WAC 480-90 and WAC 480-100 GAS and ELECTRIC COMPANIES RULEMAKING WORKSHOP June 3, 1999 9:30 a.m. - 4:00 p.m. FACILITATOR: Jeffrey Showman - WUTC Staff ATTENDEES: Bruce Folsom - Avista Dick Winters - Avista Doug Young - Avista Renee Webb - Avista Dick McCarthy - Avista Dave DeFelice - Avista Gene Cardan - PPL Ed Finklea - Energy Advocates Phillip Popoff - PSE Lynn Logen - PSE Christy Omohundro - PSE Doug Betzold - CMS Karl Karzmar - PSE Lois Douglass - NW Natural Carole Rockney - Pacificorp Robin Cross - Pacificorp Liz Klumpp - CTED Kathie Barnard - Cascade Natural Gas Barbara Groff - Cascade Natural Gas Al Rhoades - WA. State Building Code Council UTC Staff: Graciela Etchart Marjorie Schaer Jim Russell Dennis Moss Roland Martin Doug Kilpatrick Bob Cedarbaum Dave Dittemore Steve Rieger Tom Schooley Mark Anderson Penny Hanson Tani Thurston Vicki Elliott Pam Smith Dennis Lloyd Mike Parvinen Joanna Huang Sher Hadfield Sondra Walsh Bridge Line: (No one on line) * * * * * * * * * * JS: (Introduction of rulemaking leads & ALJs) MS: (Review of rulemaking purpose and procedure; overview of anticipated process for these rulemakings) BF: You’ve made it very clear that you don’t want to put a position together until you hear from the stakeholders. Will you be hearing from the C’s about any rule they feel strongly about? Are you contemplating having feedback - is there anything we as stakeholders can benefit from? JS: What we are doing here is quasi-legislative. The Commission is required to act like other legislatures, solicit public feedback, have open public meetings. The Commissioners will offer their observations and probably the best time for that will be at the open meetings at the CR-102 stage first then the adoption. MS: One of the provisions of the APA says that when we’re in a proceeding under that act to adopt rules then the open public meeting act doesn’t apply. Just so you know that if you have a particular concern you can address that with them at any time. BF: My point is simply one of efficiency - if the C’s feel strongly about one point. JS: We haven’t talked with them and we don’t have any idea what they feel strongly about. (Then gives general information about facilities, breaks, lunch, etc.) Our goal is to solicit different views and get shared communication. To get new ideas and clarify new ideas. (Then review of ground rules and introductions) JS: First session on general provisions and possible new rules. We’ve had one suggestion by Avista - should we have a rule on alternative forms of regulation? Any other issues that we haven’t covered or should be covered under the new rules - needed rules? JR: I just want to mention we’re going to cover a possible PGA rules in the accounting workshop and that wasn’t in the handout. BF: Avista may have proposals regarding customer service and protection. JS: Any other possible new general rules? BF: You asked us to be succinct - we basically proposed a rule that would allow companies to have something other than cost based rate of return regulation. It incorporates customer services, integrated resource planning and the like. This rule is modeled after the Oregon statute which allows the same sort of thing. We are not wedded to this - in your staff comments where you question whether a rule is needed or not - that would work for us. We simply don’t want to be in a situation that we do file something and staff is concerned that you may not have the authority to allow us to proceed and we do think that RCW 80.04 does allow some sort of AFOR - then the question becomes do we need a rule to embody such authority. JS: Any other observations on AFOR’s (alternative forms of regulation)? CR: We operate under an AFOR in Oregon and I think the statute was sufficient and I wouldn’t think we would need specific rules. I think it would be up to each individual company to craft the AFOR that made sense for them. I’d rather have that broad agreement that we can do an AFOR in Washington and then leave it up to the company to craft their own. PP: We like the idea of having this discussion. There are the policy level issues of whether or not we can go there. If there’s another forum to handle this - maybe we can go there. One of the nice things about the language Avista has proposed is that it is very flexible. To have the C’s make the statement that in general “this is a fine idea”. JS: Other comments on AFOR’s? MS: I know that Avista is combined gas & electric - do you see the same need in both rules? BF: We contemplated it on both sides. JS: The new energy environment - should rules be modified to suit today’s energy environment - if so, how? DB: My ideas may come up in the general PGA accounting rules. In a general sense since open access gas customers have become shoppers and they look at these unbundled alternatives and want to know more info about each one and this has changed the environment considerably. They want to know from all vendors what to be looking at and we feel that in polling our customers they wanted real time info and one of the things