Agenda Date: December 29, 1999 Item Number: Docket: UG-991988 Company Name: Avista Utilities SStaff: Joanna Huang, Revenue Requirements Specialist Yohannes Mariam, Rate Research Specialist Recommendations: Permit the filing in Docket UG-991988 to become effective January 1, 2000, with less than statutory notice (LSN). Discussion: On December 1, 1999, Avista Utilities originally filed its annual Purchase Gas Adjustment (PGA)/Deferred Gas Cost Amortization (DGCA) filing in Docket UG-991871. This filing was withdrawn and refiled in Docket UG-991988 to reflect a higher market rate or price for commodity. The revised rates are more in line with gas prices being incurred today. Approval of a filing with prices that are below the current market may result in significantly higher gas price increases and deferral amortization rates in subsequent years. The objective of the annual filing in Docket UG-991988 is twofold: 1) to adjust for projected gas costs and 2) to establish an amortization rate for the past difference between actual gas costs and gas costs embedded in tariff rates. The effect of the filing submitted by Avista will result in an increase of the estimated annual revenue by $12,132,000 (16.22 %). Avista Utilities serves approximately 113,000 natural gas customers in Eastern Washington, including Spokane and surrounding communities. The Commission has received no direct complaints concerning this filing. However, a number of customers commented on the increases from both this filing and the general rate cases. Purchased Gas Adjustment (PGA): The PGA component of the filing reflects an increase of approximately $8,318,000 million (11.12 %) in Avista’s annual revenue. The major driving force for the increase in the PGA is the increase in commodity costs over last year. The PGA filed by Avista Utilities incorporates the Company’s voluntary funding for the Gas Research Institute (GRI). The voluntary funding is designed to offset losses in GRI’s revenue from its annual pipeline funding. Staff believes that the R&D activities of GRI are beneficial to the gas industry and all customers. In order to recover the voluntary contribution for projects that are beneficial to all customers and in the absence of other mechanisms to incorporate Avista’s voluntary contribution, this year’s funding is incorporated into the commodity cost. However, in the upcoming general rate case the issue of recovery and mechanisms will be addressed. The demand cost increase results mainly from increases in the Alberta Natural Gas (ANG) and Pacific Gas Transmission (PGT) pipeline toll charges. The commodity cost increase reflects the recently observed upsurge in wholesale prices of natural gas supplies. This rise in gas prices in the Northwest is attributed, in part, to construction of new Canadian pipelines to move gas from Western Canada to Midwest and Eastern US markets, and expectations of a cold winter season. Deferred Gas Cost Amortization (DGCA): The DGCA portion (historical deferrals) of this filing will increase Avista’s annual revenue by approximately $3,814,000 (5.1 %). Included in this increase is a net direct refund to large customers of $37,885. Summary: The impact of the two filings on the monthly bill to a residential customer with consumption of 79 therms will be a net increase of $5.08 (17.09%). The combined net effect of the PGA and gas cost deferral amortization on Avista’s monthly rates and annual revenue from Washington is as follows: PGA Deferral Revenue Percent Schedule ($/therm) ($/therm) Impact Change 101 $0.05035 $0.02302 $8,022,935 17.09 % 111 0.05022 0.02288 3,530,223 22.31 % 112 0.05022 0.00331 n/a 14.96 % 121 0.05010 0.02107 476,162 25.27 % 122 0.05010 0.00331 151,905 19.22 % 131 0.05000 0.00734 36,824 22.31 % 132 0.05000 0.00331 n/a 19.28 % 146 (0.00028) 0.00161 61,358 ( 4.98)% 148 $(109,581) $ (109,581) Direct Refund $(37,885) $ ( 37,885) Conclusion: Staff recommends that the Commission order: That the requested waiver of statutory notice in connection with the tariff revisions filed herein by Avista Utilities, December 21, 1999, is hereby granted, and said tariff revisions shall become effective January 1, 2000.