20140815Comments.pdf

Avista Gorp.
1411 East Mission P.O. Box3727
Spokane. Washington 99220-0500
Telephone [phone]
TollFree 800-727-9170
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FILED ELECTRONICALLY & VIA OVERNIGHT MAIL
August 14,2014
Jean D. Jewell
Commission Secretary
Idaho Public Utilities Commission
472 W . Washington Street
Boise,lD 83702
Re: Case Nos. AVU-E-14-05 and AVU-G-14-01
Comments of Avista Corporation
Enclosed for filing with the Commission are an original and seven copies of the Comments
of Avista Corporation in support of the Stipulation and Settlement in the above-referenced
dockets.
Please direct any questions related to this filing to Patrick Ehrbar at 509.495.8620.
Sincerely,w//-
{avidJ. Meyer
Vice President, Chief Counsel for Regulatory
& Governmental Affairs
Enclosures
c: Service List
CERTIFICATE OF SERVICE
I HEREBY CERTIFY that I have this 14th day of August, 2014, served Avista's
comments in support of the Stipulation and Settlement in Case Nos. AVU-E-14-05 and
AVU-G-14-01, upon the following parties, by electronic mail:
Jean D Jewell, Secretary
!daho Public Utilities Commission
Statehouse
Boise, lD 83720-5983
Jean. iewell@puc. idaho. qov
Donald Howell
Deputy Attorney General
ldaho Public Utilities Commission
472W. Washington
Boise, lD 83702-0659
kristine. sasser@ouc. idaho. oov
donald. howell@puc. idaho.qov
Marv Lewallen
Clearwater Paper
601 W. Riverside Avenue
Suite 1100
Spokane, WA 99201
marv. lewallen@clearwaterpaper. com
Ken Miller
Snake River Alliance
223 N. 6th Street
Boise, lD 83702
km i ller@sna keriveral I ia n ce. orq
Brad M. Purdy
Attorney at Law
2019 N 17th Street
Boise, lD 83720
[e-mail]
Peter J. Richardson
Greg M. Adams
Richardson & O'Leary PLLC
515 N. 27th Street
PO Box 7218
Boise, lD 83702
peter@richardsonandolearv. com
o reo @rich ardsondoleary. com
Dean J. Miller
McDevitt & Miller, LLP
420W. Bannock St.
PO Box 2564-83701
Boise, lD 83701-2564
ioe@mcdevitt-miller. com
Benjamin J. Otto
ldaho Conservation League
710 N. 6s St.
Bosie, ldaho 83702
botto@idahoconservation. orq
Patrick Ehrbar
Manager, Rates & Tariffs
David J. Meyer, Esq.
Vice President and Chief Counsel for
Regulatory and Governmental Affairs
Avista Corporation
1411 E. Mission Avenue
P.O.Box3727
Spokane, Washingto n 99220
Phone: [phone], Fax: [phone]
IN THE MATTER OF THE APPLICATION )
OF AVISTA CORPORATION TO INITIATE )
DISCUSSIONS WITH INTERESTED )
PARTIES ON AN EXTENSION OF THE )
EXISTING RATE PLAN. )
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
CASE No. AVU-E-14-05
CASE No. AVU-G-14-01
COMMENTS OF AVISTA IN
SUPPORT OF SETTLEMENT
STIPULATION
I. INTRODUCTION
On July 23, 2014, the Idaho Public Utilities Commission ("IPUC" or the
"Commission") issued Order No. 33080 which provided that interested parties could file
written comments in support of the Settlement Stipulation no later than August 15, 2014.
Avista Corporation ("Avista" or "Company") provides the following comments in support of
the Settlement Stipulation.
The Settlement Stipulation, agreed to by all of the parties participating in this
proceeding, and through the give-and-take of negotiation, produces an end result that is just
and reasonable, and in the public interest. The Settlement provides base rate certainty over
the next year (2015), which would benefit all customers, as they plan and budget for their
needs. As such, it extends the existing rate plan for an additional year. It would prohibit
Avista from making further changes in base rates prior to January l, 2016, and would
Avista's Comments in Support of Stipulation and Settlement
AVU-E-14-05 & AVU-G-14-01 Page I
provide Avista with the opportunity to manage its costs in order to earn the agreed-upon
return on equity. Finally, in order to allay any concems that Avista might somehow o'over-
eam" during the 2015 rate-plan extension, Avista would continue the earnings test that would
refund back to customers 50% of any earnings that exceed a9.8%o return on equity ("ROE")
during 2015, based on actual, consolidated results for its Idaho electric and natural gas
operations.
