20120925final_order_no_32651.pdf

Office of the Secretary
Service Date
September 25,2012
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF AVISTA )
CORPORATION’S APPLICATION TO )CASE NO.AVU-G-12-05
CHANGE ITS RATES AND CHARGES (2012 )
PURCHASED GAS COST ADJUSTMENT).)ORDER NO.32651
_________________________________________________________________________________
)
On July 31,2012,Avista Corporation dba Avista Utilities filed its annual Purchased
Gas Cost Adjustment (PGA)Application asking to decrease its annualized revenues by about
$3.6 million (5.4%).Application at 1.’The Company says its proposal will not affect its
earnings and will decrease the average residential or small commercial customer’s bill by about
$4.42 per month (7.9%).Id.at 4.The Company asks for the Application to be processed by
Modified Procedure and for the new rates to take effect October 1,2012.Id.at 5.
On August 14,2012,the Commission issued a Notice of Application and Notice of
Modified Procedure soliciting public comments on the Application and setting a September 17,
2012.Order No.32615.Commission Staff and two members of the public filed written
comments,and the Company filed a short reply.
With this Order,the Commission grants the Company’s Application,with
modifications to Schedule 155,as more fully discussed below.
THE APPLICATION
Avista distributes natural gas in northern Idaho,eastern and central Washington,and
southwestern and northeastern Oregon.Application at 2.2 The Company buys natural gas and
then transports it through pipelines for delivery to customers.Id.at 2.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.Id.The Company also defers various pipeline refunds or charges and
miscellaneous revenue received from natural gas related transactions,including pipeline capacity
releases.Id.In its annual PGA filing,the Company proposes to (1)pass any change in the
estimated cost of natural gas for the next 13 months to customers (Schedule 150);and (2)revise
The PGA mechanism is used to adjust rates to reflect annual changes in the Company’s costs for the purchase ofnaturalgasfromsuppliers—including transportation,storage,and other related costs.
2 The Company also generates,transmits,and distributes electricity in northern Idaho and eastern Washington.Id.
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the amortization rates to refund or collect the balance of deferred gas costs (Schedule 155).Id.at
2,4.
The Company says its PGA filing,if approved,would impact customers as follows:
Commodity Demand Total Amortization Total Rate Overall
Schedule Change Change Sch.150 Change Change Percent
Service No.per Therm per Therm Change per Therm per Therm Change
General 101 ($0,02931)($0.00849)($0.03780)($0.00890)($0.04670)(5.02%)
Lg.General 111 ($0.02931)($000849)($0.03780)($0.00890)($0.04670)(6.31%)
Interruptible 131 ($0.0293 1)$000000 ($0,0293 I)($0.00203)($0.03 134)(6.06%)
The Company proposes decreasing the commodity cost (i.e.,the WACOG)from the
currently approved $0.362 per therm to $0.333 per therm,for a $0.029 per therm decrease.Id.at
3.
The Company says it periodically hedged gas throughout 2012 for the coming PGA
year (13 months),and that it will hedge about 60%of its estimated annual load requirements for
the PGA year (October 2012 —October 2013)at a fixed price comprised of:(1)11%of volumes
hedged for a term of one-year or less;(2)29%of volumes from prior multi-year hedges;and (3)
20%of volumes from underground storage.Id.Through June,the planned hedge volumes for
the PGA year have been executed at a weighted average price of $0.309 per therm.Id.
The Company says overall prices today are lower than they were in 2011.The
Company notes it filed an out-of-cycle PGA in February 2012 to reflect lower spot prices,and
that since then natural gas prices have stabilized at a much lower level than this time last year.
Further,natural gas prices during the storage injection season (April-September)have been
lower than they were in 2011.See Application at 4.These decreased prices have lowered the
storage WACOG below what is currently in embedded rates.Id.The lower cash prices and
forward prices for the upcoming PGA year have provided the opportunity to hedge natural gas at
a cost below what is embedded in rates.Id.
The Company says its demand costs account for pipeline capacity releases and
represent the costs to transport gas through pipelines to the Company’s system.The Company
proposes decreasing demand costs because increasing estimated pipeline capacity releases and
decreasing costs from the Canadian pipelines more than offset increased demand costs arising
from the recent Northwest Pipeline rate case approved by FERC.Id.
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The Company proposes to increase the amortization refund rate by $0.00890 per
therm (from $0.02885 per therm to $0.03775 per therm).Id.The Company says this increase is
driven by the recent decline in the wholesale cost of natural gas,which has resulted in a net
refund deferral balance of about $3.1 million.The Company proposes to refund this balance to
customers over the next 13 months,assuming normal weather.Id.
The Company says it notified customers of its proposed tariffs by posting notice at
each of its Idaho district offices,through a press release.Further,the Company says it will send
notice to each customer in a bill insert before the changes take effect.Id.at 2.
THE COMMENTS
Public Comments
Two Avista customers filed written comments.One customer mistakenly believed
that Avista had requested a rate increase.Staff informed that customer that the Company had
filed for a decrease to its natural gas rates.Staff Comments at 9.The second commenter
applauded Avista for reducing rates during a time of economic hardship.
Staff Comments
Staff reviewed the Company’s Application to verify that the Company’s earnings
will not change as a result of the filing.Staff Comments at 2.Staff commented that the
Company’s customer notices and press releases complied with applicable Commission rules
(Rules of Procedure 125.04 and 125.05).Id.at 8.Further,Staff said the Company’s hedging
policies and procurement plan are appropriate and protect customers from the price risks of a
changing market.Id,at 6-7.
