20130925final_order_no_32898.pdf

Office of the Secretary
Service Date
September 25,2013
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF AVISTA )
CORPORATION’S APPLICATION TO )CASE NO.AVU-G-13-01
CHANGE ITS RATES AND CHARGES (2013 )
PURCHASED GAS COST ADJUSTMENT).)ORDER NO.32898
________________________________________________________________________________________
)
On July 31,2013.Avista Corporation dba Avista Utilities (‘Company”or “Avista”)
filed its annual Purchased Gas Cost Adjustment (‘PGA”)Application asking to increase its
annualized revenues by about $4.9 million (7.5%).Application at 1.The Company says its
proposal will not affect its earnings and will increase the average,residential or small
commercial customer’s rates by $3.80 per month (6.8%).Id.at 4.The Company proposes that
the new rates take effect October 1,2013.Id.at 4-5.
On August 13,2013,the Commission issued a Notice of Application and Notice of
Modified Procedure soliciting public input on the Application and setting a September 11,2013
comment deadline.Order No.32874.The Commission also held a public workshop on
September 5,2013 in Coeur d’Alene,Idaho.Commission Staff and three members of the public
filed timely written comments,and the Company did not reply.
Having reviewed the record,the Commission issues this Order granting the
Company’s Application as discussed below.
THE APPLICATION
Avista distributes natural gas in northern Idaho.eastern and central Washington,and
southwestern and northeastern Oregon.Application at 2.1 The Company buys natural gas and
then transports it through pipelines for delivery to customers.Id.at 2.It 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.
The Company also generates,transmits,and distributes electricity in northern Idaho and eastern Washington.Id.
ORDER NO.32898 1
The PGA mechanism is used to adjust rates to reflect annual changes in the
Company’s costs for the purchase of natural gas from suppliers —including transportation,
storage,and other related costs.With this PGA filing,the Company proposes to:(1)pass to
customers any change in the estimated cost of natural gas for the next 13 months (Schedule 150);
and (2)revise the amortization rates to refund or collect the balance of deferred gas costs
(Schedule 155).Id.at 2,4.The Company’s PGA filing 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 pjpp per Therm gç
General 101 $0.04066 $0.00471 $0.04537 $0.01800 $006337 6.8%
Lg.General 111 $0.04066 $000471 $0.04537 $001800 $0.06337 9.7%
131 $0.04066 $0.00000 $0.04066 $0.00621 $0.04687 8.3%
Avista estimates that the commodity cost (i.e.,the WACOG)will increase by $0.041
per therm,from the currently approved $0.333 per therm to $0.374 per therm.Id.at 3.
Avista says it periodically hedged gas throughout 2013 for the coming PGA year (13
months),and that it will hedge about 38%of its estimated annual load requirements for the PGA
year (October 2013 —October 2014)at a fixed price comprised of:(1)12%of volumes hedged
for a term of one-year or less;and (2)26%of volumes from prior multi-year hedges.Id.
Through June,the planned hedge volumes for the PGA year have been executed at a weighted
average price of $0.452 per therm.Id.Avista says underground storage capacity represents
about 19%of its annual load requirements,with the estimated weighted average cost for all
storage volumes being $0.325 per therm.Id.
Avista says lower overall demand,increased production,and record high storage
impacted the 2012 natural gas market and drove natural gas prices to 10-year lows.But these
prices trended upward for most of 2013.According to the Company,the late,colder than normal
winter increased demand,reduced excess supply,and decreased storage balances to levels below
the five-year average.The Company explains that this return to a more balanced market added
to the uplift of natural gas prices and increased the WACOG components (hedges,index,and
storage)for the upcoming PGA year above the prior year and what is currently included in rates.
Id.at4-5.
Avista’s demand costs primarily represent the cost to transport gas through interstate
pipelines to the Company’s distribution system.The Company proposes increasing demand
ORDER NO.32898 2
costs principally to account for the inclusion of the new Northwest Pipeline transportation rates.
Id.at 5.
Avista proposes increasing the amortization rate by $0.01800 per therm (from
$0.01785 per therm in the rebate direction to $0.00015 per therm in the surcharge direction).
This increase is the result of fully amortizing the $1.6 million rebate deferral balance approved in
the 2012 PGA (the Company says the amortization balance actually was over-amortized by
about $0.1 million).The Company says this surcharge balance was mostly offset by current
2012-2013 deferrals,resulting in a deferral balance,in the surcharge direction,of about $12,000.
Id.