II. BACKGROT'ND
In Case Nos. AVU-E-12-08 and AVU-G-12-07, the Commission previously approved
a settlement that provided for a rate plan that set base rates for a period extending through
January 1,2015.
On March 24,2014, in compliance with the minimum sixty-day notice requirement of
Rule 122 of the IPUC Rules of Procedure 'Notice of Intent to File a General Rate Case,"
Avista provided notice to the IPUC that the Company intended to file a combined electric
and natural gas general rate case on or after June 2, 2014.
Between May 22 and May 27,2014, Avista had informal discussions, individually,
with the Staff of the Idaho Public Utilities Commission, Clearwater Paper Corporation, the
Idalro Forest Group, LLC, the Idaho Conservation League, the Community Action
Partnership Association of Idaho, and the Snake River Alliance, representing all intervenors
and interested parties in the Company's last general rate case (Case Nos. AVU-E-12-08 and
AVU-G-12-07).
As a part of those informal discussions, Avista explained a proposal to extend the
existing rate plan approved by the Commission in the Company's last general rate case, and
Avista's Comments in Support of Stipulation and Settlement
AVU-E-I 4-05 & AVU-G-14-01 Page2
avoid the need for Avista to immediately file a general rate case that would otherwise take
effect on or after the expiration of the existing rate plan on January l, 2015. All of the
parties expressed a willingness to engage in settlement discussions for the purpose of
exploring an extension of the existing rate plan. As part of this process, Avista furnished
information to Staff and interested parties about the size and scope of the anticipated general
rate filing and responded to requests for additional information.
On May 30,2014, Avista filed a request with the Commission for approval to initiate
settlement discussions with the Parties. On June 11,2014, the Commission issued Order No.
33051 and formally notified the public and interested parties of Avista's intent to engage in
settlement discussions, pursuant to Rule 273. The Order set a settlement conference for June
25,2014, so the Parties could discuss the Company's desire to avoid filing a general rate case
in20l4, and extend the existing rate plan for an additional period of time.
On June 25,2014, the Parties (signatories to this Stipulation) met for the purpose of
exploring a settlement that would extend the existing base rates for an additional year. The
Parties were able to reach agreement among themselves on terms and conditions such that
Avista would not seek to implement a change in base rates prior to 2016.In addition, under
the Stipulation, the increases in rates that would otherwise occur on January l, 2015,
resulting from the expiration of the BPA Credit (1.3%), and the PGA Defenal Credit (1.7%),
will not occur, but will be replaced with other credits or rebates to customers.
III. CURRENT IDAHO RATE PLAN ELEMENTS
The current and existing Idaho Rate Plan from Case Nos. AVU-E-12-08 and AVU-G-
12-07 contains the following elements:
Avista's Comments in Support of Stipulation and Settlement
AVU-E-I 4-05 & AVU-G-14-01 Page 3
t0
tl
Rate Freeze - The current Avista Rate Plan in Idaho provides for no new electric or
natural gas general rate increases to become effective prior to January 1,2015.
BPA Credit - Avista's electric customers are currently receiving a rebate of $3.865
million (1.3% on Schedule 97), related to the prior settlement with the Bonneville
Power Administration ("BPA"), for the l5-month period October 1,2013 through
December 31,2014. Retail electric rates would increase 1.3% effective January l,
2015 with the expiration of this rebate.
PGA Deferral Credit - Avista's natural gas customers are currently receiving a
rebate of $1.55 million (1.7% on Schedule 197), related to a Purchased Gas Cost
Adjustment ("PGA") deferral credit balance, for the 15-month period October 1,2013
through December 3I,2014. Retail natural gas rates would increase l.7Yo effective
January 1,2015 with the expiration of this rebate.
2013 Earnings Test - In the Company's last general rate case, the Company agreed
to an after-the-fact earnings test, where it would share with customers one-half of any
earnings in excess of the 9.8% ROE, on a consolidated basis for electric and natural
gas, for each of the years 2013 and20l4. For the 2013 eamings test, Avista defened
a benefit of $3.914 million for electric customers, and $444,000 for natural gas
customers.