they take issue with is trackers that distort real time info. One way around having trackers is to have more frequent PGA filings. We have suggestions on that for later today. JS: Any other observations on the new environment of gas companies? PP: We’ll be discussing PGA rules in the accounting forum? JS: Yes. Anything else? It appears we have wrapped up our first agenda item. DM: Interest in using this time to get into other general rules? Possibly the glossary? JS: Sure. Both Avista and Northwest Natural had made suggestions for additions to the glossary. NW Natural suggested adding definitions of applicant and facilities and changing the definition of customer. Any comments? DM: The question that came to me was - what is the purpose behind proposing that these terms be defined and what implications would there be to adding definitions? BF: This gets to Gov. Locke’s request for clarity - defining what a term of art is in this industry and what is an appropriate charge and term. EF: I’d ask NW Natural to elaborate a little bit . . . (can’t hear on tape - did not use microphone) LD: The person that wrote this will be here this afternoon. RW: (Can’t hear on tape - did not use microphone) The term used as - indicates that services shall be restored - intended to clarify since it is already written in the rule - what is a proper charge? But it’s not defined. PP: Are there any other rules that the Commission staff is considering proposing? JR: I think that in general - they are topic specific and in the issues list there are a couple of new rules we set out. DM: We have two in the rule breakout section - facility safety and PGA on the accounting side. PH: In the afternoon session we’ll be talking about possible rules for customer notice as well. JS: The metering safety can move to Room 207 and let’s take a 5 minute break here. ******** Breakout Session - Accounting, Finance, Least Cost Planning JS: We heard comments from some companies that the Least Cost Planning rules should be on a separate track and we are inclined to do that next year. However, if people want to offer observations on the LCP rule today we will certainly take those up. BF: I have two subject experts here - we have some IRPs or Least Cost Plans that we need to get out and they are starting the process. We concur that it should be a separate venue. We’re wondering if some temporary rules should be adopted or if we should put in a 1 page letter seeking some sort of waiver to contemplate some changes that the IRP rule could have. Specifically we’re talking about maybe not going with a 20 year planning horizon. DW: I’m the gas planner. We’re in the process of doing our Least Cost Plan under the old rules. It’s been our position that the plan has been a good rule in place and we have followed it. The public participation has gone way down. We just wanted guidance from staff as to whether we proceed under the old rules or can we suggest changes for this interim period as we are doing our next plan. DY: Ours is a little bit later than the gas one - we’re shooting for June. We’ ve had good working relationships with the staff - as long as we have the leeway to work with staff and they can let the other people in their groups know what’s going on and that we’re trying to consider different ways of approaching the planning process in this type of era. . . MS: As far as looking at drafting a least cost planning rule I think you would have the same problem either way. If we drafted a new rule this year it still would likely not be in effect in time to change it with these rules. I talked to Bruce yesterday and suggested they should seek a rule waiver and then the commission could respond in writing. I still think that is a separate issue from the rulemaking. BF: We were hoping there would be more connection between our waiver request and this rulemaking proceeding. The flip side is that the staff has been flexible with us in the past and your flexibility has been very helpful. I do want to have some connection - so why don’t we just take that as it is up to us to put out a waiver letter and we would continue on with the bulk of the rule in its current form. ML: I didn’t hear a lot of waiver requests from the gas side. CO: That will apply to everybody here . . . (can’t hear on tape) MS: Even if everybody in the room thought that shortening that was a good idea . . . I have my own guess as to what the reply would say BF: . . . I think that would work for us. HM: As a staff member who has done a lot of these in the past . . . I think that we’ve always been open to creative suggestions from the companies . . .the bigger picture of least cost is going to have to be drawn . . . distribution planning will be more important . . . MS: We are looking at these rules for substance as well as clarity - a NOI can be a first step in a rulemaking. However we start that process we will be doing both the substantive side and the grammar. JS: We’re in this workshop to get feedback about these rules and what we should do. Part of the recommendation will include