I The W ACOG (Weighted Average Cost of Gas) is the amount included in the tariff to reimburse the Company for
the gas purchased, This amount is reviewed and adjusted as necessary during each PGA review.
STAFF COMMENTS SEPTEMBER 15 , 2003
AVISTA FIRM NATURAL GAS TARIFF COMPONENTS
A vista s firm service rates as described in Schedules 101 - General Service, 111 - Large
General Service, and 121 - High Annual Load Factor Large General Service are subject to four
adjustments that affect the actual rate customers pay. These four adjustments are described in
Schedules 150 - Purchase Gas Cost Adjustment, 155 - Gas Rate Adjustment, 158 - Tax
Adjustment, and 191 - Energy Efficiency Rider.
The underlying fixed tariff rate for customers is the rate established in the last rate case
and includes the cost of gas, overhead, operations, transportation, other fixed costs and the
allowed rate of return (Case No. WWP-88-, Order No. 22749). Schedule 150 - Purchase
Gas Cost Adjustment (also known as Permanent Gas Cost Changes) is a forward-looking cost
adjustment that reflects anticipated changes in the variable cost to purchase and transport gas.
Schedule 155 - Gas Rate Adjustment (also known as the Temporary Adjustment) is a true up for
over- or under-collected gas costs. Schedule 158 - Tax Adjustment is a rate adjustment that adds
the local franchise fee taxes to customer rates and is adjusted as the franchise fees are changed.
Schedule 191 - Energy Efficiency Rider Adjustment is used to fund authorized Demand Side
Management programs. The sum of the tariffrate plus or minus (+/-) the Permanent Gas Cost
Changes plus or minus (+/-) the Temporary Adjustment plus (+) the Tax Adjustment and the
Energy Efficiency Rider Adjustment comprise the total rate the customers pay per therm each
month. Only changes in Schedule 150, and Schedule 155 are being proposed in this filing.
SCHEDULE 150 - PURCHASE GAS COST ADJUSTMENT
The Company s Request
The purchase gas cost adjustment is a forward-looking cost adjustment that reflects
anticipated changes in the variable cost to purchase and transport gas. The Company is
requesting an increase of$0.09919/therm for a total Schedule 150 rate of$0.27186/therm. This
increase is a combination of a $0.10417 /therm increase in the projected price for gas and a
$0.00498/therm decrease in the pipeline transportation costs. The proposed changes result in a
W ACOG included in rates of $0.44989/therm, an increase of 30% in average gas costs over last
year.
STAFF COMMENTS SEPTEMBER 15, 2003
The Natural Gas Market
The requested increase is due to price increases in the Northwest wholesale natural gas
market. Natural gas prices have remained well above the current W ACOG in A vista s rates of
$0.34/therm for the majority of the year and are projected to stay that way. Northwest natural
gas prices reached a high in March of over $0.70/therm or double the existing price in rates.
Forward winter prices are projected to be near $0.50/therm as of the first week of September.
A vista has purchased some gas forwards for this winter to insure that the price paid will not
increase further, but these purchases remain near the $0.50/therm price. The Company has also
provided Staff with an update of its anticipated W ACOG indicating a current W ACOG estimate
of $0.48 as of September 2, 2003.
The significant increase in natural gas prices is not isolated to A vista s service territory.
Staff has observed increasing market price trends since the early spring of 2003. Unseasonably
cold weather in late winter for the eastern half of the United States resulted in natural gas storage
levels that were well below normal. The low storage levels have caused an increase in natural
gas demand during the summer storage-filling season. Demand has also increased due to an
increased reliance on natural gas fired electric generation throughout the nation. Staff believes
these increases in demand coupled with the more recent increased pressure on fuel switching
because of high petroleum prices is keeping upward pressure on natural gas prices.
In addition, the western Canadian and US. Rockies natural gas reserves are no longer
confined to serve only the Northwest US. and Canada. In 2000, the Alliance pipeline opened
(See Attachment A). This pipeline allowed the Western Canadian gas-producing fields to serve
the larger Midwestern United States natural gas market. In May 2003 , a new pipeline began
service that doubled the Kern River delivery capability of US. Rockies gas into southern
California (See Attachment A). Based on these factors Staff believes Idaho customers are now
subject to the national gas market that is experiencing significant price increases and market
volatility.