Natural Gas Enerry Efficiency Funding Balance - Avista currently has a Schedule
191 Natural Gas Energy Efficiency funding balance due customers of $653,000 (the
current Schedule 191 tariff rate is zero and no energy efficiency projects are
ongoing).
IV. TERMS OF THE SETTLEMENT AGREEMENT
The terms of the Settlement Agreement are provided below. Included as Attachment
A is a schematic of the components of the Rate Extension Plan.
Avista's Comments in Support of Stipulation and Settlement
AVU-E- 14-0s & AVU-G-14-01
t3
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Page 4
t8
t6 A. Avista would not file an electric or natural gas general rate case in 2014, and
would not file for new electric or natural gas base rates to be effective prior to
January 1,2016.r
B. The BPA Credit and the PGA Defenal Credit would be replaced using other
deferral balances such that customers would not experience rate increases effective
January 1,2015.
1. The $653,000 Schedule 191 Natural Gas Energy Efficiency funding balance
and the $444,000 2013 natural gas earnings test deferral would be used to
replace the 1.7%o PGA Deferral Credit ($1,179,000) on natural gas Schedule
197 from January 1,2015 to December 31, 2015, which would result in no
rate increase for customers January 1,2015. The language on Schedule 197
would be revised to describe the new rebate.
2. $3.201 million of the $3.914 million 2013 electric earnings test deferral would
be used to replace the l.3o/o BPA credit on electric Schedule 97 from January
1,2015 to December 31, 2015, which would result in no rate increase for
customers January 1,2015. The language on Schedule 97 would be revised to
describe the new rebate.
The remaining $713,000 of the 2013 electric earnings test deferral would be
credited to customers through the Power Cost Adjustment ("PCA") over a
one-year period beginning October 1,2014.
Any differences between the estimated 2015 electric and natural gas credits,
and the actual amounts rebated to customers through December 31, 2015 on
Schedules 97 and 197, would be added to, or subtracted from, the PCA and
PGA defenal balances, respectively.
C.Project Compass2 - Eighty-percent (S0%) of the revenue requirement
associated with Project Compass during 2015, beginning the month the Project goes
t Accordingly, the Parties agree that Avista will not file another electric or natural gas general rate case before
May 3 l, 2015, and while it may request an effective date earlier than January l, 2016, final approved new rates
would not go into effect prior to January 1,2016. This does not apply to tariff filings authorized by or
contemplated by the terms of the Power Cost Adjustment (PCA), or the Purchased Gas Cost Adjustment tariff
(PGA), or other miscellaneous filings.
Avista's Comments in Support of Stipulation and Settlement
AVU-E-14-05 & AVU-G-14-01
t9
20 J.
4.2l
22
Page 5
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into service, would be deferred for recovery in a future proceeding. The 80% figure
was arrived at through negotiation for calendar year 2015 only, and is unrelated to
any assessment or determination of the prudence of the Project. The deferral is due,
in part, to the uncertainty of the timing of the in-service date for the project. In
next general rate case, Avista will address the prudence of Project Compass, and
request full recovery of the cost of the project on a going-forward basis.3
D. CS2/Colstrip O&M Amortization - The three-year amortization of the 2013
Coyote Springs 2/Colstrip O&M defenal balance of $1.253 million ($418,000 per
year) would begin January l,20l6,instead of January 1,2015.4
2 Project Compass involves the replacement of Avista's legacy Customer lnformation System, which
is composed of three highly-connected applications, which include:o Customer Service System - this application supports the traditional utility business functions
of meter reading, customer billing, payment processing, credit, collections, field requests and
customer service orders;
Work Management System - this application is used to create orders for service
emergency calls and for construction jobs for customers and Company operations; and
Electric & Gas Meter Application - this application hosts the data for the Company's
service electric and gas meters.
Together, these three applications have been connected over time with many other applications and
systems required to conduct all aspects of Avista's customer service, and natural gas and electric
business operations.
'Eighty-percent of the estimated2Ol5 electric revenue requirement is $2.663 million (Idaho share),
plus $0.637 million for natural gas (Idaho share), for an estimated total of S3.3 million. There would
be no carrying charge on the deferral.
a Per Order No. 32371 (Case No. AVU-E-ll-01), the Company was allowed to defer changes in
O&M costs related to its Coyote Springs 2 (CS2) natural gas-fired generating plant located near
Boardman, Oregon, and its fifteen (15) percent ownership share of the Colstrip 3 & 4 coal-fired
generating plants located in southeastern Montana in order to address the large variability in year-to-
year O&M costs, beginning in 2011. The Company compares actual, non-fuel, O&M expenses for
the Coyote Springs 2 and Colstrip 3 & 4 plants with the amount of expenses authorized for recovery
in base rates in the applicable deferral year, and defers the difference from that currently authorized.