whether to rewrite (Tape ended - missed some) LK: (questioning? - can’t hear on tape - no microphone used) MS: If there are people who came to comment on the least cost planning rules we want to hear about it. PP: . . . . one of our concerns was that if you were just looking at the least cost planning rule in isolation . . and it could be possible . . what we would like to see is some sort of process to address that process. Even if we were to start that NOI process and it took a year and a half - I think we’d be supportive of that. JS: Any other comments on the least cost planning rule? LK: I think it’s important and I think we need to spend some time on it. I think it’s not serving us well right now and the sooner we take a comprehensive look at it the better. ML: I think what Liz is saying is that she has a list of things she would like to discuss and she’s not sure if she should address those now. LK: My guess is we could spend the day on least cost planning. PP: Even if there’s a recommendation to the C’s to provide that guidance or we’ d be more than happy to help formulate anything - what should be covered in the NOI, all these issues we think should be all together. CO: Maybe we can make a decision as to what to recommend (can’t hear on tape - no microphone used) JS: I think that would be a good idea - we would need to have another workshop on that issue exclusively. ML: That’s what I was going to suggest - if we could make a decision today that we were going to the commissioners and try to remove this item and if it was not removed then there would be a separate workshop just on the least cost planning rules. PP: We’d like bring the C’s a recommendation for what would happen - a timeline and any other issues that would go along with it. Give them an alternative process. MS: I don’t think we’re blowing anything off until next year . . . we had scheduled things for this year . . then the Commission went through and prioritized and decided what we would do. This doesn’t mean the commission doesn’t think this is important. They thought it was more reasonable to look at it with the others . . . with our staff that’s about all we can do this year. This is going to be looked at in depth but if people are saying that it needs to be looked at in the context of the other electric rules - maybe we can start the discussion early. Right now the commission is deciding whether it makes more sense in this context or with the conservation PURPA kind of rules. LK: I think it fits better with next years proposed rules. KB: I would tend to agree that it fits in with the conservation and may need to be a separate filing. HM: I disagree - the rules are written in fairly broad terms - the connection with conservation and DSM is clear and those ideas don’t drive those rules. These rules are flexible enough to acomodate that and the issue is whether we can keep in step with these changes and get in done in a timely manner than putting it off. If PURPA is reaffirmed and beefed up then the same argument applies. I don’t see a good reason for delay. CO: I think it does make sense to look at it in the context of these other rules. (Can’t hear on tape - no microphone used) PP: One of our concerns also . . . if you look at the NOIs . . that took a long time and I don’t know if you think we could do that in four months, what took over a year before. I think we agree that this rule is a very interesting rule and it’s difficult to place where it goes in a book but those policy issues all go together. MS: I will repeat something I said this morning - I don’t think we are looking at getting these done in four months. We’re looking at a much longer time. There will be more workshops. If we need more time, we’ll take more time. BF: When Doug Young and Dick Winters met with you they came back with about 2 dozen issue points that we need to include in the next plan and they discussed items that need more flexibility. Would you be satisfied if we stayed to the current scheduled that we pledge to and then sometime in the year 2000 go through the bigger policy questions? Would that meet your needs? HM: Yes that would - as long as you recognize that in your current work that things might change in what your requirements might be. BF: Doug and Dick will draft a letter to the Commission stating that we would like some validation that flexibility is o.k. and then we’ll go forward with our current schedule. JS: Moving on to the accounting rules. Are there any issues not addressed on the issues list? ML: I’m also participating in the budget rules and a lot of you are not - one of staff’s recommendations in those rules is to simplify the way companies file budgets and to exclude a lot of information that we currently require. Two of those items are salaries and wage scales. One of our proposals is to shift that information into the annual report filings to the extent that we need it. We will still want some of that info but with your annual report, not your budget. The wage stuff we want to shift over to this report and I’m not