20250228AVU to Staff 5 Attachment A - 2024 WA 4th Qtr - Combined.pdf

Service Date: October 29, 2024
WASHINGTON UTILITIES AND TRANSPORTATION COMMISSION
NOTICE OF PENALTIES INCURRED AND DUE
FOR VIOLATIONS OF LAWS AND RULES
PENALTY ASSESSMENT: D-240736
PENALTY AMOUNT: $5,000
Investigation# 8958
SERVICE VIA EMAIL
UBI: 328-000-223
Tyler Proszek Phone: [phone]
Brian Taylor
Avista Corporation
1411 E Mission Ave MSC-10
Spokane, WA 99202-1902
Tyler.Proszek&avistacorp.com
Brian.Taor(aavistacorp.com
YOU MUST RESPOND WITHIN 15 DAYS OF THIS NOTICE
The Washington Utilities and Transportation Commission(Commission)believes that Avista
Corporation(Avista or Company)violated Revised Code of Washington(RCW) 19.122.030(3)(a)
by failing to provide the excavator with reasonably accurate information by marking the location
of its facilities.
RCW 19.122.070(I) states, in part, that violations of any provision of the chapter are subject to a
civil penalty of not more than$1,000 for an initial violation and not more than$5,000 for each
subsequent violation within a three-year period.
On September 25, 2024, the Safety Committee heard case 24-077 filed by M&L Construction Inc.
(M&L or Complainant) against Avista Corporation(Avista) and determined Avista violated RCW
19.122.030(3)(a) by failing to provide the excavator with reasonably accurate information by
marking the location of its facilities. The Safety Committee recommended that the Commission
impose a$5,000 penalty.
Commission staff(Staff) reviewed the documents, reports, and communications with the Safety
Committee and agreed with the Safety Committee's findings and recommendations.
The Commission hereby notifies you that it is assessing a $5,000 penalty (Penalty Assessment)
against you on the following grounds:
I. Alleged Violation(s):
The Complainant states that on August 22, 2024, Avista failed to determine the location of
an underground facility with reasonable accuracy at 4604 North Heartly, Spokane, WA.

PENALTY ASSESSMENT D-240736 PAGE 2
2. Analysis:
The alleged violation concerns RCW 19.122.030(3)(a), which states, in part, that a facility
operator will provide the excavator with reasonably accurate information by marking the
location of its facilities. On August 12, 2024, M&L Construction requested a locate ticket
for W Hoffman Place and North Hartley Street, Spokane, WA (ticket#24337249). M&L
stated that it was directional boring under a valid ticket. M&L had completed a pilot bore
and pulled back a 2" line. The Company noted that after it completed the boring process
another crew started digging with an excavator to set a hand hole, and there were no
indications of a gas line in the area. M&L stated that as the crew dug, the laborer saw that a
tracer wire was broken and excavation was stopped. M&L proceeded with caution and
found an unmarked ADYL gas line inches away from the tracer wire. M&L provided
pictures of the excavation area that appeared to show that the gas line had not been marked.
Avista did not participate in the peer review but provided a written response. Avista stated
that the gas line M&L discovered was incorrectly mapped in Avista's GIS system. Avista
noted that during its investigation, Avista identified the line as the gas service for 4610 N
Hartley, Spokane, WA. Avista found that initial mapping during the locate and excavation
suggested that the service was a split(twin)with 4604 extending around the back of 4604's
house and away from the excavation area. Avista stated that ELM hooked up to the 4604 N
gas meter with the understanding that the 4610 service would be accounted for through that
hook-up location. Avista stated that through further locating efforts and verification with
the original installation records after M&L's discovery, it accurately determined the service
line's correct location. Avista updated its mapping to reflect the proper location and
adjusted its locating procedures to verify split services. Avista believes the change will help
ensure mapping accuracy and prevent potential errors that could lead to unlocated facilities.
Staff reviewed the Washington One Call Center database and confirmed a valid locate
ticket(ticket#24337249) had been requested by M&L. The location of the facility that was
not marked was within the excavation area identified by M&L Construction. Staff also
confirmed through a Google Map search that the location identified in the locate ticket is in
front of 4604 N Hartley, Spokane, WA.
The Commission considered the following factors in determining the appropriate penalty amount
for the violation:
1. How serious or harmful the violation is to the public.
This incident could have been significantly more harmful to M&L workers, utility
technicians, nearby homeowners, and the public, and it could have resulted in severe injury
and/or loss of property.
2. Whether the violation is intentional.
The violation does not appear to be intentional, but rather due to negligence by Avista and
its locators. Over the past 36 months (October 9, 2021 - October 9, 2024), Avista has been
penalized by the Commission on fourteen occasions for violations of RCW 19.122.030.
Avista is aware of the requirements to comply with the dig law but continues to have
violations involving its locating practices.

PENALTY ASSESSMENT D-240736 PAGE 3
3. The likelihood of recurrence.
The likelihood of recurrence depends on Avista's actions going forward, and its ability to
ensure that its contract locator and its contract locator's processes are sufficient to comply
with the requirements of the dig law.
5. The Company's previous violations and penalties.
• Warning Letter
On January 11, 2024, the Commission mailed an Alleged Violation of Washington
Dig Law letter to Avista for violation of RCW 19.122.055(1)(a)which states, in part,
that an excavator must contact the one-number locate center before beginning
excavation. The letter included detailed information about Washington state's
underground utility damage prevention act, requirements for submitting utility locate
requests before excavating, and the possibility of penalties for each violation. The
Commission mailed the letter after receiving a report of damage caused by Avista's
electric crew on October 20, 2023, that occurred because the Company failed to
submit a request to locate underground utilities before excavating.
