20080930final_order_no_30646.pdf

Office of the Secretary
Service Date
September 30, 2008
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE APPLICATION
OF AVISTA UTILITIES FOR AUTHORITY
TO CHANGE ITS NATURAL GAS RATES
AND CHARGES (2008 PURCHASED GAS
COST ADJUSTMENT)ORDER NO. 30646
CASE NO. A VU-08-
On August 18, 2008, A vista Corporation dba A vista Utilities (A vista; Company) filed
its annual Purchased Gas Cost Adjustment (PGA) Application with the Idaho Public Utilities
Commission (Commission) requesting authority to place new rate schedules in effect as of
October I , 2008 that would increase its annual natural gas revenues by approximately $11.
million (14.2%). On September 15, 2008, Avista filed a Revised PGA Application and tariff
sheets to revise the Company s proposed weighted average cost of gas (W ACOG) to reflect a
reduction in wholesale natural gas prices. The Revised Application reduces the Company
proposed PGA increase to $3 275 047 or approximately 3.99%.
The Commission issued a Notice of Application and Modified Procedure on August
, 2008, establishing a comment/protest deadline of September 23 , 2008. The Commission
received comments from Commission Staff and 15 of the Company s customers.After
reviewing the comments and record in this case, the Commission approves the Company
Revised Application, as more fully set forth below.
The Revised Application
A vista states that if the proposed changes in its revised PGA are approved its annual
revenue will increase by approximately $3.3 million or about 4.0%. Under the revised rates, the
average residential or small commercial customer using 65 therms per month will see an
estimated increase of $2.96 per month, or approximately 3.9%. The present bill for 65 therms is
$75.14, while the proposed bill is $78.10. The actual increase will vary based on customer
usage.
Schedule 150 - Purchased Gas Cost Adjustment
The Purchased Gas Cost Adjustment is a forward-looking adjustment that reflects the
anticipated changes in the variable costs to purchase, transport and store natural gas for
customers. Since the Company s original filing, Avista states that wholesale prices for natural
ORDER NO. 30646
gas have continued to fall. During this time, the Company purchased additional natural gas for
the coming year, both for injection into underground storage and at (hedged) forward prices for
delivery throughout the year. The revised filing reflects a lower commodity cost for these
additional purchases/hedges, as well as lower projected prices for (spot) gas that will be
purchased during the forthcoming year.
WACOG
A vista originally requested weighted average cost of gas (W ACOG)
$0.90167/therm for the coming PGA year. Only the WACOG was changed in the Company
revised filing. The revised W ACOG is $0.78646/therm, a 4.11 % increase from 2007. The
proposed WACOG reflects a Schedule 150 increase of 3.102~ per therm over the WACOG in
present rates for interruptible customers on Schedule 131 and 132 and an increase of 3 .879~ per
therm for customers on Schedules 101 , 111 , and 112.
Schedule 155 - Deferred Expenses
The Company s Schedule 155 amortization rate is used to refund or surcharge
customers the difference between the actual gas costs and the projected gas costs allowed in the
previous PGA filing. Avista in this filing proposes to increase the present Schedule 155
amortization rate by 0.664~/therm from the current customer credit of 2.391~/therm. The
proposed credit of 1.727~/therm will allow the Company to refund to customers in the coming
PGA year approximately $1.3 million in over-recovery of deferred costs for 2007. Any over-
collection or under-collection will be trued up in next year s PGA filing.
The Company s proposed annual Purchased Gas Cost Adjustment (PGA) is intended
to (1) pass through changes in the estimated cost of natural gas for the forthcoming year
(Schedule 150), and (2) revise the amortization rate(s) to refund or collect the balance of deferred
gas costs (Schedule 155). Below is a table summarizing the proposed changes reflected in the
Company s revised filing.
ORDER NO. 30646
Commodity Demand Total Sch. 155 Total Rate
Schedule Change Change Sch. 150 Amort.Change Percent
Service No.per therm per therm Change per therm per therm Change
General 101 $0.03102 $0.00777 $0.03879 $0.00664 $0.04543
Lg. General III $0.03102 $0.00777 $0.03879 $0.00664 $0.04543 4.4%
Interruptible 131 $0.03102 $0.03102 $0.00664 $0.03766
Transport 146 $0.00000
The circumstances and conditions relied on for approval of the Company s revised
rates are as follows: A vista purchases natural gas for customer usage and transports it over
Williams Pipeline West (dba Northwest Pipeline Corporation), Gas Transmission Northwest
(GTN), TransCanada (Alberta), TransCanada (BC), and West Coast Pipeline Systems and defers
the effective timing differences due to implementation of rate changes and differences between
Avista s actual weighted average cost of gas (WACOG) purchased and WACOG embedded in
rates. A vista also defers various pipeline refunds or charges and miscellaneous revenue received
from gas-related transactions including pipeline capacity releases.
As reflected in attachments to the Company s filing, many factors have contributed to
the volatility of natural gas prices, making this an especially challenging year for A vista as it
purchases the commodity to serve its customers during the 2008-2009 heating season. The
spring and summer natural gas prices, it states, soared to levels not seen since Hurricanes Rita
and Katrina. Although natural gas prices decreased about 30% in August, prices remain above
levels at this time a year ago.
