20211006Comments.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:
I I33I W CHINDEN BLVD, BLDG 8, SUITE 2OI-A
BOTSE, 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 1,2021 THROUGH
ocToBER3t,2022
CASE NO. AVU-G-2I-06
COMMENTS OF 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 July 30,2021, Avista Corporation dba Avista Utilities ("Company") applied to the
Commission for authorization to implement Fixed Cost Adjustment ("FCA") rates for natural gas
service effective November 1,2021through October 31,2022, and approve its corresponding
modifications to Schedule 175 "Fixed Cost Adjustment Mechanism - Natural Gas." The
Company also asks that the Commission approve as prudently incurred the level of natural gas
FCA revenue deferred during the l8-month deferral period ended June 30, 2021.t The Company
separately applied to implement FCA rates for electric service in Case No. AVU-E-21-08. The
I In Order N o. 34502, the Commission authorized the Company to modify its electric and natural gas deferral
periods one-time to run from January | , 2020, through June 30, 202 I .
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1STAFF COMMENTS OCTOBER 6,2021
Company proposes per therm FCA rebate rates for its residential and non-residential gas
customers. The Company's Application, if approved, would decrease the current FCA rebates
and increase overall natural gas revenues by about $250,000. The monthly bill of an average
residential gas customer would increase by about $0.18, or 0.4Yo. The Company asks that its
Application be processed by Modified Procedure and requests an effective date of November 1,
2021.
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 fixed costs2 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 to increase revenue and profits and
encourages energy conservation. Id. at3-4. The Commission originally approved the
Company's FCA as a three-year pilot program, and part of the approved settlement of its 20 I 5
rate case. See Case Nos. AVU-E-I5-05; AVU-G-I5-01; Application at 3; and Order No. 33437
at 10. [n the order approving the FCA program, the Commission noted that the parties to the
Company'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 at3-4. The settlement stipulation in
those cases and Schedule 175 also set forth how the FCA mechanism works, including treatment
of existing versus new customers, quarterly reporting requirements, annual filings, interest,
accounting,anda3Yorute increase cap. Id. at4.
On June 15,2018, the Commission approved an addendum to the settlement stipulation
approved in AVU-E-I5-05 and AVU-G-I5-01, 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-19-03.
2 "Fixed costs" are a utility's costs to provide service that do not vary with energy use, output, or production, and
remain relatively stable between rate cases - for example, infrastructure and customer service.
2STAFF COMMENTS OCTOBER 6,2021
With its Application, the Company submitted its residential and non-residential rate
calculations, support for its deferrals, and its proposed FCA Schedule 175.
STAFF REVIEW
Staff reviewed the Application, supporting workpapers, and the Company's proposed
FCA Schedule 175, including the updated language to incorporate modifications authorized by
Order No. 34502. Staff audited the Company's FCA defenal accounts and internal controls
related to the FCA. This review provided Staff with reasonable assurance that the Company's
FCA natural gas deferral balances and rates were correctly calculated. Staff recommends the
Commission approve the Company's Application to return $334,866 to the natural gas
residential customers on Schedule 101 at the rate of 0.493 cents per therm, and $132,916 to the
non-residential customers on Schedules 111 and ll2 at 0.490 cents per therm for the upcoming
FCA year.
In its filing, the Company proposes a rate rebate for its residential and non-residential gas
customer groups based on the deferred revenue recorded for each group between January I ,2020
and June 30,2021. The combined effect of the expiring FCA rate and the proposed new rates is
illustrated in Table No. I below. The proposed rate change for the residential customer group
represents a$196,979, or 0.4%o, decrease in revenue, and for the non-residential customer group
a $53,438, or 0.4%o, decrease in revenue.