• Penalty Assessments:
D-240487 8-5-24 Penalty Notice $5,000 RCW 19.122.030(3)(a)
D-240566 8-7-24 Penalty Notice $5,000 RCW 19.122.030(3)(a)
D-240262 6-18-24 Penalty Notice $5,000 RCW 19.122.030(3)(a)
D-230967 1-12-24 Penalty Notice $10,000 RCW 19.122.030(4)(a)
RCW 19.122.030(3)(a)
D-230858 1-12-24 Penalty Notice $5,000 RCW 19.122.030(4)(a)
D-230098 4-17-23 Penalty Notice $5,000 RCW 19.122.030(4)(a)
D-230100 4-17-23 Penalty Notice $5,000 RCW 19.122.030(4(a)
D-230099 4-17-23 Penalty Notice $5,000 RCW 19.122.030(4)(a)
D-230005 3-13-23 Penalty Notice $5,000 RCW 19.122.030(3)(a)
D-230007 2-22-23 Penalty Notice $5,000 RCW 19.122.030(3)(a)
D-220230 5-26-22 Penalty Notice $5,000 RCW 19.122.030(3)(a)
D-220112 3-29-22 Penalty Notice $5,000 RCW 19.122.030(4)(a)
D-220111 3-29-22 Penalty Notice $5,000 RCW 19.122.030(3)(a)
D-210605 12-28-21 Penalty Notice $5,000 RCW 19.122.030(3)(a)
The Commission has considered these factors and agrees with the Safety Committee's findings of
probable violation and penalty recommendation, as follows:
• $5,000 penalty for one violation of RCW 19.122.030(3)(a).
These facts, if proven at a hearing and not rebutted or explained, are sufficient to support the
Penalty Assessment.
Your penalty is due and payable now. If you believe the violation did not occur, you may deny
committing the violation and contest the penalty through evidence presented at a hearing or in
writing. Or, if there is a reason for the violation that you believe should excuse you from the
penalty, you may ask for mitigation(reduction) of the penalty through evidence presented at a

PENALTY ASSESSMENT D-240736 PAGE 4
hearing or in writing. The Commission will grant a request for a hearing only if material issues of
law or fact require consideration of evidence and resolution in a hearing. Any request to contest
the violation or for mitigation of the penalty must include a written statement of the reasons
supporting that request. Failure to provide such a statement will result in denial of the request. See
RCW 81.04.405.
If you properly present your request for a hearing and the Commission grants that request, the
Commission will review the evidence supporting your dispute of the violation or application for
mitigation in a Brief Adjudicative Proceeding before an administrative law judge. The
administrative law judge will consider the evidence and will notify you of their decision.
You must act within 15 days after receiving this Penalty Assessment to do one of the
following:
• Pay the $5,000 penalty amount due; or
• Request a hearing to contest the occurrence of the violation; or
• Request mitigation to reduce the amount of the penalty.
Please indicate your selection on the enclosed form and submit it electronically through the
Commission's web portal at https:Hefiling.utc.wa.gov/Form within FIFTEEN (15) days after you
receive this Penalty Assessment. If you are unable to use the web portal, you may submit it via
email to [e-mail]. If you are unable to submit the form electronically, you may send a
paper copy to the Washington Utilities and Transportation Commission, P.O. Box 47250,
Olympia, Washington 98504-7250.
If you wish to make your payment online,please use this link: Make a Payment Now (wa.gov).1
If you do not act within 15 days,the Commission may refer this matter to the Office of the
Attorney General for collection.
DATED at Lacey, Washington, and effective October 29, 2024.
lsl James E. Brown II
JAMES E. BROWN II
Acting Director, Administrative Law Division
'https://www.utc.wa.gov/documents-and-proceedings/online-payments/make-payment-now.

PENALTY ASSESSMENT D-240736 PAGE 5
WASHINGTON UTILITIES AND TRANSPORTATION COMMISSION
PENALTY ASSESSMENT D-240736 Investigation# 8958
PLEASE NOTE: You must complete and sign this document and send it to the Commission
within 15 days after you receive the Penalty Assessment. Use additional paper if needed.
I have read and understand RCW 9A.72.020 (printed below), which states that making false
statements under oath is a class B felony. I am over the age of 18, competent to testify to the
matters set forth below, and I have personal knowledge of those matters. I hereby make, under
oath, the following statements:
❑ 1. Pa men t of penalty. I admit that the violation occurred and:
Enclose $5,000 in payment of the penalty.
OR Attest that I have paid the penalty in full through the Commission's payment
po al.
❑ 2. Contest the violation. I believe that the alleged violation did not occur for the reasons
I describe below(if you do not include reasons supporting your contest here,your
request will be denied):
❑ a) I ask for a hearing to present evidence on the information I provide above to
an administrative law judge for a decision.
OR ❑ b) I ask for a Commission decision based solely on the information I provide
above.
❑ 3. Request mitigation. I admit the violation,but I believe that the penalty should be
reduced for the reasons set out below(if you do not include reasons supporting your
application here,your request will be denied):
❑ a) I ask for a hearing to present evidence on the information I provide above to
an administrative law judge for a decision.
OR ❑ b) I ask for a Commission decision based solely on the information I provide
above.
I declare under penalty of perjury under the laws of the state of Washington that the foregoing,
including information I have presented on any attachments, is true and correct.
Dated: [Month/Day/Year], at [City, State]
Name of Respondent(Company) please print Signature of Applicant

PENALTY ASSESSMENT D-240736 PAGE 6
RCW 9A.72.020 "Perjury in the first degree."
(1) A person is guilty of perjury in the first degree if in any official proceeding he or she makes
a materially false statement which he or she knows to be false under an oath required or
authorized by law.
(2) Knowledge of the materiality of the statement is not an element of this crime, and the
actor's mistaken belief that his or her statement was not material is not a defense to a
prosecution under this section.
(3) Perjury in the first degree is a class B felony.

Service Date: December 23,2024
BEFORE THE WASHINGTON
UTILITIES AND TRANSPORTATION COMMISSION
WASHINGTON UTILITIES AND DOCKETS UE-240006 &
TRANSPORTATION COMMISSION, UG-240007 (Consolidated)
Complainant,
CORRECTED ORDER
V.
ORDER 08
AVISTA CORPORATION, D/B/AAVISTA
UTILITIES,
Respondent. FINAL ORDER
SUMMARY
Synopsis: The Commission rejects the tariff sheets filed by Avista Corporation, d/b/a
Avista Utilities (Avista or the Company) on January 18, 2024, including the Company's
proposed multi year rate plan. The Commission, considering the full record, authorizes
and requires Avista to file tariff sheets reflecting a two-year multi year rate plan that will
result in an increase in revenue of$11.882 million, or 2.01 percent in rate year I and
approximately $44.4 million, or 7.51 percent in rate year 2 after adjusting for offsetting
factors related to Colstrip,for its electric operations and an increase in revenue of
approximately $14.2 million, or 11.1 S percent in rate year I and approximately $4.0
million, or 2.81 percent in rate year 2,for its natural gas operations, in accordance with
the decisions below
The Commission adjusts the Company's return on equity to 9.80 percent and does not
authorize a flotation cost adjustment. The Commission accepts Avista's cost of debt of
4.99 percent. The Commission accepts the Company's proposed capital structure and
authorizes and sets rates with a capital structure of 48.5 percent equity, 51.5 percent debt.
