20080730final_order_no_30604.pdf

Office of the Secretary
Service Date
July 30, 2008
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE APPLICATION
OF A VISTA CORPORATION DBA A VISTA
UTILITIES FOR AN ACCOUNTING ORDER
AUTHORIZING ACCOUNTING ENTRIES
RELATED TO THE TERMINATION OF THE
STORAGE AGREEMENT BETWEEN
A VISTA UTILITIES AND TERASEN GAS, INC.
CASE NO. A VU-08-
ORDER NO. 30604
On June 13 , 2008, Avista Corporation filed an Application requesting an accounting
order related to the termination of a Gas Storage Agreement between the Company and Terasen
Gas, Inc. In 1982, Avista and Terasen (formerly known as BC Gas) entered into an agreement
for the storage and subsequent release of natural gas at Avista s Jackson Prairie underground
storage facility. The Agreement with Terasen was terminated May 1 , 2008. On May 1 , Avista
began using the former Terasen storage capacity to serve its own customers.
On July 2, 2008, the Commission issued a Notice of Application and Notice of
Modified Procedure requesting comments on A vista s request for an accounting order. The only
comments filed in response to the Commission s Notice were those of the Commission Staff.
Based upon our review of the record, we grant A vista s request for an accounting order as
described in greater detail below.
THE APPLICATION
Under the terminated Agreement, Terasen paid Avista $191 121 per month for the
storage and eventual delivery of gas to Terasen. The Idaho jurisdictional revenue from the
contract was $54 388 per month and this amount is embedded in the current rates paid by Idaho
customers. The Company s current general rate case (A VU-08-01) recognizes the termination
of the Terasen Agreement. However, until the new general rates become effective, Idaho
customers are currently receiving a revenue "credit" of$54 388 each month although the revenue
is no longer being received from Terasen. Consequently, the Company requested that the
Commission approve an accounting order for the Company to record these deferred "costs" to
Account 191 in the amount of $54 388 each month beginning May 1 , 2008, and ending on the
date on which its new gas rates become effective. The deferred costs associated with any partial
ORDER NO. 30604
month "would be prorated accordingly.Application at 3. This deferred amount would be
included with all other deferred gas costs and be recovered through rates as part of the
Company s annual PGA filing.
STAFF COMMENTS
The Commission Staff supported the Company s request to record the revenue lost
from the recall of the capacity released to Terasen Gas as deferred "costs" in Account 191. The
Staff agreed with the Company that Idaho customers are currently receiving a monthly benefit of
$54 388 until new rates go into effect. The Staff also noted the Company is "not requesting a
rate increase or additional monies beyond what it has been previously authorized to receive, but
rather is requesting the ability to recover revenues that were embedded in base rates that it is no
longer receiving." Staff Comments at 2.
Staff disclosed that it has known for some time that A vista intended to terminate its
Terasen storage agreement this year. Staff asserted that the extra capacity formerly provided to
Terasen will allow A vista to better meet the needs of its customers during the winter months.
Staff calculated that the $2.3 million annual revenue formerly received from Terasen will be
offset by approximately $3.8 million the Company can achieve by taking advantage of a
summer/winter price differential in natural gas. Based upon a conservative $1.65/dekatherms
differential between winter prices and summer prices, Staff calculated that the net benefit to
Idaho customers is approximately $500 000 annually. Id. at 3.
Staffs only concern with the requested accounting treatment was that it will
contribute to a substantial rate increase in the Company s September 2008 PGA filing.
Typically, gas utilities use the summer months to fill underground storage facilities. The stored
gas is then used to serve customers in the winter when gas prices have been traditionally higher.
Staff reported that NYMEX and Sumas gas futures indicate that natural gas prices may be over
$14/dekatherms this winter, or approximately $2/dekatherms more than current prices. Staff
estimated that Avista s Idaho gas customers are facing an increase of 20-25% in retail rates this
fall from the annual PGA filing. This increase would be in addition to any increase in base rates
as a result of the Company s general rate case currently before the Commission. Id.
Staff estimated that the requested accounting deferral will result in an additional
balance of approximately $330 000 for six months before new base rates become effective on or
about November 1 2008. Although this will put upward pressure on PGA rates, any increase in
ORDER NO. 30604
rates going forward will be less than what they would have been otherwise without the
termination of the storage agreement. In addition, A vistas gas customers benefit by having the
additional capacity available for their use. Consequently, the Staff recommends the Commission
approve the Company's Application for a deferred accounting order.
COMMISSION FINDINGS
Based on our review of the Company's Application and the Staff comments, we find it
reasonable to grant A vistas request for a deferred accounting order. Although A vista has
terminated its gas storage agreement with Terasen Gas, revenues from the old contract are still
embedded in current rates. We find it reasonable for Avista to defer $54 388 monthly in gas
costs to Account 191 beginning May 2008. The deferred accounting will end on the effective
date when the Commission approves new gas rates in the Company's current general rate case
(A VU-08-01). We recognize that the Company is not requesting an immediate rate increase
to compensate for the lost revenue; rather the Company is requesting the ability to recover the
imputed revenue that it is no longer receiving. We further find it reasonable that any deferred
costs associated with any partial month should be prorated accordingly. Application at 3.
ORDER
IT IS HEREBY ORDERED that Avista Corporation's Application for a deferred
accounting order is granted. Effective May 1 , 2008, the Company shall record its deferred gas
costs caused by the termination of the Terasen Agreement in Account 191 in the amount of
$54 388 each month. This deferral will cease on the effective date of new base rates in Case No.
A VU-08-01.
IT IS FURTHER ORDERED that any deferral gas costs associated with any partial
month shall be prorated accordingly.
THIS IS A FINAL ORDER. Any person interested in this Order (or in issues finally
decided by this Order) or in interlocutory Orders previously issued in this case may petition for
reconsideration within twenty-one (21) days of the service date of this Order with regard to any
matter decided in this Order or in interlocutory Orders previously issued in this case. Within
seven (7) days after any person has petitioned for reconsideration, any other person may cross-
petition for reconsideration. See Idaho Code 9 61-626.
ORDER NO. 30604
DONE by Order ofthe Idaho Public Utilities Commission at Boise, Idaho this
day of July 2008.
MACK A. REDFORD, P ENT
MARSHA H. SMITH, COMMISSIONER
ATTEST:
bls/O:A VU-08-02 dh2
ORDER NO. 30604