20120228final_order_no_32471.pdf

Office of the Secretary
Service Date
February 28,2012
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF AVISTA )
CORPORATION DBA AVISTA UTILITIES’)CASE NO.AVU-G-12-O1
APPLICATiON FOR AN ORDER )
APPROVING A CHANGE IN NATURAL GAS )ORDER NO.32471
RATES AND CHARGES )
On September 30,2011,the Commission approved a new weighted average cost of
gas (WACOG)for Avista Corporation dba Avista Utilities.The Commission also directed the
Company to “promptly file an application to amend its WACOG should gas prices materially
deviate from the presently approved [41.8 cents]1 per therm.”Order No.32370 at 5.
On February 15,2012,in compliance with the above-referenced Order,Avista
applied to the Commission for authority to decrease natural gas rates as a result of declining
natural gas prices.More specifically,the Company asked to decrease its WACOG to 36.2 cents
per therm.The Company states the new rates will decrease annual revenues by about $4.1
million but will not decrease its earnings.The Company notes that under its proposal,the
average residential or small business customer bill will decrease by about $3.46 per month,while
the average,large commercial customer bill will decrease by about 7.30%.The Company asks
that the new rates take effect on March 1,2012.
With this Order,the Commission approves the Company’s Application.
THE APPLICATION
Avista seeks to amend its existing rates and charges for natural gas service as
reflected in a proposed,Seventeenth Revision Sheet 150 to approved Tariff IPUC No.27.
Application at 2.The Company says that if the Commission approves the proposed tariff sheet,
the Company’s annual revenue will decrease by approximately $4.1 million (about 6.0%).The
changes will not affect the Company’s net income.Id.
The Application reflects Avista’s proposed out-of-period Purchased Gas Cost
Adjustment (PGA)to pass through to customers changes in the estimated cost of natural gas for
the eight months from March 2012 through October 2012.Id.at 2.The Company estimates the
The Order approved a WACOG of $0.4 1797 per therm.
ORDER NO.32471 1
WACOG will decrease by 5.6 cents per therm (i.e.,a decrease from the currently approved 41.8
cents per therm to the proposed 36.2 cents per therm).Id.at 3.
In the Application,the Company notes that its 2011 PGA filing estimated costs
associated with index/spot prices by using a 30-day historical average of forward prices ending
August 22,2011 by supply basin.The estimated monthly volumes to be purchased by basin are
multiplied by the (30-day)average price for the corresponding month and basin.These
index/spot volumes represented approximately 30%of estimated annual load requirements for
the PGA year.Id.
The Company notes that average,daily wholesale prices of natural gas have declined
substantially from the forward prices used in the 2011 PGA filing.While we are now 5 months
into the present 13-month PGA year (October 2011 through October 2012),Avista believes that
it is in its customers’best interest to update the pricing of the remaining estimated index/spot
volumes and pass those lower index prices to customers now through a lower overall rate.The
Company also believes that this is in compliance with Order No.32370 which,when approving
the Company’s 2011 PGA,stated that ‘Avista promptly file an application to amend its
WACOG should gas prices materially deviate from the presently approved $0.4 1797 per therm”
rate.Id.at 5.
Avista is not proposing changes to Schedule 150’s other components (demand costs.
variable transportation.etc.)or to current amortization rates (Schedule 155).The Company says
it will propose changes to those items in the normal annual PGA filing in September 2012.Id.
The Company says that if the Commission approves the Application,the average
residential or small business customer using 62 therms per month will see a decrease of $3.46
per month.or about 5.68%.Larger commercial customers can expect an average decrease of
about 7.30%for general service (Schedule Ill),and about 9.74%for interruptible service
(Schedule 131).Id.at 2 and Exhibit B (Notice of Public Applicant’s Proposed Tariffs).
Avista notified the public of the proposed decrease by posting notice at its Idaho
district offices and issuing a press release.If the Application is approved,the Company
maintains that it will also notify customers by placing a message on their bills.Application at 2.
