20171027final_order_no_33923.pdf

Office of the Secretary
Service Date
October 27,2017
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE APPLICATION )CASE NO.AVU-G-17-04
OF AVISTA CORPORATION DBA AVISTA )UTILITIES FOR AN ORDER APPROVING A )
CHANGE IN NATURAL GAS RATES AND )ORDER NO.33923
CHARGES )
On August 31,2017,Avista Corporation dba Avista Utilities applied to the Commission
for an Order authorizing Avista to decrease its Purchased Gas Cost Adjustment (PGA)rates.
The PGA is a Commission-approved mechanism that adjusts rates up or down each year to
reflect changes in Avista's costs to buy natural gas from suppliers.The potential changes in
costs include changes in transportation,storage,and other related costs.Avista defers these costs
into its PGA account,and then passes them on to customers through an increase or decrease in
rates.
If approved,Avista's Application would decrease the average residential or small
commercial customer's rates by $1.23 per month (about 2.4%).Application at 4.The proposed
decrease would reduce Avista's annual revenue by about $1.7 million but would not affect
Avista's earnings.See Id.at 1;Transmittal Letter accompanying Application (August 31,2017).
Avista asks that the Commission process the Application by Modified Procedure and that the
new rates take effect November 1,2017.Application at 5.
The Commission issued an Order providing Notice of Application and Notice of
Modified Procedure and setting deadlines for interested persons to file written comments.Order
No.33886.Staff timely filed comments.No other comments were received.
Having considered the record,the Commission now issues this Order approving the
Application and the proposed Tariff Schedules 150 and 155,effective November 1,2017.The
Commission's decision is more fully set forth below.
THE APPLICATION
Avista is a public utility that distributes natural gas in portions of 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.Avista's rates
for natural gas service in Idaho include a base rate component and a gas-related cost component.
The base rate component is intended to cover Avista's fixed costs to serve its Idaho customers -
ORDER NO.33923 1
for example,the Company's costs for equipment and facilities to provide service.The current
base rates were approved in Order No.33437,Case No.AVU-G-15-01.Separately frorn this
Application,the Company has applied to this Commission for an Order allowing Avista to
increase its base rates for natural gas service.See Case No.AVU-G-17-01.
The gas-related cost component of Avista's rates is at issue here.In this PGA
Application,Avista proposed to:(1)pass any change in the estimated cost of natural gas for the
next 12 months to customers (through Tariff Schedule 150);and (2)revise the amortization rates
to refund or collect the balance of deferred gas costs (through Tariff Schedule 155).Application
at 2-3.The Company summarized the effect of the revised rates (that is,the change from current
rates)as follows:
Service Schedule Commodity Demand Total Amortization Total Rate Overall
No.Change Change Schedule Change Change Percent
per therm per therm 150 per therm per therm Change
Change
General 101 $(0.02167)$(0.00831)$(0.02998)$0.00982 $(0.02016)-2.5%
Lg.111 $(0.02167)$(0.00831)$(0.02998)$0.00982 $(0.02016)-3.8%
General
Id at 3.
The Tariff Schedule 150 portion of the PGA has two parts:the commodity costs and the
demand costs.Avista's commodity costs are the variable costs at which Avista must buy natural
gas.The weighted average cost of gas (WACOG)is an estimate of those costs.Here,Avista
estimated its commodity costs will decrease by $0.022 per therm,from the currentlyapproved
$0.241 per therm to $0.219 per therm.Id Avista stated that the overall reduction is generally
the result of continued high natural gas production levels and an abundance of natural gas in
storage.Id Avista estimated the cost of purchases using a 30-day historical average of forward
prices for each supply basin and has a diversified natural gas procurement strategy that includes
hedging.Id.
Avista's demand costs reflect the cost of pipeline transportation to the Company's system
and fixed costs associated with natural gas storage.Id at 4.In this Application,Avista proposed
a $0.00831 per therm decrease in the overall demand rate.Id The proposed demand rate is
$0.10558.Id.Exhibit A.The proposed decrease is primarily due to new transportation rates for
Williams Northwest Pipeline effective on January 1,2018 and October 1,2018.Id at 4.
ORDER NO.33923 2
Tariff Schedule 155 reflects the amortization of Avista's deferral account.This schedule
applies to general and large general service customers (residential and certain commercial
customers).Id at 3-4.Other commercial customers (those taking service under Tariff Schedule
112),and High Annual Load Factor Large -Interruptible Service customers under Tariff
Schedule 132 do not participate in the amortization,but receive a one-time rebate or surcharge.