This results in a rate of return for Avista of 7.32 percent.
The Commission authorizes an increase or adjustment to the energy recovery mechanism
baseline consistent with this Order to account for the increases in Washington's allocated
share of power costs and transmission costs. While the Commission allows the power cost
baseline to be reset in this proceeding, the Commission will continue to consider carefully

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 2
ORDER 08
any future adjustments to the baseline and will change it only under extraordinary
circumstances.
TABLE OF CONTENTS
SUMMARY......................................................................................................................I
BACKGROUND ..............................................................................................................3
MEMORANDUM............................................................................................................6
I. STANDARD OF REVIEW...................................................................................6
DISCUSSION AND DECISION.......................................................................................7
II. CONTESTED ISSUES..........................................................................................7
CCA Costs/Inclusion of Costs in Dispatch .................................................................7
Energy Recovery Mechanism/Net Power Expenses..................................................23
Capital Projects and Timing/Classification of Provisional Plant ...............................57
Decarbonization—Line Extension Allowances, Non-Pipe Alternatives, Customer
Reporting, and Planning...........................................................................................69
Equity—Low-Income Assistance and Disconnections, Language Access Plan, and
Energy Burden Analysis/Reporting..........................................................................80
The Multi-Year Rate Plan.........................................................................................88
Performance Measures and Other Reporting............................................................96
Costof Capital....................................................................................................... III
Cost of Service, Rate Spread and Rate Design........................................................143
Return on Purchase Power Agreements..................................................................155
Targeted Electrification Pilot..................................................................................162
Wildfire Expense Balancing Account.....................................................................167
Insurance Expense Balancing Account and Pro Forma Insurance Expense .............173
AssociationDues...................................................................................................180
Investor Relations Expense....................................................................................183
WorkingCapital.....................................................................................................185
FIT/DFIT/ITC Adjustment.....................................................................................190
Electric and Natural Gas Adjustments (3.03) Pro Forma EDIT Reverse South Georgia
Method (RSGM) Expense......................................................................................193
Misc. Restating Non-Utility/Non-Recurring Expenses ...........................................194
Miscellaneous Pro Forma Adjustments—Non-Executive Labor, Employee Benefits,
and Incentive Pay Pro Forma Labor, Non-Executive Adjustments..........................196
Pro Forma Employee Benefits................................................................................200

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 3
ORDER 08
Pro Forma Incentives.............................................................................................203
Miscellaneous Issues..............................................................................................206
ElectricProperty Rent............................................................................................206
CoyoteSprings ......................................................................................................207
Directors'Fees.......................................................................................................208
Labor - Executive (3.06 Pro Forma Labor Exec)....................................................212
Decoupling............................................................................................................214
Pro Forma Miscellaneous O&M Adjustment..........................................................216
FINDINGS OF FACT...................................................................................................221
CONCLUSIONS OF LAW...........................................................................................228
ORDER........................................................................................................................235
BACKGROUND
I PROCEDURAL HISTORY. On January 18, 2024, Avista Corporation d/b/a Avista
Utilities (Avista or Company) filed with the Washington Utilities and Transportation
Commission (Commission) revisions to its electric service tariff, Tariff WN U-28, and its
natural gas service tariff, Tariff WN U-29 (Initial Filing).' Through these filings, Avista
seeks to increase rates and charges for the electric and natural gas services the Company
provides to its Washington customers.
2 Avista's Initial Filing proposes a rate of return of 7.61 percent(with 48.5 percent equity
and a 10.40 percent return on equity). Avista proposes a Two-Year Rate Plan, which
would begin with new base rates effective in December 2024 (Rate Year 1) and December
2025 (Rate Year 2).
3 For Rate Year 1, Avista proposes an increase to electric base revenue of$77.1 million, or
13.0 percent, and an increase to natural gas base revenue of$17.3 million, or 13.6 percent.
For Rate Year 2, Avista proposes an increase to electric base revenue of$53.7 million, or
11.7 percent, and an increase to natural gas base revenue of$4.6 million, or 3.2 percent.
4 On January 31, 2024, the Commission entered Order 01 consolidating dockets UE-240006
and UG-240007, suspending the tariffs, and setting the matters for adjudication.
' WUTC a Avista Corp. d/b/a Avista Utils.,Dockets UE-240006 &UG-240007(consolidated),
filed Revisions to Tariff WN U-28 (Electric)and Tariff WN U-29 (Natural Gas) (Jan. 18, 2024).

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 4
ORDER 08
5 On February 20, 2024, the Commission convened a virtual prehearing conference before
Administrative Law Judges James E. Brown II and Paige Doyle.
6 On February 27, 2024, the Commission entered Order 02 Prehearing Conference Order;
Notice of Hearing, establishing the Procedural Schedule, granting petitions to intervene,
and noticing an evidentiary hearing for September 30, 2024, continuing if needed to
October 1, 2024. On the same day, the Commission entered Order 03, establishing a
protective order.
7 On March 20, 2024, Commission staff(Staff) filed a Motion for Partial Summary
Determination(Motion). In its Motion, Staff asked for summary determination that
Avista's proposed portfolio forecast error adjustment, as included in Avista's proposed
Tariff WN U-28, should not be incorporated into Avista's pro forma power cost
adjustment, or its Energy Recovery Mechanism (ERM).2
8 On August 7, 2024, following extensive briefing by the parties, the Commission issued
Order 07 Denying Staff s Motion For Partial Summary Determination(Order 07), Order
07 denied Staff s Motion because granting the motion would decide a substantial portion
of the matter"without the benefit of a full proceeding where the testimony and evidence
are examined" and cross-examined.3 Order 07 reiterated the importance of the
Commission's discretion and having the ability to weigh the evidence, hear witness
testimony, and ask questions of the parties so the Commission can reasonably balance the
interests of the parties and issue a decision in the public interest.4
9 Beginning on September 30, 2024, the Commission held a two-day evidentiary hearing in
this matter before the Commissioners, with Administrative Law Judges, James E. Brown
II and Connor A. Thompson presiding.