Price Stability
There are a number of ways the Company has contributed to greater price stability for
customers. The Company has an ongoing, systematic risk management and financial hedging
program. Staff has reviewed the risk management committee s minutes and believes the
Company is reviewing the appropriate market indicators and properly documenting its decisions.
STAFF COMMENTS SEPTEMBER 15 2003
The program has fixed the price of gas for approximately one-half of the projected natural gas
winter needs for the 2003 PGA year. The Company is continuing to monitor the natural gas
market and locking additional quantities and prices when it believes market conditions are right.
In addition to financial hedges the Company has fixed storage volumes that secure
approximately 15% of its winter needs. The fixed storage volumes take advantage of the
traditional summer/winter price differential. Even though prices have not declined this summer
the stored volumes still provide some protection from potential winter price spikes.
In addition to Avista s price stability measures, the PGA process has provided an
additional measure of price stability. Over the past few years the mechanism has leveled out
prices by allowing customers to pay for market price spikes over an extended period of time.
This allows the Company to be kept whole and customers are provided some relief from the
extremely volatile spot market. This practice has helped Avista s requested increase this year to
remain low, 2.4%, when compared to other gas companies that are experiencing double digit
Increases.
However, a review of the natural gas market over the past few years clearly demonstrates
a high degree of volatility. Winter market prices for natural gas have ranged from a high of over
$1.00 per therm to prices under $0.20 per therm in the past three years. Even though the
Company s W ACOG estimate appears to be reasonably calculated, it is still just an estimate. In
the interest of customer price stability, Staff believes there is merit in leaving overall rates
unchanged in the 2003 PGA filing. If the Commission adopted a lower Schedule 150 rate of
$0.25192 (W ACOG of $0.42995), and approved the Schedule 155 as requested, this would result
in no change in general service customer rates from last year. 2 Furthermore, by setting the
W ACOG at this level the Commission is not disallowing any possible recovery of gas costs that
exceed this level. The PGA mechanism would assure that the Company would have the
opportunity to collect all gas costs that it could demonstrate were prudently incurred and refund
credits through the deferred expense tariff (Schedule 155).
Staffs proposal would stabilize Company revenues per therm at last year s levels and
result in an overall reduction in revenues of $1.5 million from the request based on the
Company s projected natural gas purchases. If the Company s estimates as filed are correct
2 Other rates may have minor changes and it would result in an overall decrease of $77 ,000 in revenues to the
Company because of large customer payments.
STAFF COMMENTS SEPTEMBER 15, 2003
keeping rates at last year s level will result in a deferral next year of about $1.5 million or
approximately two thirds of the deferral built into the 2003 PGA Application and rates would not
increase next year either. Therefore, Staff believes that no increase in residential rates is a
reasonable alternative proposal for Avista s 2003 PGA.
Regardless of rates approved in this case, should Avista s natural gas costs change
considerably in the forthcoming PGA year, the Company has the right to file for another
adjustment in rates to reflect a change in market conditions. Indeed, the Company may have the
obligation to file for rate adjustments between PGA cycles to avoid significant deferral balances
either positive or negative. Staff does not believe that maintaining current overall rates will
significantly increases the deferral balances that may be subject to recovery next year.
SCHEDULE 155 - DEFERRED EXPENSES
Avista uses Schedule 155 to pass through any over- or under-collections of accrued gas
costs since the last tracker adjustment. Avista proposes a significant decrease in Schedule 155
from $0.11018 to $0.03093 per therm for most customers.3 This reduced rate is projected to
recover the $2.25 million that was owed to the Company as of July 2003 for the deferral period
of July 2002 through June 2003. Staff believes it is appropriate for the Company to recover
these deferred costs. If the cost of gas was accurately projected by the Company in its original
filing, customers will see a decrease of approximately $0.75 million under Staffs proposal when
the Schedule 155 charge is reset next fall.
