20070921Decision memo.pdf

DECISION MEMORANDUM
TO:COMMISSIONER KJELLANDER
COMMISSIONER SMITH
COMMISSIONER REDFORD
COMMISSION SECRETARY
COMMISSION STAFF
FROM:DONOV AN E. WALKER
DATE:SEPTEMBER 21, 2007
SUBJECT:A VISTA'S 2007 PURCHASED GAS COST ADJUSTMENT (PGA), CASE
NO. A VU-07-
On September 17, 2007, Avista 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 , 2007 that would decrease its annual natural gas revenues by
approximately $4 million (4.6%). 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
The Company states that if the proposed changes are approved its annual revenue
will decrease by approximately $4 million or 4.6%. The average residential or small commercial
customer using 65 therms per month would see an estimated decrease of $3.65 per month
(4.6%).
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. The
Company states that it 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
Avista requests a decrease in the WACOG from its present $0.76085 cents per therm
to $0.75544 cents per therm, a decrease of approximately $0.005 per thermo The Company states
that approximately 70% of its estimated annual load requirements for the PGA year will be
hedged at a fixed price comprised of: (1) approximately 41 % of volumes hedged for a term of
one year or less; (2) approximately 18% hedged for a three year term; and (3) 11 % of volumes in
Jackson Prairie storage. This planned level of hedging is similar to the prior year. During 2006
the Company began incorporating three-year, fixed price hedges into its portfolio to provide
additional rate stability. Through the end of August, approximately 2/3 of planned hedge
volumes for the PGA year have been executed at a weighted average price of $7.94 per
decatherm ($0.794 per therm).
The demand cost included in the Company s Application primarily represents the
cost of pipeline transportation to the Company s system. Overall, total demand costs reflected in
this PGA filing were essentially flat, as compared to the total costs reflected in the 2006 PGA
filing. However, projected firm sales volumes are substantially lower in this filing as compared
to the projected volumes in the 2006 filing. Therefore, a similar level of dollars is recovered
over a lower level of volumes, thus resulting in a proposed increase per thermo The Company
proposed rates in this filing include a decrease that reflects the settlement of the Northwest
Pipeline s (NWP) FERC rate case. However, this decrease is offset by the inclusion of higher
rates for Gas Transmission Northwest (GTN), whose FERC rate case is still pending, as well as
increases in Canadian pipeline charges. Additionally, during 2007 the Company terminated its
agreement related to the Plymouth LNG peaking facility, resulting in a savings of $124 000 per
year in fixed demand costs.
The Company is also proposing a change in the present amortization rate that is used
to refund or surcharge customers the difference between actual gas costs and projected gas costs
from the last PGA filing over the past year. The present amortization rate for firm sales
customers is approximately a 3 A-cents per therm surcharge. The proposed decrease in the
amortization rate results in a refund rate of approximately 2A-cents per therm to pass back
estimated over collected gas costs of approximately $1.7 million as of November 1 , 2007.
The Company states that notice of its proposed decrease in price has been
accomplished by posting a notice at each of the Company s district offices in Idaho, a press
DECISION MEMORANDUM
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 proposed effective date of November 1 , 2007 , Staff recommends that this
case be processed by Modified Procedure with comments due October 24, 2007.
COMMISSION DECISION
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 with comments due by October 24, 20077
DECISION MEMORANDUM