The Company s Director of Natural Gas Supply, Kevin Christie, notes that an
unusually long, cold spring depleted storage reserves across the country, that natural gas imports
from Canada to the United States are declining, and that international demand has lured liquefied
natural gas (LNG) away from the u.S., putting pressure on natural gas prices. Higher crude oil
prices have put upward pressure on natural gas prIces. Pricing for both of those energy
commodities, Christie states, tends to be correlated.
A vista follows a structured natural gas purchasing plan that allows for flexibility
based on market prices and conditions. Currently, about 67% of estimated customer demand for
the upcoming year is either pre-purchased or placed in storage. This year A vista has increased
ORDER NO. 30646
its underground Jackson Prairie storage capacity from 11 % to 21 % of expected annual demand
requirements. Storage is a valuable asset that allows the Company to purchase lower-cost gas
during the spring and summer months and store it for use during the heating season when
wholesale gas prices are typically highest. However, prices for natural gas during this year
spring and summer time period are higher than in prior years.
Notices of Application and Modified Procedure in Case No. A VU-08-03 were
issued on August 28 2008. A Notice of Revised Application was issued on September 17 2008.
The deadline for filing written comments was September 23 , 2008. Comments were filed by
Commission Staff and 15 of the Company s customers. The customers, some on fixed incomes
all oppose an increase to rates citing hardship, the reported huge profits of the Company and the
excessive salaries of its executives. The Commission Staff reviewed the Company s original and
Revised Applications and performed an audit. Staff reviewed the Company s hedging and risk
management policies, gas purchases, and deferred accounts. After a complete examination of the
Company s original and Revised Applications and gas purchases for the year, Staff recommends
that the Commission accept the Company s Revised Application and filed tariffs.
Commission Findings
The Commission has reviewed the filings of record in Case No. A VU-08-
including the Company initial and revised Applications, and the comments and
recommendations of Commission Staff and A vista customers. We continue to find that Modified
Procedure is appropriate and that public interest does not require a hearing to consider the issues
presented in this case. RP 204.
Customers opposing the Company s proposed PGA increase cite, as a reason for
denial, hardship, the huge Company profits reported by a local newspaper and the excessive
salaries of Avista executives. We address those concerns in the Company s general rate case
(A VU-08-01) and do not address them here.We assure the customers that neither the
Company s corporate profits nor executive salaries are included in or increased by the PGA. The
Commission is required to establish just, reasonable and sufficient rates for A vista. Idaho Code
~ 61-502. It is not possible for us to just say "" to increases that have been shown to be
necessary to maintain a utility s financial health. To do so would violate the law.
ORDER NO. 30646
We encourage customers who qualify for energy assistance to apply for the federally-
funded Low Income Home Energy Assistance Program (LIHEAP) and other non-profit fuel
funds such as Project Share. For more information regarding assistance programs, customers
may contact the local Community Action Agency, Avista Utilities, the Commission, or the 2-
Idaho Care Telephone Line.
The Company s PGA mechanism is designed to pass-through prudently incurred
commodity costs in timely fashion. A vista follows a price stabilization practice of
systematically fixing portions of gas costs using physical hedges and financial instruments in a
purchasing program aimed at achieving a diversified gas portfolio. The natural gas market in the
Northwest continues to be volatile. In this case Avista monitored the changing market
conditions and took advantage of lower prices when the opportunity arose. Through its prudent
actions and purchases the Company was able to significantly reduce its weighted average cost of
gas from the date of its original filing. Its customers benefitted from its vigilance.
The Company in its revised PGA filing requests authority to implement a 2008 PGA
surcharge that will increase annual revenue for natural gas service by approximately $3.3 million
or about 4%. We find that the record in this case supports the implementation of the Company
revised PGA request. We find it reasonable to approve the Company s Revised Application and
filed tariffs. In doing so, we find it reasonable to approve the proposed Schedule 155 credit of
1.727~/therm and a WACOG of78.64~/therm. The changes we approve result in a Schedule 150
surcharge of 3. 879~/therm for customers on tariff Schedules 101 , 111 , and 112 and a surcharge
of 3.1 02~/therm for interruptible customers on Schedules 131 and 132.
CONCLUSIONS OF LAW
The Idaho Public Utilities Commission has jurisdiction over A vista Corporation dba
A vista Utilities, a natural gas utility, and the issues raised in this case, by virtue of Title 61
Idaho Code, and the Commission s Rules of Procedure, IDAPA 31.01.01.000 et seq.
ORDER
In consideration of the foregoing and as more particularly described above, IT IS
HEREBY ORDERED that Avista s Revised Application in Case No. A VU-08-03 is approved.
In doing so, we approve a Schedule 155 credit of 1.727~/therm, a W ACOG of 78.646~/therm, a
Schedule 150 surcharge of 3 .879~/therm for customers on tariff Schedules 101 , 111 , and 112 and
ORDER NO. 30646
a surcharge of 3.02~/therm for interruptible customers on Schedules 131 and 132. The
Company is directed to file conforming tariffs for an effective date of October 1 , 2008.
THIS IS A FINAL ORDER. Any person interested in this Order may petition for
reconsideration within twenty-one (21) days of the service date of this Order. Within seven (7)
days after any person has petitioned for reconsideration, any other person may cross-petition for
reconsideration. See Idaho Code ~ 61-626.
DONE by Order of the Idaho Public Utilities Commission at Boise, Idaho this
"""
day of September 2008.
MARSHA H. SMITH, COMMISSIONER
ATTEST:
D. Jewell
Commission Secretary
bls/O:A VU-O8-03 sw
ORDER NO. 30646