20050921Decision memo.pdf

DECISION MEMORANDUM
TO:COMMISSIONER KJELLANDER
COMMISSIONER SMITH
COMMISSIONER HANSEN
COMMISSION SECRETARY
COMMISSION STAFF
LEG AL
FROM:DONOVAN E. WALKER
DATE:SEPTEMBER 20, 2005
SUBJECT:A VISTA'S 2005 PGA CASE NO. A VU-05-
On September 12 , 2005, A vista Utilities filed its annual Purchased Gas Cost
Adjustment (PGA) Application with the Commission requesting authority to place new rate
schedules in effect as of November 1 2005 that will increase its annualized revenues by $15.
million (23.8%). The PGA mechanism is used to adjust rates to reflect changes in the costs for
the purchase of gas from wholesale suppliers including transportation, storage, and other related
costs of acquiring natural gas. A vista s earnings will not be increased as a result of the proposed
changes in prices and revenues. The Company requests that its Application be processed by
Modified Procedure.
THE APPLICATION
According to Avista s Application if the requested price increase is approved the
Company s annual revenue will increase by approximately $15.7 million or about 23.8%. The
average residential customer using 70 therms per month would see an estimated increase of
$16.3 6 per month.
A vista states that it purchases natural gas for customer usage and transports this gas
over various pipelines for delivery to customers. The Company defers the effect of timing
differences due to implementation of rate changes and differences between the Company s actual
Weighted Average Cost of Gas (WACOG) purchased and the WACOG embedded in rates.
A vista also defers the revenue received from the release of its storage capacity as well as various
pipeline refunds or charges and miscellaneous revenue received from gas related transactions.
DECISION MEMORANDUM
The Company requests an increase in the prospective natural gas cost component
included in the rates charged to customers by 21.443 cents per thermo This consists of an
increase of 21.047 cents per therm related to the commodity cost of purchasing and transporting
gas for customer usage and an increase of .396 cents per therm related to fixed pipeline costs.
Avista requests an increase in the present WACOG from 55.739 cents per therm to
76.786 cents per therm, an increase of 21.047 cents. This reflects first-of-the-month (FOM)
forward gas prices as of August 4, 2005 , and the Company s hedges executed to date. The
Company executes hedges to fix the price of gas on approximately 50% of its estimated annual
gas sales for the year, and uses a dollar-cost averaging approach for executing hedges, with those
volumes divided into 45-day execution windows between February 15 and November 15. The
Company states that it has completed approximately 80% of its scheduled hedges for the
upcoming PGA year, November through October.
The Company is also proposing a change in the present amortization rate, which is
used to refund or surcharge customers the difference between actual gas costs and proj ected gas
costs from the last PGA filing over the past year. A vista proposes to increase the amortization
rate from the present surcharge of 3.093 cents per therm to 5.027 cents per thermo The Company
states it has a deferred gas cost balance of approximately $3.5 million as of June 30, 2005
reflecting higher gas costs than projected during the past year. The proposed increase in the
amortization rate is expected to recover this balance over 12 months.
The Company states that notice of its proposed increase in price has been
accomplished by posting a notice at each of the Company s district offices in Idaho, a press
release distributed to various informational agencies, and a separate notice to each of its Idaho
gas customers included in their billing. A vista attached copies of these notices to its Application.
STAFF RECOMMENDATION
Given the size of the requested increase, as well as the proposed effective date of
November 1 , 2005, Staff recommends that this case be processed under Modified Procedure with
comments due by October 20, 2005. Additionally, Staff recommends that a public workshop be
conducted in Coeur d' Alene prior to Staff submitting comments.
DECISION MEMORANDUM
COMMISSION DECISION
1. Does the Commission preliminarily find that the public interest may not require a
hearing to consider the issues presented, and that this proceeding may be processed under
Modified Procedure?
2. Does the Commission wish to have Staff conduct a public workshop(s), pursuant
to Rule 125, prior to Staff filing comments in this case?
3. Does the Commission wish to schedule a public hearing for this matter? If so
does the Commission prefer to hold the public hearing in conjunction with the public workshop,
or schedule a public hearing after the submission of comments?
M:A VUGO502 dw
DECISION MEMORANDUM