10 The parties submitted initial and responsive briefs in the proceeding on October 28, 2024,
and on November 12, 2024, Alliance of Western Energy Consumers (AWEC) filed a
Motion to File a Limited Response to Public Counsel's Post-Hearing Brief.
11 PARTY REPRESENTATIVES. David Meyer, in-house counsel, represents Avista. Jeff
Roberson, Josephine R. K. Strauss, Lisa Gafken, Nash Callaghan, Liam Weiland, and
z Dockets UE-240006&UG-240007, Commission Staff's Motion for Partial Summary
Determination(Motion) (Mar. 20, 2024).
3 Dockets UE-240006&UG-240007, Order 07,Denying Staff's Motion for Partial Summary
Determination pg. 36¶ 105 (Aug. 7, 2024).
4 Dockets UE-240006&UG-240007, Order 07,pgs. 36-37¶¶ l 03-07.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 5
ORDER 08
Colin O'Brien, Assistant Attorneys General, Olympia, Washington, represent Commission
staff(Staff).5 Tad Robinson O'Neill, Jessica Johanson-Kubin, and Robert Sykes, Assistant
Attorneys General, Seattle, Washington, represent the Public Counsel Unit of the Attorney
General's Office (Public Counsel). Tyler C. Pepple and Sommer J. Moser, of Davison Van
Cleve, P.C., represent the Alliance of Western Energy Consumers (AWEC). Michael
Goetz, in-house counsel, represents the Northwest Energy Coalition(NWEC). Yochi
Zakai and Josh Kirmsse, of Shute, Mihaly &Weinberger LLP, represents The Energy
Project(TEP). Gloria Smith, of Sierra Club Environmental Law Program, represents
Sierra Club. Justina A. Caviglia represents Walmart, Inc (Walmart).
12 COMMISSION DETERMINATIONS. Based on the decisions we make in this Order,
we authorize an increase in Avista's revenue requirement of$11.882 million, or 2.01
percent in rate year 1 and approximately $44.4 million, or 7.51 percent in rate year 2 after
adjusting for offsetting factors related to Colstrip, for the Company's electric operations
and an increase in revenue of approximately $14.2 million, or 11.15 percent in rate year 1
and approximately $4.0 million, or 2.81 percent in rate year 2, for its natural gas
operations. Summaries of both the electric and natural gas revenue requirements are
attached hereto at Appendix C (electric) and Appendix D (natural gas).
13 PRELIMINARY MATTERS. We note that on November 12, 2024, AWEC filed a
Motion to File a Limited Response to Public Counsel's Post-Hearing Brief(Motion) along
with a Limited Response to Public Counsel's Post-Hearing Brief(Response).6 According
to AWEC's Motion, the Limited Response addresses an alleged inaccuracy in Paragraph
132 of Public Counsel's Post-Hearing Brief. AWEC claims that it filed its response with
the intent to ensure a clear evidentiary record. No other parties, including Public Counsel,
filed an Answer to AWEC's Motion. Upon review and consideration, we grant AWEC's
motion to ensures a clear and complete record in this proceeding.
s In formal proceedings such as this, the Commission's regulatory staff participates like any other
party, while the Commissioners make the decision.To assure fairness,the Commissioners, the
presiding administrative law judge, and the Commissioners'policy and accounting advisors do not
discuss the merits of this proceeding with the regulatory staff, or any other party, without giving
notice and opportunity for all parties to participate. See RCW 34.05.455.
6 Dockets UE-240006&UG-240007,AWEC's Motion to File a Limited Response to Public
Counsel's Post-Hearing Brief(Motion) (November 12,2024).

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 6
ORDER 08
MEMORANDUM
I. STANDARD OF REVIEW
• Regulating in the public interest and determining equitable, fair,just,
reasonable, and sufficient rates
14 The Legislature has entrusted the Commission with broad discretion to determine rates for
regulated industries. Pursuant to RCW 80.28.020,whenever the Commission finds after a
hearing that the rates charged by a utility are "unjust, unreasonable, unjustly
discriminatory or unduly preferential, or in any wise in violation of the provisions of the
law, or that such rates or charges are insufficient to yield a reasonable compensation for
the service rendered, the commission shall determine the just, reasonable, or sufficient
rates, charges, regulations,practices or contracts to be thereafter observed and in force,
and shall fix the same by order."
15 As a general matter, the burden of proving that a proposed increase is just and reasonable
is upon the public service company.' The burden of proving that the presently effective
rates are unreasonable rests upon any party challenging those rates.9
16 More recently, in 2019, the Legislature expanded the traditional definition of the public
interest standard. As Washington state transitions to a clean energy economy, the public
interest includes: "The equitable distribution of energy benefits and reduction of burdens
to vulnerable populations and highly impacted communities; long-term and short-term
public health, economic, and environmental benefits and the reduction of costs and risks;
and energy security and resiliency."10 In achieving these policies, "there should not be an
increase in environmental health impacts to highly impacted communities."11
17 In 2021, the Legislature again expanded upon the public interest standard in the context of
reviewing multiyear rate plans. RCW 80.28.425 provides that "[t]he commission's
consideration of a proposal for a multiyear rate plan is subject to the same standards
See also RCW 80.01.040(3) (providing that the Commission shall"[r]egulate in the public
interest").
a RCW 80.04.130(1).
9 WUTC a Pacific Power and Light Company,Cause No. U-76-18 (December 29, 1976) (internal
citations omitted).
10 RCW 19.405.010(6).
11 Id.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 7
ORDER 08
applicable to other rate filings made under this title, including the public interest and fair,
just, reasonable, and sufficient rates."The statute continues, "In determining the public
interest, the commission may consider such factors including, but not limited to,
environmental health and greenhouse gas emissions reductions, health and safety
concerns, economic development, and equity, to the extent such factors affect the rates,
services, and practices of a gas or electrical company regulated by the commission. ,12
18 Following the passage of RCW 80.28.425, the Commission indicated its commitment to
considering equity while regulating in the public interest: "So that the Commission's
decisions do not continue to contribute to ongoing systemic harms, we must apply an
equity lens in all public interest considerations going forward. ,13 The Commission also
indicated that regulated companies should be prepared to address equity considerations in
future cases: "Recognizing that no action is equity-neutral, regulated companies should
inquire whether each proposed modification to their rates, practices, or operations corrects
or perpetuates inequities.'"
