20201007Comments.pdf

DAYN HARDIE
DEPUTY ATTORNEY GENERAL
IDAHO PUBLIC UTILITIES COMMISSION
PO BOX 83720
BOISE, IDAHO 83720-0074
[phone]
IDAHO BAR NO. 9917
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Street Address for Express Mail:
1 1331 W CHINDEN BLVD, BLDG 8, SUITE 2OI-A
BOISE,ID 83714
Attorney for the Commission Staff
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF AVISTA'S APPLICATION )
TO IMPLEMENT FCA RATES FOR NATURAL
GAS SERVICE FROM NOVEMBER 1,2O2O
THROUGH OCTOBER 31, 2021
CASE NO. AVU-G.20-05
COMMENTS OB THE
COMMISSION STAFF
STAFF OF the Idaho Public Utilities Commission, by and through its Attorney of
record, Dayn Hardie, Deputy Attorney General, submits the following comments.
BACKGROUND
On June 30,2020, Avista Corporation ("Company" or "Avista") applied to the
Commission for authorizationto implement Fixed Cost Adjustment ("FCA") rates for natural gas
service effective from November 1, 2020, through October 31,2021, to approve its
corresponding modifications to Schedule 175, "Fixed Cost Adjustment Mechanism - Natural
Gas," and to update language in Schedule 175 to incorporate modifications authorized in Order
No. 34502. Applicati on at l-2. Avista also asks that the Commission approve the level of
natural gas FCA revenue deferred during calendar year 2019. Id. at 1. The Company separately
applied to implement FCA rates for electric service in Case No. AVU-E-20-06.
The Company proposes per therm FCA rebate rates for its residential and non-residential
gas customers. The Company's Application, if approved, would incrementally decrease overall
STAFF COMMENTS OCTOBER ],2020
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natural gas revenues by about $1.1 million. Id. at 13. The monthly bill of an average residential
gas customer would decrease by about $ 1 .1 1, or 2.2Yo. Id. at 12. Avista requests an effective
date of November 1,2020. Id. at2.
Overview of Avista's FCA Mechanism
The FCA is a rate adjustment mechanism designed to break the link between the energy a
utility sells and the revenue it collects to recover the fixed costsl of providing service, thus
decoupling the utility's revenues from its customers' energy usage. This decoupling is intended
to remove a utility's disincentive to pursue energy efficiency savings. The Commission
originally approved Avista's FCA as a three-year pilot program, and part of the approved
settlement of Avista's 2015 general rate case. See Case Nos. AVU-E-15-05; AVU-G-15-01;
Application at 3; and Order No. 33437 at 10. In the order approving the FCA program, the
Commission noted that the parties to Avista's general rate case agreed to review the program's
effectiveness at the end of its second full year, to ensure it is functioning as intended.
Applicatio n at 3-4. The settlement stipulation in those cases and Schedule 17 5 also set forth how
the FCA mechanism works, including treatment of existing versus new customers, quarterly
reporting requirements, annual filings, interest, accounting, and a 3Yo rate increase cap. Id. at 4.
On June 15,2018, the Commission approved an addendum to the settlement stipulation
approved in AVU-E-15-05 and AVU-G-15-01, which extended the term of the Company's FCA
pilot for an additional year. See Order No. 34085. On December 13, 2019, the Commission
authorized the Company to: (1) extend its FCA mechanism for both gas and electric through
March 31,2025; (2) alter the first deferral period of the FCA extension by using a one-time,
l8-month deferral period from January 1,2020 through June 30, 2021; and (3) alter its quarterly
FCA reporting requirement to 60-days after the end of each quarter. Order No. 34502; Case
Nos. AVU-E-19-06 and AVU-G-I9-03.
STAFF REVIEW
Staff reviewed the Company's Application, supporting workpapers, and the proposed
changes to Schedule 175, including the updated language to incorporate modifications authorized
I "Fixed costs" are a utility's costs to provide service that do not vary with energy use, ouQut, or production, and
remain relatively stable between rate cases - for example, infrastructure and customer service.