The deferral occurs annually, with no carrying charge, with deferred costs being amortized over a
three-year period, beginning in January of the year following the period costs are deferred. In Case
No. AVU-E-12-08, the beginning of the amortization of the 2013 deferral was delayed from 2014 to
2015. This Stipulation delays the beginning of the amortization of the 2013 deferral for one year
Avista's Comments in Support of Stipulation and Settlement
AVU-E-l4 -05 & AVU-G-14-01
and
Page 6
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E. Earnings Test - Any earnings test deferral for 2014 would be set aside to
support the one-year extension of the Rate Plan as explained below:
l. An ROE deadband would be established for 2015 between the authorized
ROE of 9.8%o and9.5%.
2. During the calendar year 2015, if Avista earns less than a 9.5% ROE, on an
actual consolidated basis for electric and natural gas, any eamings test deferral
balance from 2014 would be used to move Avista's earnings up to, or up
toward, the 9.5%o ROE on an actual consolidated basis.
3. Any 2014 earnings test deferral balance that is not needed to achieve a 9.5o/o
ROE for 2015, e.g., Avista ezuns more than 9.5% ROE during 2015, would
continue to be held as a deferral for future credit to customers.
4. During the 2015 calendar year, if Avista earns more than a 9.8% ROE, on an
actual consolidated basis for electric and natural gas, Avista would defer, for
future rebate to customers, 500/o of any eamings above the 9.8oh.
F. Meet and Confer Regarding Low-Income Issues - On or before October 1,2014,
Avista will meet with Commission Staff and other interested Parties to this case to
review the following issues:
Cost-effectiveness and appropriate funding of natural gas and electric
demand-side management ("DSM") programs for low-income customers:
Prior to the meeting, Avista will provide the Parties with the 2013 DSM
Impact Evaluation prepared by its consultant, Cadmus, as well as current
information pertaining to the cost-effectiveness of its low-income programs in
Idaho. In addition, Avista will provide its analysis of when and under what
conditions natural gas DSM programs will become cost-effective and program
funding resumes.
Electric and natural gas usage by low-income customers in Avista's Idaho
service territory and potential rate-design implications for such customers:
Prior to the meeting, Avista will provide usage data for its Idaho residential
customers for 201l-2013. Avista will consult with the Parties to identiff their
specific data requirements.
No later than December l, 2014, the Parties will determine if a formal filing
with the Commission is warranted based upon review of low-income DSM
pro gftrm co st-effectiveness and low-income usage.
from 201 5 to 2016, consistent with the one-year extension of the rate plan. The amortization of any
deferral from2014 will begin in 2015.
Avista's Comments in Support of Stipulation and Settlement
AVU-E-14-05 & AVU-G-14-01 Page 7
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V. THE STIPULATION IS IN THE PUBLIC INTEREST
This Stipulation strikes a reasonable balance between the interests of the Company
and its customers. As such, it represents a reasonable compromise among differing interests
and points of view.
The terms of the Settlement agreement represent a one-year rate plan extension
designed to provide the Company with an opportunity to earn a fair rate of retum while
continuing to closely manage its costs during this one-year period. The Parties have agreed
that the Company has demonstrated the need for revenue requirement increases for both its
electric and natural gas operations, and that the Settlement Stipulation is designed to address
the multiple purposes of addressing the Company's needs while minimizing the impact to
customers from changes in retail rates. Further, the Stipulation provides base rate certainty in
2015 while reducing the administrative burden to all parties and the Commission associated
with a general rate case. The Company will have the opportunity to manage its costs under
the given rates to eam a fair return.
VI. CONCLUSION
Avista respectfully requests that the Commission approve the Settlement Stipulation.
The Settlement Stipulation strikes a reasonable balance between the interests of the Company
and its customers.
22 RESPECTFULLY SUBMITTED this 14th day of August 2014.
Vice President, State & Federal Regulation
for Avista Corporation
Avista's Comments in Support of Stipulation and Settlement
AVU-E-14-05 & AVU-G-14-01
2t
Kelly Q. Norwood
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