20171024final_order_no_33919.pdf

Office of the Secretary
Service Date
October 24,2017
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE FIXED COST )CASE NO.AVU-G-17-03
ADJUSTMENT MECHANISM (FCA))
ANNUAL RATE ADJUSTMENT FILING )ORDER NO.33919
OF AVISTA CORPORATION FOR )NATURAL GAS SERVICE FROM )NOVEMBER 1,2017 THROUGH )OCTOBER 31,2018 )
Avista applied to the Commission for authority to implement Fixed Cost Adjustment
(FCA)rates for natural gas service from November 1,2017 through October 31,2018,and to
approve its corresponding modifications to Schedule 175,"Fixed Cost Adjustment Mechanism -
Natural Gas."The Company proposed per therm FCA surcharge rates for residential and non-
residential groups,and requested an effective date of November 1,2017.
The Commission issued a Notice of Application and Notice of Modified Procedure.
Order No.33816.Staff timely filed written comments,to which the Company did not reply.
The Commission also received 17 public comments.Having reviewed the record,the
Commission enters this Order approving the Company's Application as set forth below.
BACKGROUND
The FCA is a rate-adjustment mechanism designed to break the link between the amount
of energy a utility sells and the revenue it collects to recover fixed costs'of providing service,
thus decoupling the utility's revenues from its customers'energy usage.Order No.33437 at 3.
This decoupling removes a utility's incentive to increase sales as a means of increasing revenue
and profits,and encourages energy conservation.Id.at 3-4;Application at 4.
The Commission approved Avista's FCA as a three-year pilot program,and part of the
approved settlement of Avista's 2015 rate case,Case Nos.AVU-E-15-05,AVU-G-15-01.
Application at 3;Order No.33437 at 10.In the order approving the FCA program,the
Commission noted that the parties to Avista's rate case agreed to review the program's
effectiveness at the end of its second full year,to ensure it is functioning as intended.
Application at 3-4.The order also set forth how the FCA mechanism works,including treatment
*"Fixed costs"are a utility's costs to provideservice that do not vary with energy use,output,or production,and
remain relativelystable between rate cases -for example,infrastructure and customer service.
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of existing versus new customers,quarterly reporting,annual filings,interest,accounting,and
3%rate increase cap.Id at 4-6.
APPLICATION
Avista proposed to increase rates for each rate group based on the deferred revenue
recorded for January through December 2016.Application at 3.The Company mostly attributes
the natural gas FCA surcharges to abnormally warm weather and savings from energy efficiency
programs in 2016.Id at 7-8.
Avista recorded $2,626,654 in surcharge deferred revenue for its natural gas residential
customer group in 2016,which is affected by the 3%rate increase cap.Id at 9,12-14.With
interest through October 31,2018 and revenue related expenses,the total amount is $2,673,762.
Id at 9.The Company proposed to increase residential rates by 2.466 cents per therm,to recover
$1,440,064 from residential customers.Id at 9.If approved by the Commission,the Company
would record this amount in a regulatory asset balancing account and reduce the account balance
each month by the revenue collected under the tariff.Id at 10.The remaining deferral balance
of $1,233,698 would be carried over to be recovered or potentiallyoffset in a future period.Id
For its non-residential group,Avista recorded $500,253 in surcharge deferred revenue in
2016,which is also affected by the 3%rate increase cap.Id at 12-14.With interest through
October 31,2018 and revenue related expenses,the total amount is $509,321.Id at 11.The
Company proposed to increase non-residential rates by 1.615 cents per therm,to recover
$383,369 from commercial and industrial customers.Id at 10-11.If the proposal is approved,
the Company would record this amount in a regulatory asset balancing account and reduce the
account balance each month by the revenue collected under the tariff.Id at 11.The remaining
deferral balance of $125,952 would be carried over to be recovered or potentially offset in a
future period.Id
COMMENTS
A.Staff
On its review of the Company's Application and exhibits,Staff supported the Company's
requested rate increases for residential and non-residential customers.Staff Comments at 3.
