20141031final_order_no_33160.pdf

Office of the Secretary
Service Date
October 31,2014
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF AVISTA )
CORPORATION’S APPLICATION TO )CASE NO.AVU-G-14-04
CHANGE ITS RATES AND CHARGES (2014 )
PURCHASED NATURAL GAS COST )ORDER NO.33160
ADJUSTMENT))
On September 15,2014,Avista Corporation dba Avista Utilities filed its annual
Purchased Gas Cost Adjustment (PGA)Application.The PGA is a rate mechanism used to
adjust rates up or down to reflect changes in the market price of’natural gas,and changes in
transportation and storage costs.These changes in Avista’s natural gas costs are deferred to the
PGA account.In this Application,Avista proposed to decrease its PGA rates an average of
2.1%,or about $1.6 million per year.Application at 1.Avista asks that the new rates take effect
November 1,2014.Id.at 5.
On September 23,2014,the Commission issued a Notice of Application and Notice
of Modified Procedure soliciting public input on the Application and setting an October 17,2014
comment deadline.Order No.33133.Commission Staff was the oniy party to submit comments,
and recommended the Commission approve Avista’s Application.The Company did not reply.
1-laying 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.Avista buys natural gas and then
transports it through pipelines for delivery to customers.Id.at 2.In this PGA Application,
Avista proposes to:(1)pass any change in the estimated cost of natural gas for the next 12
months to customers (tariff Schedule 150);and (2)revise the amortization rates to refund or
collect the balance of deferred gas costs (tariff Schedule 155).Id.at 2,4.
A.Schedule 150
The tariff Schedule 150 portion of the PGA has two parts:the commodity costs and
the demand costs.The commodity costs are the variable cost of gas the Company must procure
to satisfy its estimated annual throughput requirements.The weighted average cost of gas
(WACOG)approximates a utility’s commodity costs,and also includes other variable
ORDERNO.33160
administrative costs.Avista estimates that its commodity costs will increase $00116 per therm
from the currently approved $0.3 74 per therm.to $0.3 85 per therm.Id.at 3.
Demand costs are the fixed capacity costs for interstate transportation and
underground storage,as well as capacity releases which are credited back to customers.Avista’s
demand costs are primarily costs to transport gas on interstate pipelines to Avista’s local
distribution system.Id.at 4.Avista proposes decreasing demand costs due to high projected-
usage for fixed-demand costs which more than offset expiring short-term capacity release credits
on Northwest Pipeline and increasing summer capacity on TCPL-Alberta pipeline.Id.
Avista periodically hedged gas throughout 2014 for use during the coming PGA year
(12 months).Utilities engage in “hedging”to minimize the price volatility of natural gas and
other fossil fuels.Order No.32697 at 37.Avista states that it will hedge about 35%of its
estimated annual load requirements for the PGA year (November 2014 —October 2015)at a
fixed price comprised of:(1)13%of volumes hedged for a term of one year or less;and (2)22%
of volumes from prior multi-year hedges.Application at 3.Through June,the planned hedge
volumes for the PGA year have been executed at a weighted average price of $0425 per therm.
Id.
B.Schedule 155
Tariff Schedule 155 reflects the amortization of Avista’s deferral account.Avista
proposes decreasing the amortization refund rate by $0.03071 per therm (from a $0.00015 per
therm surcharge to a $0.03056 per therm rebate).Id.at 4.This decrease is driven by changes in
the demand portion of the amortization rate,including (1)colder than normal weather during the
2013-2014 winter,resulting in higher demand cost collections;(2)Avista entered into a new
Deferred Exchange contract,effective April 2014,for which Avista charges a fixed-per-therm
charge;and (3)an error regarding allocation of Avista’s transport costs between power supply
operations and natural gas distribution operations.resulting in a net benefit to customers.Id.
C’.Proposed Rates
As set out in the table below,Avista’s proposal will decrease the average residential
or small commercial customer’s rates (Schedule 101)by $1.16 per month (about 2%).Id.at 4.
Avista also proposed that large commercial customers’rates (Schedule 111)decrease by 2.5%,
but Avista’s sole interruptible customer’s PGA rate (Schedule 131)will increase by about 0.2%.
Id.at 3.Avista’s proposal will not affect its earnings.
ORL)ERNO.33160 2
Commodity Demand Total Amortization Total Rate Overall
Schedule Change per Change per Sch.150 Change per Change per Percent
Service No.Therm Therm Change Therm Therm Change
General 101 $0.01 160 ($000022)$0.01 138 ($003071)($001933)(1.91%)
Lg.General 11 1 $0.01 160 ($000022)$0.01 138 ($003071)($001933)(2.49%)
Interruptible 131 $0.01 160 0.00000 $0.01 160 $0001 19 $001279 0.20%
STAFF COMMENTS
Staff reviewed Avista’s records from the year,as well as its Application and working
papers.Based upon its audit,Staff believes Avista’s proposed adjustments to Schedules 150 and
155 accurately capture the Company’s fixed (demand)and variable (commodity)costs given the
coming year’s forecasted gas purchases and the reconciliation of expenses from the prior year.
Staff therefore supports the Company’s Application.
Turning to Schedule 150,Staff determined the Company’s weighted average cost of
its current hedges and its estimated cost of forward-looking index purchases are reasonable and
prudent.Staff thus recommended the Commission accept the Company’s proposed WACOG of
$038510 per therm.As to Schedule 155,the Company proposes to decrease the amortization
rate by $0.03071 per therm.Staff recommended the Commission also approve the Company’s
proposed Schedule 155 amortization rate of $0.03056 per therm credit,to refund approximately
$2.4 million to customers.
DISCUSSION AND FINDINGS
The Commission has reviewed the case record,including the Company’s Application,
and Staff comments.Avista is a public utility,and the Commission has jurisdiction over it and
the issues in this case under Title 61 of the Idaho Code.Idaho Code §61-117,61-129,61-307,
61-501,and 6 1-502.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 annual 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,we find it reasonable to approve the Company’s proposed tariff
Schedule 150,including the proposed WACOG of $0.38510 per therm.The Company’s
proposed WACOG was compared to other forecasts and is consistent with the forecasted
ORI)ERNO.33160
Northvest regional cost of natural gas.We also find it reasonable to approve the $0.03056 per
therm amortization rate for the proposed tariff Schedule 155 deferral balances.The proposed
changes shall take effect onNovember 1,2014.Idaho Code §61-618.
We direct the Company to promptly file an application amending its WACOG should
gas prices materially deviate from the WACOG approved in this Order.
ORDER
IT IS HEREBY ORDERED that Avista Corporation’s Purchased Gas Cost
Adjustment (PGA)Application is approved.
IT IS FURTHER ORDERED that the Company’s Schedule Nos.150 and 155,
included as Exhibit A to the Application,are approved effective November 1,2014.
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.Avista
shall also 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 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.33160 4
DONE by Order of the Idaho Public Utilities Commission at Boise,Idaho this
day of October,2014.
PAtffL KJELLANER,JFIDENT
JC&
MARSHA H.SMITH,COMMISSIONER
I
MACK A.REDFORD,COMMISSIONER
ATTEST:
Jean D.Jewell
Commission Secretary
O:AVU-G14M4 djh2
ORDERNO.33160 5