19 During general rate case proceedings, the Commission may determine the prudence of
utility actions by reviewing whether the utility made reasonable business decisions in light
of the facts and circumstances known or that reasonably should have been known to the
utility at the time decisions were made.15 What is reasonable requires assessment of
choices made, in light of circumstances and possible alternatives, based on industry norms
and practices.16 Prudence does not require a single, ideal decision, but requires the utility
to make a reasonable decision among a number of alternatives which the Commission
might find prudent."
DISCUSSION AND DECISION
II. CONTESTED ISSUES
CCA Costs/Inclusion of Costs in Dispatch
12 Id.
13 WUTC a Cascade Natural Gas Corporation, Docket UG-210755 Order 10¶58 (August 23,
2022).
14 Id.
15 WUTC a Puget Sound Energy, Inc., Docket UE-031725, Order 12 at¶ 19(Apr. 7, 2004).
"See, id.
17 WUTC a Puget Sound Energy, Inc.,Dockets UE-090704 and UG-090705 (consolidated),
Order 11 at¶337 (Apr. 2, 2010).

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 8
ORDER 08
Avistas Direct Testimony
20 Company witness Kinney testifies that Avista has added significant work processes to both
its power and natural gas supply departments to account for increased activity associated
with CCA compliance.18 Currently, this added CCA work has been performed by existing
employees. However, Kinney states that this resource approach cannot be sustained as
other critical work has been either delayed or not adequately supported.19
21 As such, Kinney states that the Company plans to hire four more positions in 2024 to
support compliance with CCA. These include a Climate Compliance Manager, a CCA
Portfolio Manager, an Energy Supply Analyst, and an Investment Program Manager.20 The
Company notes that it expects it will need to hire additional positions beyond these four as
it continues to understand what it characterizes as the broad reaching effects of the CCA.21
22 Avista witness Kinney states that the CCA labor adjustment is the only pro forma
adjustment in this case where the Company is seeking approval of incremental costs
incurred to comply with CCA.22
23 Kinney testifies that its Pro Forma CCA Labor Expense adjustment reflects the
incremental labor expense of four additional employees in 2024, totaling approximately
$494,000 ($381,000 to electric and$113,000 to gas).23 This adjustment decreases Net
Operating Income (NOI)by $301,000 for electric and $89,000 for gas.24
24 The Company testifies that its strategy for natural gas decarbonization includes
diversifying and transitioning from conventional fossil fuel natural gas to Renewable
Natural Gas (RNG), hydrogen, other renewable fuels, and reducing consumption via
conservation and energy efficiency.25 Additionally,Avista testifies that it will purchase
carbon offsets as necessary to meet the CCA compliance obligations.26
18 Kinney, SJK-1T at 9:3-4.
19 Kinney, SJK-1T at 9:4-7.
20 Kinney, SJK-1T at 9:7-9.
21 Kinney, SJK-IT at 10:4-8.
22 Kinney, SJK-1T at 10:18-20.
23 Schultz, Exh.KJS-IT at 69:13-15.
24 Schultz, Exh.KJS-IT at 70:1-2.
2s Thackston,Exh. JRT-IT at 9:5-8.
26 Thackston,Exh. JRT-1T at 9:9.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 9
ORDER 08
25 Avista contends that based on the CCA's cap-and-trade program's current allowance price
range of$22-$82 USD, natural gas with a carbon offset or Renewable Thermal Credits
(RTC) will continue to most cost effectively serve Washington customers.27
26 The Company also argues that in the short term, the best approach to recover CCA costs is
to have them flow through a 95/5 Energy Recovery Mechanism (ERM) without
deadbands.28 Kinney states that allowing those CCA costs to flow through the ERM at
95/5 obligates the Company to pay 5 percent of anticipated CCA costs but avoid
disagreements among parties over the magnitude of costs that cannot be known at this
point.29
27 Kinney contends that requesting 100 percent recovery of CCA costs would be the fairest
outcome and reflect the legislation's intent.30 However, as part of an overall package to
simplify the ERM and address increasing forecast costs, he states that the Company is
offering this 95/5 split as a compromise.31
Staff's Response Testimony
28 Staff witness Erdahl testifies that Avista does not currently and, unless ordered by the
Commission, does not plan to incorporate the cost of carbon allowances in future dispatch
decision.32
29 Erdahl contends that the failure to include allowance costs in dispatch may result in
polluting thermal units being dispatched too frequently, which creates equity concerns
when those thermal units are located in or near vulnerable populations or highly impacted
communities.33 Erdahl identifies the Boulder Park facility and the Northeast Combustion
Turbine as thermal units located within vulnerable population census areas, and the Kettle
Falls Biomass Facility which is located within a highly impacted community(HIC).34
27 Thackston,Exh. JRT-1T at 9:12-15.
28 Kinney,Exh. SJK-1T at 64:18-19.
29 Kinney,Exh. SJK-1 T at 64:19-20 and 65:1-2.
30 Kinney,Exh. SJK-1 T at 65:4-5.
31 Kinney,Exh. SJK-IT at 65:6-9.
32 Erdahl, Exh. BAE-1 T at 21:16-17, 22:3-4.
33 Erdahl, Exh. BAE-1T at 22:6-10.
29 Erdahl, Exh. BAE-IT at 23:15-17.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 10
ORDER 08
30 She recommends that the Commission direct Avista to include the cost of carbon
allowance instruments in its forecasting and day-to-day dispatch decisions.35
31 Erdahl notes that Puget Sound Energy (PSE) applies a CCA allowance instrument cost
adder into costs associated with thermal fleet dispatch to supply secondary and wholesale
market sales.36
32 Erdahl acknowledges that the inclusion of CCA allowance costs in dispatch decision could
result in reduced dispatch of Avista's thermal resource under certain conditions, which
could reduce the Company's wholesale and secondary sale revenues.3' However, Erdahl
emphasizes that several of Avista's thermal resources are located within vulnerable
populations and highly impacted communities.38
33 Staff Witness Wilson testifies that it does not appear that Avista's carbon allowances are
being tracked consistently with the CCA.39 According to Wilson, in the Company's CCA
Compliance Model,Avista expects that its no-cost allowances are intended to be used both
for emissions associated with serving retail load and for emissions associated with
wholesale sales whose revenues benefit its retail customers.40
34 However, Wilson states that this understanding is incorrect as Ecology allocated no-cost
allowances to Avista based on its requirements to serve Washington retail load, and that
Avista remains responsible for obtaining allowances for its wholesale load.al
35 To the extent that Avista is relying on the understanding that Ecology is allocating no-cost
allowances to Avista for emissions associated with wholesale sales, Staff believes that
such reliance is likely to lead to imprudent decisions.42
36 Wilson also contends that the Company has placed too much weight on Ecology's "true-
up"mechanism.43 According to Staff, Ecology has said that it anticipates that future
" Erdahl, Exh. BAE-1 T at 24:1-2.