Staff recognized that the Company's FCA "removes financial disincentives for energy
efficiency,"but noted that the FCA also "removes the risk of declining sales associated with
weather fluctuations,business cycles,and all other factors."Id at 5.Staff thus asserted it is
ORDER NO.33919 2
unclear "how customers benefit from FCA rate adjustments for weather and other factors."Id
Staff suggested that the Company share the "value of risk reduction realized by the Company"
with customers.Id.Ultimately,Staff recommended that the Commission accept the Company's
proposed Tariff Sheets 175,175A,175B,and 175C as filed.
Staff believed the Company's customer notice and press release did not fully comply
with Rule 125.Id.at 6.The Company filed its Application on July 3,2017,but did not file its
customer notice until August 23,2017,and did not file a press release until September 8,2017.
Id.The Company advised Staff that the press release,which covered this and another filing
(Avista's annual Purchased Gas Cost Adjustment,Case No.AVU-G-17-04),was intended to
"minimize potential customer confusion."Id.Staff noted that the Company included notices
with customer bills between August 15 and September 13,and thus believed customers were
sufficientlynotified of their opportunityto comment in this case.Id.at 7.
B.Public Comments
The Commission received 17 public comments,all opposing Avista's request.Several
customers noted they are on fixed incomes and cannot afford the rate increase.Others believed
the amount of the increase was unreasonable and unfair.Many questioned the pending merger
with HydroOne,and its connection to Avista's requested rate increase.
DISCUSSION AND FINDINGS
The Commission has jurisdiction over Avista under Title 61 of the Idaho Code,and
specifically Idaho Code §§61-336,-502,and -622.The Commission has reviewed the record
and finds the Company's requested rate increases for residential and non-residential customers to
be fair,just,and reasonable.The Commission finds that the Company correctly calculated its
deferral balances and appropriately applied the 3%annual rate adjustment cap.The Commission
thus approves the Company's proposed Tariff Sheets 175,175A,175B,and 175C as filed,
effective November I,2017.
We acknowledge Staff's concern about how customers benefit from FCA rate
adjustments for weather and other factors.We encourage interested persons and parties to
examine this question in the ongoing review of Avista's FCA program.We look forward to the
results of such an analysis in the Company's next FCA filing.See Order No.33437 at 10.
As to the Company's late customer notice and press release,we remind the Company that
we expect it to comply with Rule 125 of our Rules of Procedure.Rules 125.03 and .04 require
ORDER NO.33919 3
the Company to file its customer notice and press release with its Application,which the
Company did not do.IDAPA 31.01.01 125.03-04.Adequate notice is important to ensure
customers have a meaningful opportunity to participate.
In this case,we received 17 public comments,all opposing the Company's requested rate
increases.We note that several questioned whether the Company's pending merger with
HydroOne impacted the requested rate increase here.The Commission considered and approved
the Company's FCA mechanism as part of Avista's general rate case in 2015.Order No.33437
at 10.While we are sympathetic to customers'concerns,the Company's request to implement
an adjustment to the FCA is a routine filing that is unrelated to Avista's merger with HydroOne.
Avista is requesting recovery of costs specifically related to the FCA mechanism.Based on our
review,we approve the FCA rate adjustment as just and reasonable.
ORDER
IT IS HEREBY ORDERED that the Company's FCA Filing for Natural Gas Service
from November 1,2017 through October 31,2018 is granted as requested,effective November
1,2017.The Commission approves the Company's Tariff Sheets 175,175A,175B,and 175C,
as filed.
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.
ORDER NO.33919 4
DONE by Order of the Idaho Public Utilities Commission at Boise,Idaho this
day of October 2017.
PAUL KJELLANDRR.PRFSIDENT
KRISTINE RAPER,COMMISSIONER
ERIC ANDERSON,COMMISSIONER
ATTEST:
Diane M.Hanian
Commission Secretary
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