20080411Decision memo.pdf

DECISION MEMORANDUM
TO:COMMISSIONER REDFORD
COMMISSIONER SMITH
COMMISSIONER KEMPTON
COMMISSION SECRETARY
COMMISSION STAFF
FROM:SCOTT WOODBURY AND KRISTINE SASSER
DEPUTY A TTO RNEYS GENERAL
DATE:APRIL 9, 2008
SUBJECT:CASE NOS. A VU-08-0l/A VU-G-08-01 (A vista)
GENERAL RATE CASE - ELECTRIC/GAS
On April 3 , 2008 , Avista Corporation dba Avista Utilities (Avista; Company) filed an
Application with the Idaho Public Utilities Commission (Commission) for authority to increase the
Company s general rates for electric and natural gas service in Idaho by averages of 15.8% and 5.
respectively. If approved, the Company revenues for electric base retail rates would increase by
$32.3 million annually; Company revenues for natural gas service would increase by $4.7 million
annually. The Company requests an effective date of May 5, 2008 for its proposed electric/gas rate
Increase.
Electricity
Under the Company s rate proposal, an average residential electric customer (Schedule 1)
using 977 kilowatt hours of electricity per month would see a $10.70 per month increase or 15.9% for
a revised monthly bill of $78.08. This includes a Company proposed increase in the basic monthly
customer service charge from $4.00 to $4.60. Other electric customers would see an increase
between 15.4% and 16.5%.
The proposed revenue increase for electric service requested in this case, the Company
states, is driven primarily by increased power supply costs, capital investments in upgrading aging
infrastructure to increase capacity and reliability, relicensing costs for Avista s Spokane River
Hydropower Project, and the Company s investment in advanced meter reading (AMR).
Natural Gas
Under the Company s rate proposal, an average residential natural gas customer (Schedule
101) who uses 65 therms per month would see a $4.91 increase or 6., for a revised monthly bill of
DECISION MEMORANDUM
$80.05. This includes a proposed increase in the monthly basic customer service charge from $3.
to $4.00. Larger commercial natural gas customers would see no more than a 3.3% increase. The
proposed rate change for natural gas customers, the Company states, does not reflect changes in the
cost of natural gas purchased by A vista to serve customers. Changes in the cost of natural gas are
reflected in annual Purchased Gas Adjustment.
Driving the natural gas rate request in this case is Avista s investment in expanding the
natural gas storage and delivery capacity at its Jackson Prairie Storage Facility and the Company
investment in advanced meter reading (AMR).
Evidence in support of the Company s need for a rate increase for electric and natural gas
is based on a 2007 test year. The Company proposes an average rate of return on rate base of 8.74%
with a 47.94% common equity ratio and a 10.8% return on equity. Avista alleges that unless it is
authorized to increase rates as requested, the Company s rates will not be fair, just and reasonable
and it will not have the opportunity to realize a fair return on its investment.
The Company s base rates and charges for electric and natural gas service were last
adjusted in 2004 (Case Nos. A VU-04-0l/A VU-04-, Order No. 29602). An additional electric
rate adjustment related to the Coyote Springs II generating project was implemented April 12, 2005
(Case No. A VU-05-0l).
COMMISSION DECISION
A vista has filed combined general rate case for its electric and natural gas servIce In
Idaho. Staff recommends that the Commission suspend the rates which are the subject of this
Application for a period of 30 days plus 5 months from the proposed May 5, 2008 effective date
(Idaho Code ~~ 61-622 and 61-623). Staff further recommends that the Commission issue a Notice
of Application, establish an intervention deadline, and schedule a prehearing conference. Staff will
recommend further procedure as the case develops. Does the Commission agree with Staffs
recommended procedure?
Scott D. Woodbury
Deputy Attorney General
bls/M:AVU-O8-0l/AVU-O8-01 sw
DECISION MEMORANDUM