36 Erdahl, Exh. BAE-IT at 24:7-8.
37 Erdahl, Exh. BAE-1 T at 24:21-22 and at 25:1-2.
38 Erdahl, Exh. BAE-IT at 25:6-9.
39 Wilson,Exh. JDW-ITC at 17:5-6.
40 Wilson,Exh. JDW-ITC at 17:6-10.
41 Wilson,Exh. JDW-ITC at 17:11-17.
42 Wilson,Exh. JDW-ITC at 17:18-20.
43 Wilson,Exh. JDW-ITC at 20:7-9.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 11
ORDER 08
allocation decisions will be based on concepts such as the reasons for the difference
between forecast and actual emissions as well as the expectation that allowance costs will
be a factor in dispatch.aa Given Ecology staff's statement that the true-up will not be one-
for one, Staff witness Wilson emphasizes that Avista may need to purchase some
allowances for its retail load and especially for its wholesale load, unless those loads are
served by energy that does not incur a CCA compliance obligation.45
37 Wilson asserts that this strongly suggests that Avista should consider the price of carbon
allowances in its dispatch decisions and, hence, in its Net Power Expense (NPE)
forecast.46
38 Witness Wilson further opines that Avista's no-price dispatch approach puts its allocation
of no cost allowances at risk. Given that Ecology is going to consider the reasons for any
difference between allocated allowances and actual emissions, if Avista excludes the cost
of carbon allowances from its dispatch decisions, Ecology staff will likely look
unfavorably on a request to fully true-up Avista's allowances.47
39 Staff Witness Wilson testifies that a key complication for the Commission's review of the
forecast and actual NPE is that Ecology's CCA compliance requirements do not occur at
the end of each calendar year,but require partial and then final surrender of required
allowances over a four-year compliance period.a$ Therefore, Wilson contends that the
Commission must determine if it will expect Avista to record allowance costs to show
compliance on an annual basis or not.49
40 If the Commission chooses to do so, then witness Wilson states that Avista's actual NPE
would include the actual net cost of CCA allowance transactions in its annual NPE filing
and, for any surplus or deficit in allowance transactions,Avista would determine an
additional net cost on a mark-to-market basis.5'According to Staff, this option would have
at least two disadvantages:51
44 Wilson,Exh. JDW-ITC at 20:24-26, 21:1.
45 Wilson,Exh. JDW-ITC at 21:7-10.
46 Wilson,Exh. JDW-ITC at 21:11-12.
47 Wilson,Exh. JDW-ITC at 21:13-17.
as Wilson,Exh. JDW-ITC at 23:3-7.
49 Wilson,Exh. JDW-ITC at 23:7-9.
50 Wilson,Exh. JDW-ITC at 23:10-13.
51 Wilson,Exh. JDW-1TC at 23:13-16.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 12
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• The methods for pricing its unsold(or unpurchased) allowances would need to be
developed; and
• Reviews and the resulting net value would need to be carried forward to
subsequent years.
41 Wilson notes that this option would have the advantages of providing the Commission
with a clear opportunity to review the prudence of Avista's transactions and pricing
decisions.52
42 If the Commission does not require Avista to show compliance on an annual basis, then
Avista could simply record its actual net transaction costs for the year and defer the
valuation of any allowance surplus or deficit to the future.53 Wilson notes that this option
would be far more administrable and eliminate the need to develop a mark-to-market
pricing method.14
43 However, since Avista would only encounter a compliance date at which it is required to
fully account for its emissions by surrendering allowances every four years,Wilson
identifies that the Commission could find it more challenging to review the prudence of
Avista's transactions and pricing decisions.55
44 Wilson believes that the Commission will find it most efficient to review the prudence of
Avista's CCA allowance use and transactions in annual NPE review proceedings due to
the Commission every year.56
45 Accordingly, Staff argues that in future NPE proceedings,Avista should demonstrate that
throughout each reporting year, it has identified an appropriate carbon allowance price and
that its unit dispatch and power purchase decisions were prudent, which should include a
clear demonstration that those decisions were consistent with its current estimate of the
carbon allowance price.51 Wilson also argues that in future NPE proceedings,Avista will
also need to demonstrate that its purchase or sale of allowances is prudent.58
52 Wilson,Exh. JDW-ITC at 23:16-18.
53 Wilson,Exh. JDW-ITC at 23:19-20.
54 Wilson,Exh. JDW-ITC at 23:20-22.
55 Wilson,Exh. JDW-1 TC at 23:22-23, 24:1-3.
56 Wilson,Exh. JDW-ITC at 24:16-17.
57 Wilson,Exh. JDW-ITC at 24:22-25:3.
58 Wilson,Exh. JDW-ITC at 25:4-5.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 13
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46 Wilson also suggests the following five factors for the Commission to weigh when
determining how to review the prudence of CCA use and transactions:59
• Administrative simplicity;
• Necessity of reviewing the allowance price and other factors that should be
considered in unit dispatch and power purchase decisions during the annual NPE
proceeding;
• Consideration that decisions to transact (or not transact) in the carbon market and
carbon auctions depend on the reasonableness of the carbon price estimate and
carbon price forecast as it existed during the year;
• Consideration that it is preferable to account for the costs (or benefits)resulting
from decisions to transact (or not transact) in the year in which those transactions
affect NPE (using mark-to-market valuations for unused allowances, as discussed
above); and
• Consideration that it will be easier to review the reasonableness of a utility's
carbon price forecasting method after that method is exposed to a variety of real-
world circumstances, which may take several years to manifest.
