1. Purchased Gas Cost Adjustment (PGA) 101
Annette Brandon– Avista
2019 Natural Gas Outlook Meeting
July 16, 2019

2. Brief History
ORS (2)(e) - Identifiable utility expenses or revenues, the recovery or refund of which the commission finds should be deferred in order to minimize the frequency of rate changes or the fluctuation of rate levels or to match appropriately the costs borne by and benefits received by ratepayers.
Order – “The PGA is a tariff that allows a utility to recover the changes in its wholesale gas costs on a periodic basis, without the need for a formal rate review. The PGA provides for pass through to customers of actual, prudently-incurred costs of natural gas purchases. The Commission determines the amount of gas costs that are passed through to customers in rates. Because actual gas costs incurred during any particular time period are not known in advance, deferred accounting is associated with the PGA mechanism.” 1

3. Commodity, Demand, and Amortization The Three Components of the PGA
The cost of the actual molecules purchased by the utility to serve customers needs (Commodity WACOG)
Demand/Transportation
The cost of transporting natural gas from the hub/field to the utility’s distribution system.
Transportation Resources are Owned & Operated by Interstate Pipelines such as:
Williams - Northwest Pipeline
TransCanada - Gas Transmission Northwest
Amortization
True-up of the actual cost of natural gas and transportation compared to the revenue received from customers based on the prior PGA.
* WACOG = Weighted Average Cost of Gas
Embedded PGA Rate
Amortization
Demand
Commodity

4. From Purchased Gas to Purchased Gas Adjustments Commodity
Executed Hedges
Hedges to be Executed
Prices: 60-day basin-weighted average forward index prices
Misc. Charges – fuel, broker fees, border fees
PGA Commodity Cost
Forecast Commodity Costs
Embedded Commodity Rate
Forecast Commodity Volumes (therms) 3

5. From Purchased Gas to Purchased Gas Adjustments Demand
Demand Costs
Pipeline Contracts – Fixed Costs
(with future rate changes if known)
Less: Capacity Release Credits
Canadian Exchange Difference
Forecast Demand Costs
Embedded Demand Rate
Forecast Demand Volumes (therms) 4

6. From Purchased Gas to Purchased Gas Adjustments Amortization
Commodity Deferral - Actual vs. Embedded Commodity Costs
Optimization benefits – storage, basin, transport
Actual prices higher or lower than estimated
Volume differences due to warmer or colder weather
Balance to be Amortized the following year
Demand Deferral - Actual vs. Embedded Demand Costs
Pipeline Contracts (primarily due to capacity releases)
Capacity Releases more or less than estimated
Canadian Exchange Rate differences 5

7. Example – Commodity and Amortization6