20181015final_order_no_34170.pdf

Office of the Secretary
Service Date
October 15,2018
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF AVISTA )CORPORATION'S APPLICATION TO )CASE NO.AVU-G-18-03
IMPLEMENT FIXED COST ADJUSTMENT )RATES FOR NATURAL GAS SERVICE )FROM NOVEMBER 1,2018,THROUGH )ORDER NO.34170
OCTOBER 31,2019 )
On July 2,2018,Avista Corporation ("Company")applied to the Commission for
authority to implement Fixed Cost Adjustment ("FCA")rates for natural gas service from
November 1,2018,through October 31,2019,and to approve its corresponding modifications to
Tariff Sheet 175,"Fixed Cost Adjustment Mechanism -Natural Gas."Along with this request,
the Company sought approval of its FCA deferrals from January 1,2017,through December 31,
2017.The Company also requested an FCA rebate rate of0.766 cents per therm for its Residential
Group and 1.067 cents per therm for its Non-Residential Group from November 1,2018,through
October 31,2019.The Company requested an effective date of November 1,2018.
The Commission issued a Notice of Application and Notice of Modified Procedure
setting deadlines for interested persons to submit comments in the case.Order No.34114.Staff
filed the only comments,and recommended the Commission approve the Application.The
Company did not reply.
Having reviewed the record,the Commission now approves the Company's
Application as set forth below.
BACKGROUND
The FCA rate adjustment mechanism breaks the link between the energy a utility sells
and the revenue it collects to recover its fixed costs'to serve customers,thus decoupling the
utility's revenues from its customers'energy usage.Order No.33437 at 3.This decoupling
encourages energy conservation by removing a utility's incentive to sell more energy to increase
revenue and profits.Id.at 3-4;Application at 4.
I "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 exarnple,infrastructure and custorner service.
ORDER NO.34170 1
The Commission approved the Company's FCA as a three-year pilot program as part
of the approved settlement of Avista's 2015 rate case.See Case Nos.AVU-E-15-05 and AVU-G-
15-01;Application at 3;and Order No.33437 at 10.In Order No.33437,the Commission ordered
analysis of 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,
includingtreatment of existing versus new customers,quarterly reporting,annual filings,interest,
accounting,and 3%rate increase cap.Id.at 4-6.
On June 15,2018,the Commission approvedan addendum to the settlement stipulation
approved in AVU-G-15-01,which extended the term of the Company's FCA pilot,and,therefore,
the effectiveness review,for another year.See Order No.34085.
APPLICATION
The Company proposed to decrease rates for its natural gas Residential and Non-
Residential Groups based on the deferred revenue recorded for January through December 2017.
Application at 1.The Company attributed the proposed changes to drivers such as abnormally
cold weather during 2017 and an FCA revenue shortfall associated with energy efficiency
programmatic savings.Id.at 7-8.The Company stated that other drivers are not easily quantifiable
but include,among others,the effects of non-programmatic energy efficiency and changes in
business cycles.Id.at 8.
The Company recorded $1,636,265 in the rebate direction in deferred revenue for its
natural gas Residential Group in 2017,which includes an actual 2016 carry over balance of
approximately $1.2 million.Id.at 9.The Company's proposed rate of -0.766 cents per therm
would rebate $465,043 to the Company's Residential natural gas customers served under rate
Schedule 101.Id.;Application Exhibit B.For its Non-residential Group,the Company recorded
$377,623 in the rebate direction in deferred revenue in 2017,which includes an actual 2016 carry
over balance of approximately $108,778.Id.at 10-11.The Company's proposed rate of -1.067
cents per therm would rebate $274,617 to the Company's Commercial and Industrial natural gas
customers served under rate Schedules 111 and 112.Id.;and Application Exhibit B.
Because the Commission approved the extended FCA pilot period,the Company also
proposed changes to its Tariff Sheet 175 to reflect,among other changes:(1)an FCA mechanism
term of four years;and (2)that interested parties will conduct an effectiveness review at the end
of the third year.Id.at 4.
ORDER NO.34170
STAFF COMMENTS
Staff believes the Company calculated its proposed FCA deferral balances and rates
using the methodology authorized in Order No.33437.Thus,Staff recornmended the Commission
allow the Company,in the 2018 FCA year,to rebate $465,043 to the Residential Group with a rate
of -0.766 cents per therm,and rebate $274,617 for the Non-Residential Group with a rate of
-1.067 cents per therm.Staff Comments at 3.Staff also supported the updates the Company
requested to make to its Tariff Sheet 175.Id.
While Staff agreed with the Company's reported energy efficiency savings numbers,it
also noted that per-customer consumption has been increasing since introduction of the FCA,
reiterating that it will conduct a full assessment of the FCA mechanism for effectiveness during
the Commission ordered third full-year program review,including analysis of a lower cost of
equity to recognize lower risk to the Company as a result of the FCA.Id.3-5.
Staff noted that the Company included notices with customer bills between July 12,
2018,and August 10,2018.Staff thus believed customers were sufficiently notified of their
opportunity to comment.See IDAPA 31.01.01.125;and Staff Comments at 5-6.
DISCUSSION AND FINDINGS
The Commission has jurisdiction over the Company and this matter 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 natural gas FCA residential rate of -0.766
cents per therm,and FCA non-residential rate of -1.067 cents per therm to be fair,just,and
reasonable.The Commission finds that the Company correctly calculated its deferral balances.
The 3%annual rate adjustment cap is not operative because there is no proposed carryover for
either class.The Commission thus approves the Company's Application and Tariff Sheet 175,as
filed,effective November 1,2018.
We encourage interested persons and parties to examine issues related to the
effectiveness of the FCA in the end of third-year programmatic review in 2019,including,among
other issues,the effect of the FCA on customer and Company risk and the benefits accruing
therefrom.See Order Nos.33437 and 34085.
ORDER
IT IS HEREBY ORDERED that the Company's Application is approved.The
Company's FCA Filing for Natural Gas Service from November 1,2018,through October 31,
ORDER NO.34170 3
2019,is granted as requested,effective November 1,2018.I a Commission approves the
Company's Tariff Sheet 175 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.
DONE by Order of the Idaho Public Utilities Commission at Boise,Idaho this N
day of October 2018.
PAUL KJELLA E RESIDENT
KR INE RAPER,COMMISSIONER
ERIC ANDERSON,COMMISSIONER
Diane M.Hanian
Commission Secretary
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