STAFF COMMENTS OCTOBER 7,20202
by Order No. 34502. Staff performed an audit of the Company's FCA deferral accounts and
internal controls related to the FCA. Staff verified that the Company used the Commission-
approved methodology authorized by Order Nos. 34502, 34085 and33437 to calculate the FCA
deferral balance and associated rates for residential and non-residential classes. Staffs review
confirmed the Company's FCA natural gas deferral balances and rates were correctly calculated.
Staff recommends Commission approval of the Company's Application-rebating $509,799 to
the natural gas residential customers on Schedule 101 at the rate of 0.783 cents per therm, and
$ 178,13 1 to the non-residential customers on Schedules 1 1 1 and 112 at the rate of 0.687 cents
per therm during the upcoming FCA year.
Additionally, Staff recommends that the Commission approve the Company's proposed
updates to Schedule 175 to include the modifications authorized in Order No. 34502. The
Company will also file its FCA Applications by July 31 of each year during the extended FCA
period.
In its filing, Avista proposes arate rebate for its natural gas residential and non-
residential customer groups based on the amount of deferred revenue recorded for each group
between January 1,2019 and December 31, 2019. The combined effect of the expiring FCA rate
and the proposed new rates is illustrated in the Table No. 1, below. The residential customer
group rate change represents a $ I .1 million or 2.2Yo decrease in FCA revenue, and the non-
residential customer group rate change represents a $35,000 or 0.3Yo decrease in FCA revenue.
Table No 1:Present and P F
As illustrated in Table No. 2, below, Avista's proposed rebate to residential customers is
calculated by adjusting the 2019 calendar year over-collection of $517,162. The adjustment
includes the 2018 residual balance of $22,393, plus interest and revenue related expense
J
Expiring Present
FCA Revenue Proposed FCA Revenue
Change in FCA
Revenue
s (s09.799)$ 0,128,980)Residential $ 619,181
78,$(1 13 1)$ (34,485)Non-Residential $ (143,645)
$ (687.930)$ (1,163,465)Total $ 475,536
STAFF COMMENTS OCTOBER 7,2020
adjustments. The Company's proposed rebate rate of 0.783 cents per therm is designed to refund
the $509,799 to the Company's natural gas residential customers served under rate Schedule 101.
If approved, the Company would record this amount in a regulatory liability balancing account
and reduce the account balance each month by the rebate received by customers under the tariff.
Table No.2: Residential N Gas Customers Rebate
2019 Deferred Revenue ($5 I 7,1 62)
Add: 2018 Residual Balance 522,393
Add: Interest through 10/3112021 ($12,200)
Add: Revenue Related Expense Adi.($2.830)
Total Rebate ($509,799)
Customer rebate ($509,799)
Carryover Deferred revenue $0
The non-residential rebate is illustrated in Table No. 3, below. For its non-residential
customer groups, Avista's proposed rebate rate of 0.687 cents per therm is designed to refund
$ 178,13 1 to customers receiving service under rate Schedules 1 I 1 and 1 12. If approved, the
Company would record this amount in a regulatory liability balancing account and reduce the
account balance each month by the rebate received by customers under the tariff.
Table No.3: N -Residential Natural Gas mers Rehate
4
2019 Deferred Revenue ($ 175,3 10)
Add: 2018 Residual Balance $2,617
Add: Interest r0l3U202t $4,347)
Add: Revenue Related Expense Adi.($1.0e2)
Total Rebate ($ 178,l3 I )
Customer rebate ($178,131)
Carryover Deferred revenue $0
STAFF COMMENTS OCTOBER 7,2020
Enerry Consumption Drivers
The proposed FCA rebates for both the residential and non-residential customer groups in
2019 are the result of increases in use-per-customer from levels established in the 2016 test year.
The 2016 use-per-customer levels are used to establish the FCA base period. Compared to 2019
average monthly use-per-customer, residential use was higher by three therms, and non-
residential was higher by 7l therms.