Table No 1: Combined Impact of Present and Proposed FCA Rates
Expiring Present FCA
Revenue
Proposed FCA
Revenue
Change in FCA
Revenue
Residential $ (531,845)$ (334,866)$ (196,979)
Non-Residential $ (186,354)$ (132,916)$ (53,438)
Total $ (718,199)s (467,782)$ (250,417)
The Company recorded$324,456 in the rebate direction in deferred revenue for its
residential natural gas customer group for the 18 months ended June 30, 2021. After considering
the prior year residual balance of $6,663 and other adjustments, the Company proposes to retum
$334,866, at a proposed rate of 0.493 cents per therm, to the Company's residential natural gas
JSTAFF COMMENTS OCTOBER 6,2021
customers served under rate Schedule l0l. See Exhibit B. If approved by the Commission, 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
For its non-residential natural gas customer groups, the Company recorded $130,431 in
the rebate direction in deferred revenue for the l8 months ended June 30, 2020. After
considering the prior year residual balance of $918 and other adjustments, the Company
proposes to return $132,916, at a proposed rate of 0.490 cents per therm, to the Company's
commercial and industrial natural gas customers served under rate Schedules 111 and I12. See
Exhibit B. If approved by the Commission, 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: Non-Residential Natural Gas Customers Rebate
4
January 1,2020 - June 30,2021, Deferred Revenue ($324.4s6)
Add: 2019 Residual Balance ($6.663)
Add: Interest through 1013112022 ($2,211)
Add: Revenue Related Expense Adi ($1.536)
Total Requested Recovery ($334.866)
Customer Rebate Revenue ($334,866)
Carryover Deferred revenue $0
January 1.2020 - June 30,2021, Deferred Revenue ($130,431)
Add: 2019 Residual Balance ($e 1 8)
Add: Interest through 1013112022 ($e64)
Add: Revenue Related Expense Adi ($604)
Total Requested Recovery ($132,916)
Customer Rebate ($132,916)
Carryover Deferred revenue $o
STAFF COMMENTS OCTOBER 6,2021
Energy Consumption Drivers
The proposed FCA rebates for both the residential and non-residential customer groups
for the 18 months ended June 30, 2021, are the result of increases in use-per-customer from
levels in the 20I6 test year. The 2016 use-per-customers ("UPC") levels are used to establish the
FCA base period. Residential average monthly UPC was higher by two therms, and non-
residential average monthly UPC was higher by approximately 23 therms during the deferral
period.
The Company estimated the impact 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 diffrcult to quantifr, including the effects of non-programmatic energy
efficiency, changes in business cycles, non-quantifiable effects related to the COVID 19
pandemic, etc. 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 shows the Company's estimates of these drivers on UPC in therms and FCA
revenue in millions of dollars. 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: Imnact of the Drivers on Use-per-Customer and FCA Revenue
Source
Residential Non-Residential
UPC
(Therms)
FCA
Revenue
UPC
(Therms)
FCA
Revenue
Weather $ (4.10)$ (3.00)$ (s6.70)$ (0.50)
Enersv Efficiency $ (0.70)$ (0.80)$ (7.40)$(0.I 0)
Other $ 6.80 s 4.10 $ 86.70 $ 0.70
Total $ 2.00 $ 0.30 $ 22.60 $ 0.10
CUSTOMER NOTICE AND PRESS RELEASE
The Company's press release and customer notice were included with its Application.
Each document addresses the following cases: this case (AW-G-21-06), the electric FCA
5STAFF COMMENTS OCTOBER 6,2021
(AVU-E-2I-08), the Power Cost Adjustment (AVU-E-2I-09), the BPA Residential and Small
Farm Credit (AVU-E-21-10) and the Electric Energy Efficiency Adjustment (ACE-E-2l-11).3
Staff reviewed the documents and determined both meet the requirements of Rule 125 of the
Commission's Rules of Procedure. See IDAPA 31.01.01 .125. The notice was included with bills
mailed to customers between August 12,2021, and September 9, 2021, providing customers with
a reasonable opportunity to file timely comments with the Commission by the October 6,2021,
deadline. As of October 5, 2021, no customer comments had been filed.
STAFF RECOMMENDATION
Staff recommends that the Commission approve the Company's natural gas FCA fiIing,
specifically:
l. The proposed FCA residential rebate rate of 0.493 cents per therm, which is
designed to refund $334,866 to the Company's residential natural gas customer
group;
2. The proposed FCA non-residential rebate rate of 0.490 cents per therm, which is
designed to refund $132,916 to the Company's non-residential natural gas
customer group; and
3. The proposed changes to Schedule 175 reflecting the FCA rate rebate for
effective November 1,2021, through October 31,2022.
Respectfully submitted this IL day of October 2021.
Dayn
Deputy Attorney General
Technical Staff: Johan Kalala-Kasanda
Kevin Keyt
Curtis Thaden
i: umisc/comments/avug2 l.6dhjkkkct comments
3 On August 19,2021, Avista filed a request to withdraw its Application for Case No. AVE-E-21-l I (Electric
Energy Effi c iency Adj ustment).
6STAFF COMMENTS OCTOBER 6,2021
CERTIFICATE OF SERVICE
I HEREBY CERTIFY THAT I HAVE THIS 6th DAY OF OCTOBER 2021,
SERVED THE FOREGOING COMMENTS OX' TITE COMMISSION STAFF TO
AVISTA CORPORATION, IN CASE NO. AVU-G-21-06, BY E-MAILING A COPY
THEREOF, TO THE FOLLOWING:
PATRICK EHRBAR
DIR OF REGULATORY AFFAIRS
AVISTA CORPORATION
PO BOX 3727
SPOKANE WA99220-3727
E-MAIL: [e-mail]
dockets@avi stacom.com
DAVID J MEYER
VP & CHIEF COUNSEL
AVISTA CORPORATION
PO BOX3727
SPoKANE W499220-3727
E-MAIL: [e-mail]
CERTIFICATE OF SERVICE