20090925Decision Memo.pdf

DECISION MEMORANDUM 1
DECISION MEMORANDUM

TO: COMMISSIONER KEMPTON
COMMISSIONER SMITH
COMMISSIONER REDFORD
COMMISSION SECRETARY
COMMISSION STAFF

FROM: KRISTINE SASSER
DEPUTY ATTORNEY GENERAL

DATE: SEPTEMBER 24, 2009

SUBJECT: IN THE MATTER OF AVISTA’S 2009 PGA, CASE NO. AVU-G-09-05

On September 15, 2009, Avista Corporation 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. The Company requests that its Application be
processed by Modified Procedure and that its rates become effective on November 1, 2009.
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 (WACOG) purchased and the WACOG 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 WACOG from the currently approved $0.760 per therm
to $0.491 per therm. The Application asserts that wholesale gas prices have fallen dramatically
DECISION MEMORANDUM 2
since July 2008 and the Company has been hedging gas on a periodic basis 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 therm.
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 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. Avista is proposing a $0.760 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.
Avista 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 of the Commission’s Rules of Procedure.
STAFF RECOMMENDATION
Staff recommends that the case be processed by Modified Procedure with comments due
by October 16, 2009.
COMMISSION DECISION
1. Does the Commission wish to process this case under Modified Procedure with
comments due no later than October 16, 2009?

M:AVU-G-09-05_ks