47 While Avista has not estimated CCA costs, Wilson states that in response to a data
request60,Avista provided an illustration of how CCA costs might affect the ERM. In its
illustration,Avista suggests that a"bad case, representing approximately a 25% overrun of
current(2023) allowance grant levels"would result in an annual cost of as much as $30
million.61
48 Witness Wilson recommends that the Commission direct Avista to include CCA allowance
costs in the dispatch of its thermal generation plants, whether to serve customer load or to
sell electricity into the wholesale market. Wilson opines that Avista should then offset the
allowance costs for its retail customer load with no-cost allowances.62
49 Wilson also believes that it is most appropriate for the prudence of allowance costs to be
reviewed in each utility's respective NPE true-up proceeding—in Avista's case, its annual
ERM proceeding.63
AWEC's Cross-Answering Testimony
59 Wilson,Exh. JDW-ITC at 25:12-27 and at 26:1-3.
60 See Staff DR-171 Supplemental.
61 Wilson,Exh. JDW-ITC at 27:12-16;see also JDW-11 Avista's Response to DR No. 171.
62 Wilson,Exh. JDW-ITC at 31:19-22.
63 Wilson,Exh. JDW-ITC at 32:12-14.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 14
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50 AWEC Witness Mullins contends that the decision for how to respond to the uncertainty in
the rule is best made by Avista, not the Commission. He states that it is appropriate for
Avista to take on the risk of a prudence disallowance if it is not appropriately considering
CCA allowance costs in dispatch (both for operations and forecast NPE) or incorrectly
interpreting guidance or regulations from Department of Ecology("Ecology").64 Mullins
recommends that the Commission not adopt a prescriptive approach as advocated by Staff
in this case.65
51 Mullins also states that the impacts of including CCA costs in plant dispatch may produce
different impacts for differing customer classes.66
52 He also expressed concerns about the Commission committing at this time to undertake a
prudence review on an annual basis as part of Avista's ERM.67 Since the CCA has four-
year compliance periods, Mullins argues that it is not clear what the benefits of annual
prudence reviews would be if performed within compliance periods,68 and that committing
to annual prudence reviews now may create different compliance incentives that
ultimately put upward pressure on rates.69
53 Mullins recommends that the Commission not direct Avista to alter its modeling of CCA
costs in the net power supply expense baseline in this case.70 Mullins also recommends
that the Commission not commit to the process and venue for a prudence review of
Avista's CCA costs at this time.71 Finally, Mullins recommends that the Commission not
impose any obligations on Avista with regards to the way that it operates its system and
with regard to participation in the carbon allowance market at this time.72
Puhlic Counsel's Cross-Answering Testimony
64 Mullins,Exh. BGM-8T at 10:5-9.
65 Mullins,Exh. BGM-8T at 10:10-11.
66 Mullins,Exh. BGM-8T at 11:2-3.
67 Mullins,Exh. BGM-8T at 11:13-15.
68 Mullins,Exh. BGM-8T at 11:16-18.
69 Mullins,Exh. BGM-8T at 11:18-20.
70 Mullins,Exh. BGM-8T at 12:21-22.
71 Mullins,Exh. BGM-8T at 13:9-10.
72 Mullins,Exh. BGM-8T at 13:11-14.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 15
ORDER 08
54 Public Counsel Witness Earle argues that while review of CCA allowance costs in the
annual ERM review may be useful to provide guardrails, full determination of prudency
cannot be reasonably determined until the compliance period and 10-month balancing
period is over.73 He says the Commission should only provide a final determination of
prudency after the four-year compliance period and 10-month balancing period is over.74
Staffs Cross-Answering Testimony
55 Staff witness Wilson contends that considering the basic economics, it is cost-efficient for
Avista and other Washington utilities to include the cost of CCA allowances in their
dispatch decisions.75
56 Additionally, Wilson testifies that Avista's modeling found that including a CCA
allowance price of$71.15 per ton resulted in a net increase of$73,333,559 in power
costs.76
57 Wilson argues that a $71.15-per-ton allowance price is not representative of recent market
prices.77 He states that a recent forward market price for CCA allowances was $38.09 per
ton, which traded at about $38 per ton according to the Intercontinental Exchange (ICE)
forward price for December 2025 from August 1, 2024.78 Using this price, Staff forecasts
a CCA allowance cost of$43.1 million.79
58 Wilson contends that if Avista dispatches its system using a market price for CCA
allowances, its 2025 emissions are forecast to be reduced by 18 percent relative to its
proposal.80
Avista's Rebuttal Testimony
73 Earle, Exh. RLE-17T at 6:1-3.
74 Earle, Exh. RLE-17T at 6:4-5.
75 Wilson,Exh. JDW-24CTr at 14:2-4.
76 Wilson,Exh. JDW-24CTr at 9:1-2.
77 Wilson,Exh. JDW-24CTr at 10:14-15.
78 Wilson,Exh. JDW-24CTr at 13:1-3.
79 Wilson,Exh. JDW-24CTr at 12:2-3.
80 Wilson,Exh. JDW-24CTr at 13:4-5.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 16
ORDER 08
59 Company Witness Kinney disagrees with Staff's recommendation that it include CCA
allowance costs in thermal plants dispatch.81 Kinney states that there is no requirement for
Avista to include carbon prices and emission allowance obligation in all unit dispatch and
power supply decisions.82
60 To help illustrate the impact of including CCA allowance costs in thermal plant dispatch
is, the Company ran a scenario based on its original filing. The result was a $73.3 million
(system) increase (42%) in NPE, caused by lower surplus sales and additional market
purchases to serve load in cases where the "phantom" carbon cost prevents dispatching
lower-cost generation.83
61 Kinney asserts that including CCA costs in dispatch would require base rates requested in
this proceeding to be substantially increased and lists the following arguments against its
inclusion:84
• The CCA does not require carbon to be added to dispatch, which is an operational
decision;
• The Commission has not provided any policy and direction to include carbon in
dispatch decisions;
• As illustrated in the modeled scenario, adding the price of carbon could add $73.3
million(system) to the annual NPE;
• The Department of Ecology has not finalized the true-up mechanism, and Avista
expects it could be granted no-cost allowances covering wholesale transactions
made on behalf of customers; and
• Even if Avista is not given no-cost allowances for wholesale transactions, the
Company has multiple ways to mitigate allowance requirements associated with
these sales.