sure that’s something that has to be in the rules. I’m just telling you there is a shift between the budget rule and this rule. KK: Is that something we are addressing in this rule? ML: We’ll discuss that tomorrow - but this might be your chance. KK: I think our position would be the same as it was for the budgets. For companies with registered securities or there’s substantial benefit reporting requirements by the Securities & Exchange Commission. We ought to be able to defer to that for reporting to the commission. JS: Any other issues for the accounting rules? JR: We were looking at possibly having a 191 reporting requirement added to the rule - in other words what are your PGA balances. We’ve been getting some reports from some utilities but they are not consistent so we want to look at that issue. BF: Is that if you don’t file PGA regularly or in between? JR: Should we require the company by rule to file their PGA quarterly? ML: Currently we’re getting this information rather consistently from a few companies. KK: We’ve been supplying monthly information on PGA balances and 191 balances but we believe the rules should be revised to not require companies to disclose more than on a quarterly basis. JR: Karl talked about the reporting period and that’s important - we might want to take that up now. What time period is proper for reporting and how should they be formatted? KK: Since that one overlaps a lot of the others - maybe we could start with the timing. RM: Maybe we could start with the most frequent one. MS: Does staff need it monthly? TS: It’s not necessarily that it needs to be submitted monthly but we do use the monthly information - so if it were quarterly with the 3 months of that quarter involved, that would suffice. MS: So quarterly - but with each month listed separately? TS: Right. KK: That would be acceptable after we reported to FCC then we don’t have any problem with that schedule. ML: How soon do you report to the FCC? KK: The requirements now are 45 days on a quarterly basis; and 90 days on an annual basis. ML: The reason why you want to wait until the FCC report is out is because it would be like pre-information - is that your concern? KK: That’s one of our concerns, especially with the pending competitive environment and financial disclosure requirements with the FCC that we would be concerned about. We would not want to distribute any internal financial information. TS: Currently the monthly reports are due 60 days after the end of that month, so 60 days after the end of a quarter would fit the 45 day FCC period as well. KK: With the exception of year end. The company has no problem with the 60 day requirement at the end of the quarter we would provide all of the information for the previous 3 months. BF: For clarification - let’s assume my semi-annual commission basis reports stay the same and you have access to the FCC filings - what is it about the actual set that you like? I’m trying to get behind how you use them and where the value is? RM: You may note that the semi-annual commission basis reports starts with the historical data . . . it serves a totally different purpose. BF: But given the FCC reporting on a quarterly basis of actuals - would that meet your needs? TS: The use of the data comes in handy when you’re doing trend analysis, expecially in a rate case and not only for the company involved but if you want to look at the trends of comparative companies to see if there is a similar trend in another company then we have the data because it’s difficult to go back and ask Avista for information if we’re working on Pacificorp. ML: When I was doing all those rate cases I definitely used monthly reports - they were very valuable in a lot of ways. BF: Avista has suggested that the monthly reports be terminated but again we’re not wedded to this. If staff does see value in them we’d be happy to keep providing them on some regular basis. MS: Hearing what Puget is saying would you prefer to provide them quarterly than by month? BF: Yes ML: Avista provides us the most extensive information - some of the information we think we should be getting from the other companies - but I think Avista gives us more information because it’s easier than weeding out the required information. BF: There are some issues that we feel strongly about in our rule comments and this is not one. RM: I need a clarification about information on a quarterly basis - there is only one quarter data or 12 months reported on the quarter reporter? KK: Currently the requirement is to provide monthly and the 12 month data. Even though the companies provide year to date information it’s not required. I think we would prefer that when we do provide the quarterly information - that we provide the information for each of the 3 months in that quarter plus the quarterly information and the 12 month information at the end of the quarter but not 12 month information for the months leading up to the end of the quarter. TS: I think that’s quite sufficient for our purposes. KK: At the end of the quarter there’s