Avista proposes permanent PCA mechanism
Avista Utilities is proposing a yearly adjustment to rates
that will allow the utility to recover extraordinary power supply expenses not
included in base rates. The yearly Power Cost Adjustment (PCA) mechanism would
be similar to one that has been in place for Idaho Power Co. customers since
1993.
The yearly adjustment increases or decreases customer
rates depending on streamflows and wholesale market conditions. During years
when water supply for hydroelectric facilities is ample and wholesale electric
market conditions are normal, customers typically get a credit. When water
supply is short and the company has to acquire electricity from more expensive
sources, customers get a surcharge. The credit or surcharge lasts one year and
then is renewed based on current conditions and updated projections. During
those years when there is a surcharge, the revenue from the surcharge goes
directly to pay amounts the utility owes its fuel or energy suppliers. The
surcharge is not used to increase company profits.
Last October, the Idaho Public Utilities Commission
approved Avista’s application for a 12-month extension of a 2.45 percent
surcharge that was originally intended to recover extraordinary power supply
costs that resulted from the 2000-01 Western energy crisis. While the
commission approved extending the surcharge through June 30 of this year, it
expressed concern the surcharge was being continued to allow for projected
future power supply expenses rather than recovering only those costs directly
attributable to the Western energy crisis.
The surcharge, originally at 19.4 percent, was implemented
in October 2001 to allow the company to start paying down a $78 million debt it
incurred following the energy crisis. In 2005, with the debt down to $26.1
million, the surcharge was reduced to 4.38 percent. In April 2006, the
surcharge was reduced to its current level of 2.45 percent. By June 30, 2006,
the deferred balance was down to $1.5 million. But increased expenses that
Avista claimed were due to a shortfall in hydro generation and to increasing
gas fuel expenses for the utility’s thermal generating plants, resulted in the
deferral balance increasing to $3.2 million by July 31.
In the October order allowing continuation of the
surcharge, the commission said there would need to be a thorough review of the
surcharge before it could be renewed again. A workshop with Avista and
commission staff was held in March and the commission is now taking comment on
an Avista proposal to adjust rates up or down on Oct. 1 of each year depending
on the amount in the deferral balance.
Further, Avista proposes that the current surcharge of
2.45 percent be continued to Sept. 30 to further pay down the deferral balance
before the proposed new PCA goes into effect Oct. 1. Extending the surcharge
another three months will result in a smaller increase on Oct. 1, the company
maintains. Avista is projecting that the proposed PCA on Oct. 1 will be an
increase from 2.45 percent to about 4 percent. The current 2.45 percent
surcharge is 0.163 cents per kWh for a residential customer, or about $1.63 a
month for a residential customer who uses 1,000 kWh per month.
The commission is taking comment
on Avista’s proposal through May 31. Comments are accepted via e-mail by
accessing the commission’s homepage at www.puc.idaho.gov
and clicking on "Comments & Questions." Fill in the case number
(AVU-E-07-01) and enter your comments. Comments can also be mailed to P.O. Box
83720, Boise, ID 83720-0074 or faxed to (208) 334-3762.
A full
text of the commission’s notice, along with other documents related to this
case, are available on the commission’s Web site. Click on “File Room” and then
on “Electric Cases” and scroll down to the above case number.