Staff reviewed the Company’s proposed modifications to the PGA as reflected in the
Company’s proposed changes to Schedules 150 and 155.Id.at 3-8.Staff reviewed the
Company’s adjustments to Schedule 150 to determine if they reasonably capture the Company’s
variable (commodity)costs and fixed (demand)costs.Specifically,Staff has reviewed the
Company’s pipeline transportation and storage costs,fixed price hedges,estimates of future
commodity prices,and its risk management policies.Additionally,Staff has reviewed the
proposed Schedule 155 amortization rate that “true up”expenses from the last PGA to ensure
that it properly captures all of the deferral account components.Id.at 2.
The Company’s proposed rate changes would decrease annual revenue by about $3.6
million,or 5.4%.Id.Under the proposed rates,a Schedule 101 residential or small business
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customer using an average of 60 therms per month will see a decrease of $4.42 per month,or
approximately 7.9%.
Schedule 150 and the WA COG
The Company proposes a WACOG of $0.333 per therm,which is lower than the
currently-approved $0.362 per therm.Id.at 33 The Company’s proposed decrease is based on
the cost as of mid-July of the Company’s executed hedges,current underground storage,and its
estimated index price for future deliveries.Staff reviewed the Company’s proposed WACOG
and forecasted natural gas prices and believes they are reasonable.Staff thus recommends the
Commission accept the Company’s proposed WACOG.
Staff noted that the Company will continue to watch the market for changes that
could materially impact natural gas prices moving forward.Staff said that if spring and summer
prices significantly deviate from the proposed rates,Staff would expect the Company to return to
the Commission with a new filing.
Schedule 155 Deferred Expenses
The Schedule 155 portion of the PGA is the amortization component of the
Company’s deferral account.When the Company pays more for gas than what is estimated in
the preceding WACOG,a surcharge is issued to customers.However,if the Company pays less
for gas than what is estimated in the preceding WACOG,a credit is issued to customers.
In this Application,the Company proposes to increase the Schedule 155 amortization
refund rate from $0.02885 per therm to $0.03775 per therm,which will refund about $3.1
million to customers over the next 13 months,assuming normal weather.Id.at 6.Staff,on the
other hand,recommends that the Commission decrease the Company’s proposed amortization
rate to $0.01785 per therm and hold back about $1.55 million in an un-refunded credit balance.
Id.at 7-8.Staff said the $1.55 million un-refunded credit balance will remain in the PGA deferral
account and accumulate interest until it is used to offset base rate increases or is returned to
customers in a future PGA.Staff notes that on August 10,2012,Avista filed a Notice of Intent to
File a General Rate Case that may result in a rate increase.Id.Staff says its proposed holdback
can be used to reduce potential rate increases that could occur in the spring and fall of 2013,
thereby improving rate stability in the long-run.Staffs proposal results in an October 1,2012
The Commission approved a $0418 per therm WACOG in the Company’s last annual PGA,and subsequently an
interim PGA of $0362 cents per therm in March 2012.
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rate decrease of approximately $2.14 million in annual revenue,or about 3.2%.Staffs proposed
rate adjustments are as follows:
Service Schedule Commodity Demand Total Sch.Amortization Total Rate Overall
No.Change per Change per 150 Change per Change per Percent
Therm Therm Change Therm Therm Change
General 101 ($002931)($000849)($003780)$0.009975 ($002782)(2.99%)
Lg.General 1 1 1 ($0.02931)($0.00849)($0.03780)$0.009975 ($0.02782)(3.76%)
Interruptible 131 ($0.02931)$000000 ($0.02931 $0015550 ($0.01376)(2.66%)
Id.at8.
Company Reply
In reply,the Company noted that Stafi recommended,among other things,that the
Commission approve a modification to the proposed amortization rate (Schedule 155)such that
approximately $1.55 million in an un-refunded credit balance be held back due to the Company’s
filing of a “Notice of Intent to File a General Rate Case.”The Company said it supports Staffs
position on this issue and that the un-refunded credit balance could be used to mitigate any
potential rate increase approved by the Commission,thereby improving rate stability for
customers.
DISCUSSION AND FINDINGS
The Commission has reviewed the case record,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 §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 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.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.
Based on our review of the record,we find it reasonable to approve the Company’s
proposed Schedule 150,including the proposed WACOG of $0.333 per therm.The Company’s
ORDERNO.32651 5
proposed WACOG was compared to other forecasts and is consistent with the forecasted
northwest regional cost of natural gas.
We also find it reasonable to approve a $0.0 1785 per therm amortization rate for the
proposed Schedule 155 deferral balances.We believe the resulting $1.55 million un-refunded
credit balance will help mitigate potential rate increases and provide rate stability for customers.
Finally,the Commission directs the Company to promptly file an application
amending its WACOG should gas prices materially deviate from the presently approved $0.333
per therm.
ORDER
IT IS HEREBY ORDERED that Avista Corporation’s Purchased Gas Cost
Adjustment (PGA)Application is approved as modified by the body of this Order.The Company
shall decrease its annualized revenues by $3.6 million,establish a WACOG of $0.3 33 per therm,
and decrease the Schedule 155 amortization rate for deferral balances to $0.01785 per therm.
The Company is directed to file conforming tariffs to be effective for service rendered on and
after October 1,2012.
IT IS FURTHER ORDERED that Avista promptly file an application to amend its
WACOG should gas prices materially deviate from the presently approved $0.333 per therm.
IT IS FURTHER ORDERED that Avista continue to file quarterly WACOG
projections and monthly deferred 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.
ORDERNO.32651 6
DONE by Order of the Idaho Public Utilities Commission at Boise,Idaho this 2
day of September 2012.
PAUL KJELLAN ,P SIDENT
MACK A.REDF’oRL:COMMISSIONER
a
MARSHA H.SMITH,COMMISSIONER
ATTEST:
/1 /
Jean D Jewell
Commission Secretary
O:AVUGI 205 kk2
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