20091028final_order_no_30937.pdf

Office of the Secretary
Service Date
October 28, 2009
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE APPLICATION
OF A VISTA UTILITIES FOR AUTHORITY
TO CHANGE ITS NATURAL GAS RATES
AND CHARGES (2009 PURCHASED GAS
COST ADJUSTMENT).ORDER NO. 30937
CASE NO. A VU-09-
On September 15, 2009, Avista Corporation dba Avista Utilities filed its annual
Purchased Gas Cost Adjustment (PGA) Application requesting authority to decrease its
annualized revenues by approximately $14.7 million. Application at 1. The PGA mechanism is
used to adjust rates to reflect annual changes in Avista s costs for the purchase of natural gas
from suppliers - including transportation, storage, and other related costs. Avista s earnings will
not be decreased as a result of the proposed changes in prices and revenues. On September 29
2009, the Commission issued a Notice of Application and Notice of Modified Procedure setting
an October 16, 2009, deadline for comments. Staff was the only party to file comments. After
reviewing the comments and the record in this case, the Commission approves the Company
Application as modified and more fully set forth below.
THE APPLICATION
The Company states that if the proposed changes are approved its annual revenue will
decrease by approximately $14.7 million or 17.8%. The average residential or small commercial
customer using 66 therms per month will see a decrease of$12.74 per month.
The Company 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 (W ACOG) purchased and the W ACOG
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.
Avista proposes decreasing the W ACOG from the currently approved $0.760 per
therm to $0.491 per thermo The Application asserts that wholesale gas prices have fallen
dramatically since July 2008 and the Company has been hedging gas on a periodic basis
ORDER NO. 30937
throughout 2009 for the coming PGA year. The Company states that approximately 64% of its
estimated annual load requirements for the PGA year will be hedged at a fixed price comprised
of: (1) 42% of volumes hedged for a term of one year or less; (2) 10% of prior multi-year
hedges; and (3) 12% from underground storage. The Company states that through August 2009
most of the planned hedge volumes for the PGA year have been executed at a weighted average
price of $0.582 per thermo
The demand costs included in the Company s Application primarily represent the
costs of pipeline transportation to the Company s system. Avista s proposal includes essentially
no change in the demand cost included in rates. Application at 4.
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 through the past year. The present amortization rate for firm sales
customers is a $0.1580 per therm refund. A vista is proposing a $0.0760 per therm increase in the
amortization rate for firm sales customers. In order to mitigate a potential 2010 PGA increase
the Company proposes to refund the deferral balance over a two-year period, rather than one.
Application at 4.
A vista asserts that it has notified customers of its proposed decrease in rates by
posting a notice at each of the Company s district offices in Idaho, by means of a press release
distributed to various informational agencies, and by separate notice to each of its Idaho gas
customers via a bill insert. The Company requests that this matter be handled under Modified
Procedure pursuant to Rules 201-210 ofthe Commission s Rules of Procedure.
THE COMMENTS
Given that the Company has hedged 64% of its estimated load requirements for the
upcoming year at fixed prices, and it estimates the additional volumes to be purchased at $0.478
per therm, Staff recommended the Commission accept the Company s proposed $0.49093
W ACOG. However, given the volatility of the current market, Staff recommended that the
Commission reserve the right to reopen the case and reevaluate any approved tariffs if the
proposed W ACOG materially changes.
In this PGA filing the Company proposed to refund the deferral balance over a two-
year period. The Company believes that the substantial W ACOG reduction in this filing presents
a unique opportunity to mitigate future PGA increases through a two-year refund of the deferral
ORDER NO. 30937
balance. Staff believes that the risk of higher gas costs for customers next year under a single
year amortization is diminished by the continued growth in the Schedule 155 deferral balance.
Staff also cites the potential for a lower W ACOG than that included by the Company in this case.
Consequently, Staff recommended that the Commission amortize the deferral credit balance to
customers over one year. In doing so, Staff recommended that the Commission accept a
proposed decrease in the credit of 2.008 cents per therm for customers on tariff Schedules 101
and Ill , and a decrease in the credit of 0.433 cents per therm for customers on tariff Schedule
131. I
DISCUSSION
We have reviewed the record for this case, including the Application and comments.
The Commission has jurisdiction over Avista Corporation, a public utility, its Application for
authority to change rates and prices, and the issues involved in this case pursuant to Title 61 of
the Idaho Code, and more specifically, Idaho Code gg 61-117 , 61-129, 61-307, 61-501 , and 61-
502, along with the Commission s Rules of Procedure, IDAPA 31.01.01.000 et seq.
The Commission is required to establish just, reasonable, and sufficient rates for
utilities subject to our jurisdiction. Idaho Code g 61-502. The PGA mechanism is used to adjust
rates to reflect changes in the costs for the purchase of gas from suppliers, including
transportation, storage and other related costs of acquiring and delivering natural gas. The
Company s earnings are not increased from changes in prices and revenues resulting from the
annual PGA. The PGA mechanism is designed to pass through prudently incurred commodity
costs in a timely fashion.
A reduction in demand for natural gas coupled with an abundance of natural gas
supplies have driven down natural gas prices. In addition, A vista follows a flexible, diversified
natural gas purchasing plan and effectively manages its underground natural gas storage facility.
These actions allow A vista to provide stable and low prices to its customers. Consequently, we
find it reasonable to decrease the approved W ACOG from $0.75984 per therm to $0.49093 per
thermo However, because it is understandably difficult to estimate the risk margin built into
forward prices in the current market, the Commission directs the Company to promptly file an
application to amend its W ACOG should gas prices materially deviate from the presently
1 This results in a decrease to the Company s overall revenue by $18 881 959 or 22.90% as opposed to the
Company s proposal of$14 699 479 or 17.83%.
ORDER NO. 30937
approved $0.49093 per thermo Moreover, the Commission reserves the right to reopen this case
and reevaluate the approved tariffs if the W ACOG materially changes. Idaho Code g 61-624.
Typically, when a refund is due to customers, the deferral balance is amortized over
one year. However, in this PGA filing the Company proposed to refund the balance over a two-
year period. In light of the current economic realities facing the utility s customers, the
Commission finds it reasonable and appropriate to amortize the deferral credit balance to
customers over one year.
ORDER
IT IS HEREBY ORDERED that Avista s Application is approved as modified
herein. The Company shall decrease its annualized revenues and establish a Weighted Average
Cost of Gas of $0.49093 per thermo The Company shall file conforming tariffs to be effective
November 1 2009.
IT IS FURTHER ORDERED that Avista amortize the deferral balance and credit
customers over one year. The Commission approves a decrease in the credit of 2.008 cents per
therm for customers on tariff Schedules 101 and Ill , and a decrease in the credit of 0.433 cents
per therm for customers on tariff Schedule 131. This results in a decrease to the Company
annual overall revenue by $18 881 959 or 22.90%.
IT IS FURTHER ORDERED that Avista promptly file an application to amend its
W ACOG should gas prices materially deviate from the presently approved $0.49093 per thermo
THIS IS A FINAL ORDER. Any person interested in this Order (or in issues finally
decided by 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 gg 61-
626 and 62-619.
ORDER NO. 30937
DONE by Order of the Idaho Public Utilities Commission at Boise, Idaho this d g
If..
day of October 2009.
,~~
K MP ON SIDENT
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ARSHA H. SMITH, COMMISSIONER
MACK A. REDFORD, COMMISSIONER
ATTEST:
jlv-
ill
. D. Jewel
Co mission Secretary
O:A VU-09-ks2
ORDER NO. 30937