LARGE CUSTOMERS
In addition to Schedule 150 and 155 adjustments for the general body of ratepayers, the
Company is working directly with its large gas customers on the proposed deferral collection.
Even though many of these customers have switched from tariffed gas commodity service to
transportation-only service a few large customers remain on tariffed rates. In the Company
2001 PGA filing, Avista provided each large customer with an accounting of its portion of the
deferral and a lump sum payment or deferral payment plan option. The Company has continued
this practice in its 2003 PGA filing. In the past, providing the large customers with an individual
payment option has reduced the deferral and avoided a shift of costs to the general body of
3 The Company proposes to lower the Schedule 155 tariff amount from $.11598 to $.0350 for Schedule 131.
ST AFF COMMENTS SEPTEMBER 15 2003
ratepayers. Neither the Company nor Staff is aware of any additional large customers planning
to shift to transportation rates but continuing to provide large customers with a clear
understanding of their deferral balances allows these customers a better understanding of their
obligation. Staff will continue to monitor the Company s treatment of its large customer
deferrals.
CONSUMER ISSUES
Avista s Purchased Cost Adjustment (PGA) Application filed on August 5 , 2003
contained the customer notice. Staffreviewed the notice and determined it complied with the
requirements of IDAP A 31.21.02.102. The notices were mailed with customer bills beginning
August 1 2003 and ending on September 2 2003. The press release dated August 1 2003 , was
also reviewed and determined to be compliant with the IDAP A requirements. Customers have
until September 15 , 2003 to file comments with the Commission. By September 15 , 2003 , one
Idaho customer had commented on the case and suggested that the increase not be granted.
On September 8 , 2003 at 7:00 p., Staff presented a workshop in Lewiston to discuss
the proposed rate increase. Other than representatives from the IPUC and Avista, there were
three individuals in attendance: a customer, a newspaper reporter, and a private energy
consultant from Boise.
On September 9 2003, another workshop was held at 7:00 p.m. in Coeur d'Alene.
Attendees included the IPUC Staff, Avista representatives , and one reporter from a local
newspaper. No customers attended.
Since Avista s last PGA in November of2002, five natural gas-related complaints were
investigated by Consumer Staff. With only five complaints, no patterns or trends could be
identified.
STAFF RECOMMENDATIONS
Given the volatility in the gas market, the possibility of a decrease in the Schedule 155
tariff next year and the relatively small increase proposed by the Company, Staff believes that
maintaining current overall rates at this time provides price stability for customers without
creating much added risk of a substantial rate increase next year. Therefore, Staff recommends
that the Commission approve the Schedule 155 rate as filed and set the Schedule 150 rate at
STAFF COMMENTS SEPTEMBER 15, 2003
$0.25192 (W ACOG of $0.42995).4 This will allow customers to experience no change in their
current overall rates.
Respectively submitted this
15
day of September 2003.
Technical Staff: Michael Fuss
Alden Holm
Marilyn Parker
i :umisc/commen ts/avueO3 Ajhtc
4 Other rates may have minor changes and it would result in an overall decrease of $77 ,000 in revenues to the
Company because of large customer payments.
ST AFF COMMENTS SEPTEMBER 15, 2003
Ma
j
o
r
N
e
w
U
.
S.
N
a
t
u
r
a
l
G
a
s
P
i
p
e
l
i
n
e
S
y
s
t
e
m
s
,
19
9
0
-
2
0
0
2
Po
n
y
E
x
p
r
e
s
!
(
1
9
9
7
)
.
25
5
m
i
l
l
i
o
n
c
u
b
i
c
f
e
e
t
p
e
r
d
a
y
PN
G
T
S
P
o
r
t
l
a
n
d
(
1
9
9
9
)
17
8
m
i
l
l
i
o
n
c
u
b
i
c
f
e
e
t
p
e
r
d
a
Ma
r
i
t
i
m
e
s
a
n
d
N
o
r
t
h
e
a
s
(
1
9
9
9
)
40
0
m
i
l
l
i
o
n
c
u
b
i
c
f
e
e
t
p
e
r
d
a
y
Tu
s
c
a
r
o
r
a
(
1
9
9
5
)
11
0
m
i
l
l
i
o
n
.
c
u
b
i
c
f
e
e
t
p
e
r
d
a
y
r..
