20180117Comments.pdf

BRANDON KARPEN
DEPUTY ATTORNEY GENERAL
IDAHO PUBLIC UTILITIES COMMISSION
PO BOX 83720
BOISE, IDAHO 83720-0074
(208) 334-03s7
IDAHO BAR NO. 7956
IN THE MATTER OF AVISTA
CORPORATION'S APPLICATION TO
CHANGE ITS NATURAL GAS RATES AND
CHARGES (2017 PURCHASED GAS COST
ADJUSTMENT).
.REC
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2018 JfiH I 7 pH Z: 39
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Street Address for Express Mail:
472W, WASHINGTON
BOISE, IDAHO 83702-5918
Attorney for the Commission Staff
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
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CASE NO. AVU-G.17-06
COMMENTS OF THE
COMMISSION STAFF
COMES NOW the Staff of the Idaho Public Utilities Commission, by and through its
Attorney of record, Brandon Karpen, Deputy Attorney General, and in response to the Notice of
Application and Notice of Modified Procedure issued in Order No. 33963 on January 10, 2018,
in Case No. AVU-G-17-06, submits the following comments.
BACKGROUND
On December 26,2017, Avista Corporation dba Avista Utilities filed an update to its
annual Purchased Gas Cost Adjustment (PGA) Application. By way of summary, the PGA is a
Commission-approved mechanism that adjusts rates up or down to reflect changes in Avista's
costs to buy natural gas from suppliers-including 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.
With this Application, Avista proposes to decrease its PGA rates by about $3.2 million
(7 .4%). Application at 1. The proposal would decrease the average residential or small
commercial customer rates by $2.73 per month (about 6.4%). Large commercial customer rates
would decrease by about 10.3%. Avista's proposal would not affect Avista's earnings. Avista
ISTAFF COMMENTS JANUARY I7,2OI8
asks the Commission to process the Application by Modified Procedure, and that the new rates
take effect January 26,2018. Id. at 4.
A. Overview of Proposed Rates
Avista distributes natural gas in northern Idaho, eastern and central Washington, and
southwestern and northeastern Oregon. Avista buys natural gas and then transports it through
pipelines for delivery to customers. In this PGA Application, Avista proposes passing on
reductions in the estimated cost of natural gas for the next 12 months to customers (Tariff
Schedule 150). The amortization rates of the defened gas cost balance (Tariff Schedule I 55)
were approved in Order No. 332923, effective November 1,2017. Avista is not proposing to
change the amortization rates in this Application. Avista proposes to change its PGA rates for its
two customer classes as follows:
Id. at2. Avista's proposed changes to Schedules 150 and 155 and Avista's rates are
further explained below.
B. Schedules 150 and 155
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. In this case, Avista
estimates its commodity costs will decrease by $0.02167 per therm, from the currently approved
$0.24058 per therm to $0.21891 per therm. Id. at3. In order to minimize exposure to potential
rising gas costs, Avista diversifies how it procures natural gas. Id. Avista's procurement
strategy includes hedging, the use of underground storage capacity,and estimating the cost of
index purchases using a 30-day historical average of forward prices for each supply basin. Id.
Avista is not requesting any change related to demand charges in this hling. Demand
costs primarily are costs to transport gas on interstate pipelines to Avista's local distribution
2
Service
Schedule
No.
Commodity
Change per
Therm
Demand
Change
per Therm
Total
Sch. 150
Change
Amortization
Change per
Therm
Total Rate
Change per
Therm
Overall
Percent
Change
General l0l $(0.05s20)$-$(0.0ss20)s-$(o.oss2o)(6.7%\
Lg. General lll $(0.0ss20)$-$(0.05s20)$$(0.0s520)(10.3%l
STAFF COMMENTS JANUARY I7,2OI8
system. Avista states that any changes related to demand charges will occur in the Company's
next annual PGA filing. Id. at3.
Tariff Schedule 155 reflects the amorttzation of Avista's deferral account. Avista is not
requesting any change related to amortization charges in this filing. Avista states that any
changes related to anrortrzation charges will occur in the Company's next annual PGA filing.
Id. at3-4.
Avista asserts it will notifu customers of its proposed tariffs by means of a press release.