a lot more attention paid to reconciling balances and so monthly reports have to be viewed as unaudited information and we really only report audited financial information on a quarterly and annual basis. ML: Therefore when you submit these monthly statements it will be the composite of information that will be audited and not the individual information. KK: Exactly - it would be the three months combined that form the quarter that are audited as a quarter. DB: I’m not sure which reports you’re talking about - specifically regarding the 191 (can’t hear on tape - no microphone used). TS: That is correct but that is total company financial information. DB: Can we separate the 191 and still get that on a monthly basis in a timely fashion? TS: I’m not that familiar with the PGA reports? ML: The people who work with electric are not familiar with that information. We decided we wanted two things - Jim wanted their journal entries and I wanted the balance information. That was the purpose of the 191 reporting. DB: I’m just concerned about . . (can’t hear on tape) ML: I don’t think that information includes that type of data. MS: Would you want to continue to get that monthly then? ML: Quarterly would be fine. MS: I’m just asking because it sounds like it’s something the customer rep is interested in getting it monthly. ML: Maybe he should look at the type of information that we are talking about - assuming that it’s not marked confidential. I’m not sure the information that we have is what he’s talking about. KK: We would still prefer not to file any financial information until it’s been provided to the FCC which would be not more often than quarterly on the 60 day schedule. That would include account 191. It could have competitive impact. Depending on the circumstances we would be concerned about disclosing to the public before we disclose to the FCC. JS: Can we move to a different report? FERC reporting - or uniform system of accounts. MP: If we can move back to the monthly reports for a minute? Is there a need for the language to bring up what we would like included in the reports? It would be nice to at least get a certain level of detail on those whether it would be at the FERC account level - is that something we just agree to or is that something that needs to be incorporated? ML: Further point on this might be more than detail - one of the valuable things we get from Avista is that we want the allocated gas and electric operations on a monthly basis. What form the report comes in also, in other words what information is contained in it not just by the account but what operations are shown in the reports. One of our questions is whether they should require the gas allocated and electric allocated Washington intrastate results of operation. RM: On this subject - someone might construe the cost of operations as just financial statements or income statements. Unless we define what cost of operation is there might be confusion. MS: I’m going to suggest we look at #1 which is suggesting we might break this into two rules - one on accounting systems and one on reporting requirements. Do people think that is a good idea? KK: Are we moving off this subject? MS: What I’d like to do is get us looking at #1. I was just suggesting that as an organizing tool so we could talk about the two subject areas. KK: First I’d like to respond. Right now the way the rules are written it leaves it up to the company to report in it’s own accounting information. Most of the reports that are filed with the commission are specially prepared for the commission and we do not prepare those on a monthly basis or the data because we don’t use it in that manner. The company prepares reports for management purposes which is usually not the information which is laid out by FERC. It would be our preference that whatever we do file - be filed in the manner in which the company prepares it’s own financial information. TS: . . . the question is do you report the higher level accounts or the detail within the accounts? And as you are keeping track on the uniform system of accounts, it’s more or less just saying at what subaccount level do you make the report. KK: I think the company would be willing to supply whatever detail the commission needs in the manner that the company prepares it itself. ML: That’s another thing we’re discussing tomorrow on a different rule - having the reports come in the format that the company has but with sufficient detail. KK: As a general rule we would like to be able to provide the reports in the manner that the company prepares them. MS: It sounds like there is a general consensus that in terms of reporting requirements it would be fine for the company to report to the commission in the same format it uses internally but there needs to be some discussion about how detailed that is . . . . is that what I’m hearing? BF: We put in some comments on the budget rule that are very much in line with what Mert just said. We certainly concur. When it comes to the budget rule we do have somebody who spends about 