.
.
.
.
.
--
-
--
-
-
-
\
:
-
-
-
.
.
.
.
.
.
-
--
-
-
V
/
,-
-
-
-.
-
Em
p
i
r
e
(
1
9
9
4
)
55
0
mi
l
l
i
O
nC
U
b
i
C
fe
e
t
P
e
r
d
a
Y
\
"
'
-
/
~.
.
,
-
f-
-
-
-
'V
'
r-
"
-
.
.
.
c-
-
-
.
.
.
.
--
i
(-
-
--
-
--
-
-
-
--
C/
\
~.
-
.
.
.
I
-
L
.
.
---
1--
--
'
c.
.
-
-
.
.
I
-
/
.
.
-
-
.
PN
G
T
S
/
M
a
r
i
t
i
m
e
P
h
a
s
e
1
(
1
9
9
8
)
TT
--
\
.
.
\
,.
J
I
-
1:
-
-
-
-
~~
63
2
m
i
l
l
i
o
n
c
u
b
i
c
f
e
e
t
p
e
r
d
a
y
Ke
r
n
R
i
v
e
r
1
9
9
2
)
I
.
~
\
.
.
75
0
m
"
"
o
n
C
U
b
;
1:
'
~
.
t
"
"
'
d
a
y
.
/
:2
.
-
~e
w
a
t
e
~(
1
9
9
5
)
'\
Cr
o
s
s
r
o
a
d
!
(
1
9
9
5
)
.
/
.
.
-
.?
"
C
2
5
0
m
i
l
l
i
o
n
c
u
b
i
c
f
e
e
t
p
e
r
d
a
y
-
/
-
-
.
.
bi
d
i
r
e
c
t
i
o
n
a
l
f"
--
-
-
-
r
.
.
.
.
~
=
-
-
-
-
25
0
m
l
l
ll
~
.
n
c
u
b
i
c
f
e
e
t
p
e
r
~'
\
.
.
.
.
"
.
MO
j
a
V
e
(
1
9
9
2
I
N
o
r
t
h
e
~n
B
o
r
d
e
r
E
x
t
e
n
s
i
o
n
.
'
2
.
7.
.
.
45
0
m
i
l
l
i
o
n
c
u
b
i
c
f
e
~~
~
d
a
65
0
m
i
l
l
i
o
n
C
U
b
i
fe
e
t
p
e
r
d
98
t
IL
f
-
.::
.
~
.
~
e
c
t
o
r
(
~
O
O
O
)
~
5
4f
m
i
l
l
i
o
n
c
u
b
i
c
~~
~
.
r
:
~
(
2
0
0
1
t
o
1,
I
I
i
)
~
o
~
i
l
e
B
a
~(
1
9
9
3
)
'
72
0
m
i
l
l
i
o
n
c
u
b
i
c
f
e
e
t
p
e
r
d
a
y
No
r
t
h
B
a
j
a
P
i
p
e
l
i
n
e
(
2
0
0
2
)
I
.
1
-
60
0
m
l
lo
n
c
u
b
i
c
f
e
e
t
p
e
r
d
a
)
'
.
50
0
m
i
l
l
i
o
n
c
u
b
i
c
f
e
e
t
p
e
r
d
a
y
-
~
-
-.
1
Sa
n
d
h
i
l
i
s
P
i
p
e
l
i
n
e
(
2
0
0
1
)
-.
\
-
~j
~
30
0
m
i
l
l
'
ic
f
e
e
t
p
e
r
d
a
y
Qu
e
s
t
So
u
t
h
e
rn
T
r
a
i
l
s
(
2
0
0
2
)
.
)
.
..
~
'
Gu
l
f
s
t
r
e
a
m
G
a
s
S
y
s
t
e
m
(
2
0
0
2
87
m
i
l
l
i
o
n
c
u
b
i
c
f
e
e
t
p
e
r
d
a
y
.
/
'
.
