20080723Comments.pdf

DONALD L. HOWELL, II
DEPUTY ATTORNEY GENERAL
IDAHO PUBLIC UTILITIES COMMISSION
PO BOX 83720
BOISE, IDAHO 83720-0074
[phone]
IDAHO BAR NO. 3366
Street Address for Express Mail:
472 W. WASHINGTON
BOISE, IDAHO 83702-5983
Attorney for the Commission Staff
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE APPLICATION OF )
AVISTA CORPORATION DBA AVISTA )
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-G-08-2
COMMENTS OF THE
COMMISSION STAFF
The Staff of the Idaho Public Utilities Commission, by and through its Attorney of
Record, Donald L. Howell II, Deputy Attorney General, submits the following comments in
-J
response to Order No. 30587 issued on July 2, 2008.
BACKGROUND
On June 13,2008, Avista Corporation dba Avista Utilties fied an Application requesting
an accounting Order related to the termination of a Gas Storage Agreement ("the 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 natual gas at A vista's Jackson Prairie underground storage
facility. Under the Agreement, Terasen paid Avista $191,121 per month for the storage and
STAFF COMMENTS 1 JULY 23, 2008
eventual delivery of gas to Terasen. The Idaho jurisdictional revenue from Terasen, $54,388 per
month, is embedded in the current rates paid by Idaho customers.
The Agreement with Terasen was terminated May 1,2008. On May 1, Avista began
using the Terasen storage capacity to serve its own customers. "The benefits associated with this
recalled storage capacity are directly passed on to customers through the Company's anual
PGA filing." Application at 2.
The termination of the Agreement is incorporated in the Company's curent general rate
case (AVU-G-08-1). However, until the Commission authorizes new general rates to become
effective, Idaho customers are currently receiving a credit of$54,388 each month although the
revenue under the Agreement is no longer being received. Consequently, the Company requests
that the Commission approve an accounting Order for the Company to record the additional
deferred gas costs to Account 191 in the amount of$54,388 each month beginning May 1,2008
and ending on the date in which its new gas rates become effective. The deferred costs
associated with a parial month "would be prorated accordingly. ¡d. at 3. This deferred amount
would be included with all other deferred gas costs and be recovered through the rates as par of
the Company's anual PGA filing.
STAFF REVIEW
Staff has reviewed the Company's Application and is generally supportive of the
Company's request to record the revenue lost from the recall ofthe capacity release to Terasen
Gas as deferred gas costs in Account .191. The revenue that was received from Terasen was
embedded in the calculation of the Idaho revenue requirement in the previous general rate case,
and without that revenue, Idaho gas customers are essentially receiving a monthly benefit of
$54,388 until new rates go in effect from the current rate case A VU -G-08-1. It is importt to
note that 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 abilty to recover revenues that
were embedded in base rates that it is no longer receiving.
The Company has kept Staff well apprised of its intent to recall the excess capacity that it
had released to Terasen. The terms of the original contract required that Avista provide Terasen
with two years notice prior to recallng the capacity. The Company had informed Staff of its
decision on several occasions prior to notifying Terasen and Staff has supported the decision in
both its PGA comments and natural gas IRP comments. The extra capacity will allow the
STAFF COMMENTS 2 JUL Y 23, 2008
Company to better meet the needs of its customers in the cold winter months and wil provide
additional use in the sumer months as the Company injects gas into storage. The $2.3 millon
anual revenue received from Terasen will be offset by approximately $3.8 milion the Company
can achieve by taing advantage of a sumer/winter price differential in natural gas. For its
analysis, the Company used a modest $1.65/dekatherm differential between winter prices and
summer prices. Staff accepts the Company's analysis as conservative, as we have seen larger
swings in prices between the seasons in the past. The net benefit to customers is approximately
$1.5 millon per year system-wide or about $500,000 anually for Avista's Idaho gas customers.
Staffs main concern with the requested accounting treatment is that it will contrbute to
the substantial rate increase that Staff anticipates coming in the Company's September PGA
filing. With the exception of a brief spike after Hurricane Katrina, natural gas prices have
reached record highs this sumer. Typically, gas utilties use the summer months to fill
underground storage facilities that are then used to serve load in the winter when natural gas
prices have been traditionally higher. Even with record high gas prices this summer, NYMEX
and Sumas futures indicate that natural gas may be over $ 14/dekatherm this winter, or
approximately $2/dekatherm more than curent prices. Early estimates indicate that Avista's
Idaho gas customers are facing an increase of 20-25% in retail rates this fall from the anual
PGA filing, on top of any increase in base rates as a result of the Company's general rate case
curently before the Commission.
STAFF RECOMMENDATION
When new base rates become effective around November 1,2008, the additional balance
of approximately $330,000 ($55,000 per month for 6 months) from the recalled Terasen contract
wil provide upward pressure on PGA rates of approximately 0.4%. However, with the anual
benefit of the additional capacity reflected in future PGA cases, any increases in rates going
forward will be less than what they would otherwise have been without the recall. Therefore,
Staff recommends that the Commission approve the Company's Application.
STAFF COMMENTS 3 JULY 23, 2008
Respectfully submitted this 2 ~eJ day of July 2008.
uâ)Donald L. Howell, II
Deputy Attorney General
Technical Staff: Donn English
i: umisc/commentsavug08.2dhtcdeme
STAFF COMMENTS 4 JULY 23, 2008
CERTIFICATE OF SERVICE
I HEREBY CERTIFY THAT I HAVE THIS 23RD DAY OF JUL Y 2008, SERVED
THE FOREGOING COMMENTS OF THE COMMISSION STAFF, IN CASE
NO. AVU-E-08-02, BY MAILING A COPY THEREOF, POSTAGE PREPAID, TO THE
FOLLOWING:
DAVID J. MEYER
VICE PRESIDENT AND CHIEF COUNSEL
A visTA CORPORATION
PO BOX 3727
SPOKANE WA 99220
E-MAIL: david.meyer(iavistacorp.com
KELL Y NORWOOD
VICE PRESIDENT - STATE & FED. REG.
A VISTA UTILITIES
PO BOX 3727
SPOKANE W A 99220
E-MAIL: kelly.norwood(iavistacorp.com
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CERTIFICATE OF SERVICE