5 weeks in December and January doing nothing but changing our internal reporting to fit with the commission’s budget rule. ML: Currently I think that is what’s happening. BF: What I’m saying is that we do have to massage it to fit your format so we would prefer to send it in our format. MS: How does that sound to the other companies and customers who are at the table? RM: Results of operations are the basic information that we continue to monitor. From my prospective it involves rate of return calculations. So others may define it as just an income statement or balance sheet but that doesn’t tell me whether the company is earning a certain level of return. KK: I think the company would be concerned about defining what the rules are beyond a level which it has to report already to some of the other agencies. The reports that it provides the FCC , the general information in there would allow you to see the balances - but I would again ask that the rule not require the company to provide information more detailed than what it already discloses. BF: Roland you’re talking about section 7 of 031? I want to go back to the value of actual data - the reason that we have a semi-annual commission basis results of operation report is that the information was allegedly misused in 1986 and 1987 to the legislature. The commissioners had a hard time explaining to the legislature that those were actuals and not commission basis. They were able to tell the legislature there wasn’t an excess earnings mode as much as was reported. I’m asking that we don’t put ourselves in that position again - and then from the commission basis reports you can audit those and get a feeling of where we are . I want to make sure that we understand your interests. RM: Do I take it that your proposal is to not submit a monthly report that you are submitting right now with rate base calculations, allocations and differentials? BF: No, I’m saying that Avista would still be willing to supply those reports but I want to make sure that we’re not using the data for purposes that there may be better data out there to use. MS: I’m hearing staff saying that they like what Avista is doing. KK: Let me make a statement about that. Currently the company prepares its reports on a combined gas and electric basis. We do not break our financial results of operations out on a monthly basis. And the only time we do it is for commission purposes. It has no management use. MS: Does anybody use it for looking at the separation stuff that was in the merger agreement? CO: It’s just a question of how often it’s provided - it’s basically a workload issue. KK: I would say that there’s probably 3,000 hours a year devoted to preparing commission basis reports. ML: The way I’m reading your comments - is that you do not have normal bookkeeping where you keep gas and electric separate. KK: That’s correct. Our accounting system was not set up to track the gas and electric separately. We’re operating on a combined basis. So on a monthly basis the company makes no attempt to separate the common expenses or plant. RM: But you still follow the uniform system of accounting for gas and electric? KK: For internal reporting purposes we don’t prepare everything on a FERC basis - it’s only done for commission purposes. So our monthly report use an entirely different system of accounts. RM: So generally speaking the source data can be separated into different operations but when they get aggregated there is no distinction whether it’s gas or electric. KK: The source stated is most simply stated, separate into three categories: those which are exclusively electric, exclusively gas, and common. There’s no attempt on a monthly basis to separate common expenses between the electric and gas operation. Stff: I think we understand what that system is like. It does lead into what the commission basis report is. One thing everyone commented on is do we need to file that twice a year? We are looking very seriously at an annual commission basis report. There is a question as to which time period is best and what works the best for the companies as well. KK: This is one of the areas that we indicated we thought an annual report would be sufficient given all of the information provided throughout the year. Our preference to correspond with the company’s fiscal year. RM: So the current timing as far as submission - May will work on an annual basis. KK: The current timing is acceptable ML: I agree with the Karl. I would think that using the fiscal year would make it most complete because the company’s year-end adjustments would all be included. Using split year is more difficult I would think. KK: Exactly for those reasons - the companies separate their financial years into fiscal years and fiscal years are complete within themselves. KB: Cascade moved to a fiscal year so our year end is September 30th. We would prefer the 12/31 because it’s tied to the calendar year. I know we’ve always had problems with the June - partially because of some of the tax information that is reported and th