~
13
0
m
i
l
l
i
o
n
c
u
b
i
c
f
e
e
t
p
e
r
d
a
Tr
a
n
s
C
o
l
o
r
a
d
o
(
1
9
9
8
)
30
0
m
i
l
l
i
o
n
c
u
b
i
c
f
e
e
t
p
e
r
d
a
y
.
~
"
(
Wi
l
l
i
a
m
s
S
e
a
h
a
w
k
(2
0
0
1
~
\
(
I
"
-
,
36
0
m
i
l
l
i
o
n
c
u
b
i
c
f
e
e
t
p
e
r
d
a
y
\
'"
r.
/
J
n
;p
Na
u
t
i
l
u
s
(
1
9
9
7
)
,
,
"
-
De
s
t
i
n
(
1
9
9
8
)
i;
;
g
~
~
60
0
m
;
l
U
o
n
c
u
b
i
c
r
e
e
l
p
e
'
d
o
y
\
1
,
00
0
m
i
l
!
;
o
"
c
u
b
;
,
f
e
e
t
p"
d
o
,
~r
o
/
/
~
~
Ga
r
d
e
n
B
a
n
k
s
O
f
f
s
h
o
r
e
S
y
s
t
e
r
f
1
9
9
7
)
Ne
m
o
(
2
0
0
1
)
\
D
I
G
S
M
a
i
n
P
a
s
s
G
a
t
h
e
r
i
n
g
S
y
s
t
e
m
(1
9
9
7
)
~
~
g
*
C
o
n
v
e
r
t
e
d
O
i
l
P
i
p
e
l
i
n
e
60
0
m
i
l
l
i
o
n
c
u
b
i
c
f
e
e
t
p
e
r
d
a
y
30
0
m
i
l
l
i
o
n
c
u
b
i
c
f
e
e
t
p
e
r
d
a
\
2
0
0
m
i
l
l
i
o
n
c
u
b
i
c
fe
e
t
p
e
r
d
a
y
g
2
;p
Ma
n
t
a
R
a
y
G
a
t
h
e
r
i
n
g
S
y
s
t
e
n
t
1
9
9
7
)
Di
s
c
o
v
e
r
y
(
1
9
9
7
)
Vi
,
30
0
m
i
l
l
i
o
n
c
u
b
i
c
f
e
e
t
p
e
r
d
a
y
60
0
m
i
l
l
i
o
n
c
u
b
i
c
f
e
e
t
p
e
r
d
a
y
0
~
=
C
o
m
p
l
e
t
e
d
I
n
2
0
0
2
Y'
~
=
D
i
r
e
c
t
i
o
n
o
f
F
l
o
w
...
.
.
.
No
t
e
:
R
o
u
t
e
s
a
r
e
o
n
l
y
a
p
p
r
o
x
i
m
a
t
i
o
n
s
.
So
u
r
c
e
:
E
n
e
r
g
y
I
n
f
o
r
m
a
t
i
o
n
A
d
m
i
n
i
s
t
r
a
t
i
o
n
,
G
a
s
T
r
a
n
G
a
s
T
r
a
n
s
p
o
r
t
a
t
i
o
n
I
n
f
o
r
m
a
t
i
o
n
S
y
s
t
e
m
,
N
a
t
u
r
a
l
G
a
s
P
i
p
e
l
i
n
e
D
a
t
a
b
a
s
e
CERTIFICATE OF SERVICE
HEREBY CERTIFY THAT I HAVE THIS 15TH DAY OF SEPTEMBER 2003
SERVED THE FOREGOING COMMENTS OF THE COMMISSION STAFF, IN
CASE NO. AVU-03-, BY MAILING A COpy THEREOF, POSTAGE PREPAID
TO THE FOLLOWING:
DAVID J. MEYER
SR VP AND GENERAL COUNSEL
A VISTA CORPORATION
PO BOX 3727
SPOKANE W A 99220-3727
KELLY NORWOOD
VICE PRESIDENT
A VISTA CORPORATION
PO BOX 3727
SPOKANE WA 99220-3727
MAILED TO:
kell y .norwood~a vistacorp. com
T Y
CERTIFICATE OF SERVICE