Avista asserts that it has notified customers of its proposed tariffs by posting notice at
each of its Idaho district offices and issuing 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
Three public commenters opposing the increase argue that the Company should not
receive a rate increase because there is abundant oil and gas in the country and the requested
increase will be hard on persons living on a fixed income.Further,the Company should
advocate for its customers by lobbying Washington to not shut down coal plants and other
energy sources.
The Commission Staff recognizes that rate increases can be difficult for customers on
a fixed income,but Staff supports the Company’s Application because proposed adjustments to
Schedules 150 and 155 reasonably capture the Company’s fixed (demand)and variable
(commodity)costs.
The Schedule 150 part of the PGA consists of the Company’s commodity costs (the
weighted average cost of gas or “WACOG”)and demand costs (the cost to transport gas to the
Company’s distribution system).Staff reviewed the Company’s Schedule 150 proposal and
found the Company’s hedges to be prudent and its approach to estimating forward prices and
demand costs to be reasonable.Staff thus recommended the Commission accept the Company’s
proposal to increase the WACOG by $0.04 1 per therm (from the current WACOG of $0.33 3 per
therm to $0.37350 per therm)and proposed demand costs of $0.l0798 per therm.
With regard to the Schedule 155 part of the PGA,which is the amortization of the
Company’s deferral account,Staff explains that the current year’s deferral activity consists of the
ORDER NO.32898 3
difference in the price the Company paid for natural gas and the WACOG established in the prior
PGA.interest charges on the deferred amount,and capacity releases to benefit customers.In this
case,the Company paid more for gas than what was estimated in the prior WACOG.
Accordingly.the Company proposes to increase the Schedule 155 amortization rate by $0.0 1800
per therm (from a $0.01 785 credit to a $0.000 15 per therm surcharge).Staff recommended the
Commission approve the Company’s proposal,which will enable the Company to recover an
$11 .837 deferral balance over the next 12 months.
Lastly,StafT recommended the Commission tell customers about potential financial
assistance opportunities,such as the Low Income Energy Assistance Program (LIHEAP)and
Project Share.
DISCUSSION AND FINDINGS
The Commission has reviewed the case record,including the Application and
comments.The Company is a public utility,and the Commission has jurisdiction over it and the
issues in this case under Title 61 of the Idaho Code,and more specifically,Idaho Code §61-
117,61-129.61-307.61-501,and 61-502.The Commission must establish just,reasonable,and
sufficient rates for utilities subject to its jurisdiction.Idaho Code §6 1-502.The PGA
mechanism is used to adjust rates to reflect changes in the Company’s costs for the purchase of
natural gas from suppliers —including transportation,storage and other related costs.The
Company’s earnings are not to be increased from changes in prices and revenues resulting from
the 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 $0.37750 per therm.The
Company’s 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
$0.00015 per therm amortization rate for the proposed Schedule 155 deferral balances.The
proposed changes shall take effect on October 1,2013.
We direct the Company to promptly file an application amending its WACOG should
gas prices materially deviate from the WACOG approved in this Order.
We appreciate the public comments received in this case.We understand that many
customers struggle to pay utility bills,and we remind these customers they may qualify for
ORDER NO.32898 4
financial assistance.Information regarding the federally-funded Low Income Energy Assistance
Program (LIHEAP)and local non-profit and other fuel funds such as Project Share in Avista’s
northern Idaho service territory,can be obtained by calling the nearest Community Action
Agency,Avista Utilities,the Idaho Public Utilities Commission,or the 2-1-1 Idaho Care Line.
ORDER
IT IS HEREBY ORDERED that the Company’s PGA Application is approved.The
Company shall establish a WACOG of $0.37350 per therm,and increase the Schedule 155
amortization rate for deferral balances rate by $0.01800 per therm (from a $001785 credit to a
$0.00015 per therm surcharge).The Company is directed to file conforming tariffs to be
effective for service rendered on and after October 1,2013.
IT IS FURTHER ORDERED that Avista promptly file an application to amend its
WACOG should gas prices materially deviate from the WACOG approved in this Order.
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.
ORDER NO.32898 5
DONE by Order of the Idaho Public Utilities Commission at Boise.Idaho this
day of September 2013
J\I\Q)
ATTEST:
/1 /1 [=Ii
/l.)7
.JIktn D.Jewell3
Commission Secretary
MACK A.REDFORD,COMMISSIONER
MARSHA H.SMITH,COMMISSIONER
O:AVUGI3O1kk2
PA PRESDFNT
ORDER NO.32898 6