Id. at2.
aJSTAFF COMMENTS JANUARY I7,2OI8
STAFF ANALYSIS
On October 27 ,2017 , the Commission approved Avista's annual Purchased Gas Cost
Adjustment (PGA) Application requesting authority to decrease its annualized revenues by
$ 1.7 million or approximately 2.4%. Order No. 33923. Within that Order, the Commission
approved the Company's Tariff Schedule 150 rate, including the WACOG and demand costs and
Tariff Schedule 155 rate amortizing the previous year's deferral balance. The Commission
further ordered the Company to "promptly apply to amend its WACOG if gas prices materially
deviate from the WACOG approved in this Order."
The WACOG approved in Order No. 33923 was $0.219 per therm, a decrease of $0.022
per them from the previous year. The decrease in the WACOG in that case was a result of
continued high natural gas production levels and an abundance ofnatural gas in storage. These
factors have continued to put further downward pressure on wholesale natural gas prices. In this
Application, the Company is requesting to further decrease the WACOG from $0.219 per therm
to $0.164 per therm for the remainder of the PGA year. The Company is not proposing any other
changes to the PGA that was approved on October 27,2017.
The Company's proposed WACOG was recalculated using updated index pricing and
also factors in additional natural gas hedges that were entered into after the PGA was approved.
Index prices were calculated by using a 3O-day historical average of forward prices weighted by
the supply basins (as of December 18,2017). The annual weighted average price for these
volumes is $0.146 per therm versus the approved $0.214 per therm included in the October 2017
PGA. The weighted average price for the new natural gas hedging contracts is $0.230 per therm
versus the approved$0.262 per therm included in the October 2017 PGA. Simply updating these
two aspects of the WACOG results in a proposed $3.2 million revenue reduction.
Staff has reviewed the Company's Application and proposed WACOG calculation and
believes that a rate reduction is necessary. Because of the desire to reduce rates expeditiously to
benefit customers during the current heating season, Staff believes that the proposed update to
the PGA by recalculating only the WACOG is appropriate. In the regular annual PGA to be filed
later in 2018, Staff will again review the demand charges, transportation charges, and
normalization methodology.
CUSTOMER NOTICE AND PRESS RELEASE
In compliance with Rule 125 of the Commission's Rules of Procedure, Avista issued a
press release announcing its Application to decrease rates. See IDAPA 31.01.01 .125.01,.04, and
.05. The Company did not provide direct notice to its customers prior to filing its Application.
Rule 125.02 allows utilities to delay distribution of customer notices under certain
circumstances. See IDAPA 31.01.01 .125.02. Avista's request to reduce rates, the limited scope
of this case, and the expedited review process approved by the Commission are consistent with
the circumstances contemplated by Rule 125.02. Staff recommends that the Company provide
customers with direct notice of the rate decrease following Commission approval.
STAFF RECOMMENDATION
Staff recommends that the Commission approve the updated WACOG of $0.164 per
therm, resulting in a $3.2 million dollar revenue decrease or approximately 7.4Yo reduction to be
effective January 26,2018. Staff recommends that the Company provide customers with direct
notice of the rate decrease following Commission approval.
Respectfully submitted this
Technical Staff: Donn English
Kevin Keyt
Mike Morrison
i :umisc/comments/avugl T.6bkmmkkdejtjf comments
day ofJanuary 2018
Deputy Attomey
\+\,
4STAFF COMMENTS JANUARY I7,2OI8
CERTIFICATE OF SERVICE
I HEREBY CERTIFY THAT I HAVE THIS 17th DAY OF JANUARY 2018,
SERVED THE FOREGOING COMMENTS OF THE COMMISSION STAFF, IN
CASE NO. AVU-G.17-06, BY MAILING A COPY THEREOF, POSTAGE PREPAID,
TO THE FOLLOWING:
PATRICK EHRBAR
SR MGR RATES & TARIFFS
AVISTA CORPORATION
PO BOX3727
SPOKANE W A 99220-3721
E-MAIL: [e-mail]
DAVID J MEYER
VP & CHIEF COUNSEL
AVISTA CORPORATION
PO BOX3727
SPOKANE WA99220-3727
E-MAIL: [e-mail]
Y
CERTIFICATE OF SERVICE