Avista estimated the impacts of three primary drivers of FCA revenue deferrals: (l)
Weather; (2) Energy Efficiency; and (3) "Other." The Company identifies the "Other" drivers as
items that are difficult to quantifr, such as the effects of non-programmatic energy efficiency and
the business cycle. The "Other" drivers have a more significant impact on non-residential
customers than on residential customers. Weather is an especially significant driver for
residential customers because residential energy usage is relatively sensitive to weather
fluctuations.
Table No. 4, below, shows Avista's estimates of these drivers on use-per-customer
("UPC") in therms and FCA revenue in millions of dollars (MM$). The results demonstrate that
energy efficiency is not the sole driver of fluctuations in energy sales, and that the FCA
mechanism provides fixed cost recovery for a wide range of factors.
Table No. 4:of the Drivers on Use-ner-Customer FCA Revenue in
Source
Residential
UPC
(Therms)
Residential
FCA
Revenue
Non-
Residential
UPC
(Therms)
Non-
Residential
FCA
Revenue
Weather +2.0 $940,000 +28.3 $110,000
Energy Efficiency -0.7 ($350,000)-8.6 ($30,000)
Other +1.2 ($7o,ooo)+51.7 $ 100,000
Total +2.5 s520,000 +71.4 $180,000
Million Dollars (MM $)
5STAFF COMMENTS OCTOBER 7 ,2020
Risk Reduction Attributable to the FCA
The FCA helps stabilize revenue and lowers risk to the Company, thus potentially
lowering its cost of capital. However, it is less clear how customers benefit from FCA rate
adjustments. Thus far, Staff has not recommended a lower cost of equity to recognize the lower
risk to the Company, but Staff may consider such a proposal in the future.
CUSTOMER NOTICE AND PRESS RELEASE
The Company's press release and customer notice were included with its Application.
Each document addresses three cases: this case (AVU-G-20-05), the Purchased Gas Cost
Adjustment (AVU-G-20-04), and the electric Fixed Cost Adjustment (AVU-E-20-8). Staff
reviewed the documents and determined that all meet the requirements of Rule 125 of the
Commission's Rules of Procedure. The notice was included with bills mailed to customers
between July 6, 2020 and August 3,2020, providing customers with a reasonable opportunity to
file timely comments with the Commission by the October 7,2020, deadline. As of October 6,
2020,no customer comments had been filed.
STAFF RECOMMENDATION
Staff recommends that the Commission approve the Company's FCA filing, specifically:
1. The proposed FCA residential rebate rate of 0.783 cents per therm, which is
designed to refund $509,799 to the Company's residential natural gas customer
group.
2. The proposed FCA non-residential rebate rate of 0.687 cents per therm, which is
designed to refund $ 178,13 I to the Company's non-residential natural gas
customer groups.
3. The proposed updates to the language in the Schedule 17 5 to include the
modifications authorized in Order No. 34502.
STAFF COMMENTS OCTOBER 7,20206
7tkRespectfully submiued this day of October 2020.
Deputy Attorney General
Technical Staff: Johan Kalala-Kasanda
Bentley Erdwurm
Curtis Thaden
i:umisc/comments/avug20.5dhjkbcct comments
7STAFF COMMENTS OCTOBER 7,2020
CERTIFICATE OF SERVICE
I HEREBY CERTIFY THAT I HAVE THIS 7TH DAY OF OCTOBER 2020,
SERVED THE FOREGOING COMMENTS OF THE COMMISSION STAFF" IN
CASE NO. AVU-G-20-05, BY E-MAILING A COPY THEREOF, TO THE
FOLLOWING:
PATRICK EHRBAR
DIR OF REGULATORY AFFAIRS
AVISTA CORPORATION
PO BOX3727
SPoKANE W A 99220-3727
E-MAIL: [e-mail]
avl vlstacorn.com
DAVID J MEYER
VP & CHIEF COI-INSEL
AVISTA CORPORATION
PO BOX3727
SPOKANE WA99220-3727
E-MAIL: davicl.rneyer(?.avistacorp.com
SECRET
CERTIFICATE OF SERVICE