20161027final_order_no_33637.pdf

BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF AVISTA )
CORPORATION DBA AVISTA UTILITIES' ) CASE NO. AVU-G-16-02
APPLICATION TO CHANGE ITS NATURAL )
GAS RATES AND CHARGES (2016 )
PURCHASED GAS COST ADJUSTMENT) ) ORDER NO. 33637
--------------------)
Office of the Secretary
Service Date
October 27, 2016
On August 29, 2016, Avista Corporation dba Avista Utilities filed its annual
Purchased Gas Cost Adjustment (PGA) Application. The PGA is a Commission-approved
mechanism that adjusts rates up or down to reflect changes in A vista's costs to buy natural gas
from suppliers-including changes in transportation, storage, and other related costs. A vista
defers these costs into its PGA account, and then passes them to customers through an increase
or decrease in rates. With this Application, A vista proposes to decrease its PGA rates by about
$6.1 million (7.8%), effective November 1, 2016.
On September 9, 2016, the Commission issued a Notice of Application and Notice of
Modified Procedure. Order No. 33594. The Commission set an October 11, 2016, comment
deadline, and an October 14, 2016, reply comment deadline for the Company. Commission Staff
filed the only comments and supported the Company's Application.
Having reviewed the record, we issue this Order approving A vista's Application and
proposed tariffs as filed, effective November 1, 2016.
THE 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). This year, Avista's
proposal would decrease PGA rates for customers as follows:
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 Chane
General 101 $(0.01140) $0.0048 $(0.0060) $(0.06958) 18) (7.7%)
111 $(0.01140) $0.0048 $(0.0060) $(0.06958) ($0.07618) (7.7%)
131 $(0.01140) $(0.01140) $(0.07202) ($0.08342) 0.0%
ORDER NO. 33637 1
These changes would decrease Avista's PGA rates by about $6.1 million (7.8%), but would not
affect Avista's earnings. The average residential or small commercial customer's rate would
decrease by about $4.65 per month.
Avista's proposed changes to Schedules 150 and 155 are further discussed below.
B. Schedule 150
The Schedule 150 portion of the PGA has two parts: (1) the commodity costs; and (2)
the demand costs. Commodity costs are the variable costs at which A vista buys natural gas. The
weighted average cost of gas (W ACOG) approximates those costs. In this case, A vista estimated
that its commodity costs will decrease by $0.0114 per therm, from the currently approved $0.252
to $0.2406 per therm. In an effort to minimize the volatility, the Company has used a diversified
approach to procure natural gas, including hedging, underground storage, and estimating the cost
of index purchases.
Demand costs are the Company's fixed-capacity costs for interstate transportation
and underground storage, as well as capacity releases that are credited back to customers. The
demand costs primarily are costs to transport gas on interstate pipelines to Avista's local
distribution system. Here, Avista proposed a $0.0048 per therm increase in the overall demand
rate for customer Schedules 101 and 111. A vista's proposed demand rate includes the new cost
of transporting gas over TransCanada-Gas Transmission Northwest, which is to take effect on
January 1, 2017.
C. Schedule 155
A vista explained that tariff Schedule 15 5 reflects the amortization of A vista's deferral
account. A vista proposed to increase the amortization rate for customer Schedules 101 and 111
by $0.00170 per therm, which will decrease the rebate that customers currently enjoy from
$0.03056 per therm to $0.02886 per therm. Avista explained that lower than expected wholesale
natural gas prices contributed to the proposed amortization rate by causing A vista to collect
revenues that exceeded its costs. A vista noted, however, that part of the benefit from reduced
wholesale gas prices was offset by an under collection of fixed-demand costs that resulted from a
warmer-than-normal winter.
THE COMMENTS
Staff's comments support A vista's Application. Staff noted that it assessed the
reasonableness of Avista's proposal by examining Avista's gas purchases for the year, and
ORDER NO. 33637 2
A vista's fixed-price hedges, pipeline transportation and storage costs, and estimates of future
commodity prices. Staff confirmed that the proposed changes to Schedules 150 and 155
accurately capture Avista's fixed (demand) and variable (commodity) costs given the coming
year's forecasted gas purchases and properly amortize the deferral balance from the prior year.
Further, Staff verified that Avista's filing will not change Avista's earnings.
Staff ultimately recommended that the Commission approve Avista's PGA
Application and proposed tariffs as filed. Specifically, Staff recommended that the Commission
approve, with an effective date of November 1, 2016, Avista's proposed: (1) Tariff Schedule
150, including the proposed weighted average cost of gas (WACOG) of $0.2406 per therm; 1 and
(2) Tariff Schedule 155, including the proposed amortization rate of $0.09844 per therm credit to
refund approximately $7.4 million to customers. Staff also recommended that Avista apply to
amend its proposed W ACOG if gas prices materially deviate from the proposed W ACOG during
the upcoming year.
DISCUSSION AND FINDINGS
The Commission has reviewed the record, including the Application and comments.
A vista is a gas corporation and 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 § 61-502.
Based on our review of the record, we find that A vista's proposed Schedules 150 and
155 accurately capture A vista's fixed and variable costs in light of forecasted gas purchases, and
properly amortize Avista's deferral balance from the prior year. We thus find it fair, just, and
reasonable to approve A vista's proposed Schedule 150, including the proposed W ACOG of
$0.2406 per therm, and proposed Schedule 155 with an amortization rate of $0.09844 per therm.
As always, we expect Avista to promptly apply to amend its WACOG if gas prices materially
deviate from the W ACOG approved in this Order.
ORDER
IT IS HEREBY ORDERED that Avista's PGA Application is approved. Avista shall
establish a W ACOG of $0.2406 per therm, and a Schedule 155 amortization rate of $0.09844 per
1 The W ACOG includes fuel charges to move gas at the city gate, plus some variable transport costs, and Gas
Research Institute (GRI) funding. It does not include third-party gas management fees.
ORDER NO. 33637 3
therm. Avista's proposed tariffs are approved as filed for service rendered on and after
November 1, 2016.
IT IS FURTHER ORDERED that Avista shall promptly apply to amend its WACOG
if gas prices materially deviate from the W ACOG approved in this Order.
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.
.17-t" DONE by Order of the Idaho Public Utilities Commission at Boise, Idaho this 0\.
day of October 2016.
PA~
ERIC ANDERSON, COMMISSIONER
ATTEST:
O:AVU-G-16-02_bk2
ORDER NO. 33637 4