Id at 4 and n.1.With this Application,Avista proposed to decrease the amortization rate in
Tariff Schedule 155 by $0.00982 per therm.Id at 4.The existing rate is $0.09844 per therm in
the rebate direction;the proposed rate is $0.08862 in the rebate direction.Id Avista explained
that it replaced most of the present rebate "due,in part,to a combination of lower actual natural
gas prices versus the embedded WACOG,as well as through optimization efforts (both storage
as well as fixed transportation contract)[.]"Id
Avista stated it will notify customers of its proposed tariffs by posting notice at each of
its Idaho district offices,and through a press release.Id.at 2.Also,Avista stated it will send
notice to each customer in bill inserts in the September-October timeframe.Id.
As part of its Application,the Company filed its proposed rate schedules and tariff sheets,
and its workpapers,pipeline tariffs,customer notice,press release,and bill inserts.See
Application,Exhibits A through E.
STAFF COMMENTS
Staff reviewed the Application and supporting documents and "support[ed]the
Company's proposal to reduce natural gas revenues in Idaho by approximately $1.7 million."
Staff Comments at 2.Staff reviewed Avista's gas purchases,fixed price hedges,pipeline
transportation and storage costs,and estimates of future commodity prices.Id.Staff audited
Avista's deferral balances to assess the reasonableness of the proposed changes and reviewed
Avista's jurisdictional allocations and Lost and Unaccounted for (LAUF)gas volumes.I Id.at 3.
Based on its review,Staff recommended the Commission approve the Application and proposed
tariffs as filed.Id.
Staff summarized the changes to Tariff Schedules 150 and 155.Id.at 3-4.Staff also
summarized the changes to the WACOG.Specifically,Staff reviewed gas market fundamentals
and prices and believes that Avista's weighted average cost of its current hedges,and estimated
'LAUF gas is the difference between the amount of natural gas delivered to the Company's distribution system at
the city gate and amount of natural gas ultimately recorded at the customers'meters.
ORDER NO.33923 3
cost of forward-looking index purchases,are reasonable.Id at 6.Staff recommended the
Commission accept Avista's proposed WACOG of $0.219 per therm and recommended that
Avista return to the Commission with a new filing if prices materially deviate from the proposed
rates during the upcoming year.Id.Staff also summarized Avista's risk management practices,
includingAvista's procurement strategies and sales of surplus capacity (referred to as capacity
release).Staff also reviewed Avista's LAUF gas volume,which Staff believed to be reasonable.
Id at 6-7.
Finally,Staff believed that Avista's press release and customer notice for this Application
comply with Rule 125 of the Commission's Rules of Procedure,IDAPA 31.01.01.125.Id at 7.
Staff indicated that as of October 19,2017,no customer comments had been received.Id
In sum,Staff recommended the Commission approve Avista's proposed Tariff Schedule
150,including the proposed WACOG of $0.219 per therm,and Tariff Schedule 155,including
the proposed amortization rate of $0.08862 per therm.Id
COMMISSION FINDINGS AND DECISION
The Commission has jurisdiction over this matter under Idaho Code §§61-502 and 61-
503.The Commission has the express statutory authority to investigate rates,charges,rules,
regulations,practices,and contracts of public utilities and to determine whether they are just,
reasonable,preferential discriminatory,or in violation of any provision of law,and may fix the
same by Order.Idaho Code §§61-502 and 61-503.The Commission has reviewed the record,
includingthe Application and comments.
Based on that review,we find that the Application is reasonable and that Avista's
proposed Tariff Schedules 150 and 155 accurately capture Avista's fixed and variable costs in
lightof forecasted gas purchases,and properly amortize Avista's deferral balance from the prior
year.We thus find it fair,just and reasonable to approve Avista's Application and its proposed
Tariff Schedules 150 (including the WACOG of $0.219 per therm)and 155 as filed,effective
November 1,2017.As always,we expect Avista to promptlyapply to amend its WACOG if gas
prices materially deviate from the WACOG approved in this Order.
ORDER
IT IS HEREBY ORDERED that the Company's Application for an Order approving a
change in natural gas rates and charges is approved.The Company's WACOG of $0.219 per
ORDER NO.33923 4
therm,included in Tariff Schedule 150,is approved.The Company's proposed Tariff Schedules
150 and 155 are approved as filed,effective November 1,2017.
IT IS HEREBY ORDERED that Avista shall promptly apply to amend its WACOG if
gas prices materiallydeviate from the WACOG approved in this Order.
THIS IS A FINAL ORDER.Any person interested in this Order may petition for
reconsideration within twenty-one (21)days of the service date of this Order with regard to any
matter decided in this Order.Within seven (7)days after any person has petitioned for
reconsideration,any other person may cross-petition for reconsideration.See Idaho Code §61-
626.
DONE by Order of the Idaho Public Utilities Commission at Boise,Idaho this >/
day of October 2017.
PAUL KJELLAÑI R,PRESIDENT
KR$flNE RAPER,C MlúISSIONER
ERIC ANDERSON,COMMISSIONER
ATTEST:
Diane M.Hanian
Commission Secretary
1:\LegalìLORDERS\AVUGl704 cc2 final order.doc
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