STAFF RECOMMENDATION
After examining Avista’s Application,Staff believes that the accounting treatment
used by the Company is appropriate.By only proposing a change to the WACOG,only
ORDER NO.32471
Commodity Charges contained within Schedule 150 are affected.Current demand charges and
transportation rates in Schedule 150 and current amortization rates in Schedule 155 are
unaffected.The reduction in the WACOG reflected in this filing will affect rates collected once
approved.Variation between actual and projected gas prices will be deferred and become part of
the true-up of the Company’s balancing account in the Company’s normal PGA filing expected
to be effective October 1,2012.
Staff compared Avista’s changes of projected index and spot gas prices for non..
hedged volumes of natural gas to NYMEX/NGX futures prices for basins from which the
Company sources its gas.Based on its analysis,Staff believes that the Company’s proposed
WACOG is reasonable.Staff believes that the proposed decreases from the Company’s previous
PGA filing provide sufficient cause to allow the rates to take effect on less than 30 days’notice.
See Rule 123 and 134 (rates and changes may take effect on less than 30 days’notice if “the
Commission approves an earlier effective date for good cause shown”).Therefore,Staff
recommended the Commission approve the Company’s Application to decrease rates without
further delay or comment,and that the rates take effect March 1,2012.
Staff has also found evidence that index gas prices have continued to soften since
Avista prepared its Application.Staff recommended the Company be required to continue to
monitor future index and spot prices and be required to file another application to amend its
WACOG should gas prices materially deviate from the proposed rate of $036216 per therm.
FINDINGS AND DISCUSSION
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 §61-117,61-129,61-307,61-
501,and 61-502,along with the Commission’s Rules of Procedure,IDAPA 31.01.01.000,etseq.
The Commission must establish just,reasonable,and sufficient rates for utilities
subject to its jurisdiction.Idaho Code §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.Consistent with Order
No,32370,the Company must promptly seek to adjust its rates whenever natural gas prices
materially deviate from the Commission-approved WACOG.
ORDER NO.32471 3
Here,natural gas prices have materially decreased since the Commission approved
the Company’s current WACOG of $41.8 cents per therm.Consequently,the Commission finds
that the Company has appropriately filed to decrease its WACOG.The Commission finds that
the proposed WAGOG of $036216 per therm is reasonable and that,under the circumstances,
allowing customers to immediately benefit from the resulting rate decrease is sufficient cause to
let the rates take effect on less than 30 days’notice.See Idaho Code §61-307,and Rules 123
and 134 (rates and changes may take effect on less than 30 days’notice if the Commission
approves an earlier effective date for good cause).Accordingly.the Commission approves the
requested effective date of March 1,2012.
The Commission commends the Company for promptly seeking to amend its
WACOG and decrease rates.The Commission finds it appropriate for the Company to continue
to monitor future index and spot prices and to seek to amend its WACOG again if gas prices
materially deviate from $0.36216 per therm.
ORDER
IT IS HEREBY ORDERED that Avista’s Application is approved.The Company is
authorized to pass-through its proposed rate decrease to customers as filed.The Company’s
WACOG shall decrease from $0.41797 per therm to $036216 per therm.The Company’s
proposed tariff sheet at Exhibit A to the Application is approved as filed with an effective date of
March 1,2012.
IT IS FURTHER ORDERED that Avista shall promptly apply to amend its WACOG
if gas prices materially deviate from the presently approved $0.36216 per therm.
IT IS FURTHER ORDERED that Avista shall continue to file quarterly WACOG
projections and monthly de1rred-cost reports with the Commission.
THIS IS A FINAL ORDER.Any person interested in this Order (or in issues finally
decided by this Order)may petition for reconsideration within twenty-one (21)days of the
service date of this Order.Within seven (7)days after any person has petitioned for
reconsideration,any other person may cross-petition for reconsideration.See Idaho Code §61-
626.
ORDER NO.32471 4
DONE by Order of the Idaho Public Utilities Commission at Boise,Idaho this 2 ‘
day of February 2012.
PAKLLA D R(R IDENT
MACK A.REOR,COMMISSIONER
Out of the Office on this Date
MARSHA H.SMITH,COMMISSIONER
ATTEST:
1L /i
J$in D.Jewel(J
iommission Secretary
O:AVU-G I 2-0 Ikk
ORDER NO.32471