62 Kinney contends that it would be imprudent to add the cost of carbon in Avista's resource
dispatch resulting in $73.3 million(system) of additional cost to customers.85 Additionally,
Company witness Kinney asserts that adding a carbon price to thermal resource dispatch
81 Kinney,Exh. SJK-17T at 30:21-22 and at 31:1.
82 Kinney,Exh. SJK-17T at 31:5-6.
83 Kinney,Exh. SJK-17T at 31:18-22.
84 Kinney,Exh. SJK-17T at 32:12-22 and at 33:2-4.
85 Kinney,Exh. SJK-17T at 33:17-19.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 17
ORDER 08
reduces wholesale revenue to Idaho customers not obligated to meet CCA compliance and
who do not receive no-cost allowance grants from the Department of Ecology.86
63 Kinney testifies that absent publicly available guidance, it remains unclear if the
Department of Ecology will essentially "claw back" or withhold a commensurate number
of allowances in future distribution allocations as part of the true-up process.As such, it is
just as plausible for Avista to assume the true up mechanism will apply to wholesale
market transactions (in effect a"one-for-one" application) as it is to assume it will not.87
64 Kinney also argues that contrary to the statement by Staff Witness Wilson,Avista's view
of allowance costs is correct—namely, that the CCA is not intended to be the primary
means of carbon reduction for electric customers.88 While Wilson suggests engaging in
auctions or bilateral markets to counter the impacts of reduced sales. Kinney contends that
there are no statutory or regulatory requirements for utilities to sell their no-cost
allowances in at least the initial two compliance periods, to do so may be premature.89
65 Regarding the necessity of prudency reviews, Kinney states that if the Company incurs
any costs associated with the purchase of CCA allowances to cover the emissions
associated with wholesale transactions, those costs will flow through Account 509 in the
ERM.90 FERC accounting requires that all costs and benefits associated with a single
transaction must be recorded during the same period and should be recovered (or passed
back to customers) at the same time.91 Thus, Kinney argues this necessitates the need to
evaluate the prudency of certain costs and benefits associated with the CCA in the annual
ERM filing,but only when it has incurred CCA allowance costs.9'
66 Kinney contends that it makes sense for the prudence review of procuring allowances for
natural gas local distribution company (LDC)-related emissions to occur at the end of the
compliance period because of the requirements to consign no-cost allowances and turn in
30 percent of current year vintage allowances annually, and because natural gas companies
must procure significant allowances to cover emissions.93 However, the Company argues
86 Kinney,Exh. SJK-17T at 34:1-3.
87 Kinney,Exh. SJK-17T at 35:7-11.
88 Kinney,Exh. SJK-17T at 35:19-21.
89 Kinney,Exh. SJK-17T at 37:8-11.
90 Kinney,Exh. SJK-17T at 40:13-15.
91 Kinney,Exh. SJK-17T at 40:15-18.
92 Kinney,Exh. SJK-17T at 40:18-20.
93 Kinney,Exh. SJK-17T at 41:1-4.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 18
ORDER 08
that prudence of CCA purchases on the electric side likely will need to be reviewed both
annually and then in totality after the 4-year compliance period due to the lag between
forecasted and actual emissions.94
Parties'Briefs
Avista
67 In its post-hearing brief, the Company maintains its position that CCA allowance costs
should not be included in thermal plant dispatch. To do otherwise,Avista argues would be
to require something that was contained in a retracted Policy Statement and is not well
understood, but could result in increased power costs of$73.3 million, or a 42 percent
increase to NPE.95
Staff
68 In its post-hearing brief, Staff reiterates its position that the costs associated with the CCA
should be reviewed annually to ensure prudent management and that CCA costs should be
included in dispatch decisions as it pertains to meeting Washington retail load.96
69 Regarding annual reviews, Staff notes that despite Public Counsel and AWEC disagreeing
with Staff's proposal, Public Counsel witness Earle acknowledges annual reviews might
be useful to guard against overruns and AWEC witness Mullins admits there is uncertainty
about overruns until the end of the compliance period.97 This uncertainty, Staff states is the
exact reason there should be annual reviews coinciding with review of power costs, which
will avoid rate shock to customers and ensure prudent management of costs.
70 For inclusion of CCA costs in dispatch, Staff argues that the economic benefits of thermal
dispatch should not be overstated and the risk of emissions exceeding no-cost allowances,
resulting in higher costs, "outweigh the lower surplus sales revenues that will result from
excluding CCA costs."98 Staff counters arguments from Avista against inclusion of CCA
costs, stating that Avista will still be able to market thermal resources into states such as
94 Kinney,Exh. SJK-17T at 41:9-11.
95 WUTC a Avista Corp.,Dockets 240006 &240007,Avista's Post-Hearing Brief¶¶91-92(Oct.
28, 2024) (Avista's Post-Hearing Brief).
96 WUTC a Avista Corp.,Dockets 240006 &240007, Staff's Post-Hearing Brief¶88 (Oct. 28,
2024)(Staff's Post-Hearing Brief).
97 Staff's Post-Hearing Brief, at¶¶94-95.
98 Staff's Post-Hearing Brief, at¶96.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 19
ORDER 08
Oregon, which do not require CCA compliance, excluding the CCA adder.99 Staff also
notes that Avista's arguments regarding wheeling thermal power into Washington ignore
Ecology's rules on the issue, which would still require Avista, as the "first jurisdictional
deliverer"to hold the compliance obligation.'00
71 In response to AWEC's criticism of including CCA costs in dispatch, Staff argues that the
Commission has a duty to regulate rates and that necessitates consideration of CCA costs,
despite witness Mullins assertion that the Commission should not enforce CCA
compliance.101 Further, Staff takes issue with witness Mullins example of Coyote Springs
dispatch decisions being binary, that is either to dispatch Coyote Springs or buy
unspecified power, which also has a compliance obligation. Staff argues that this is an
oversimplification, and in fact,power is available that is bundled with renewable energy
certificates, and that not including CCA costs in dispatch favors thermal dispatch of Avista
assets like Coyote Springs because CCA costs would need to be assigned to unspecified
wholesale power.112
Public Counsel
72 Public Counsel opposes Staff's recommendation to review CCA allowance costs annually
for prudence. Public Counsel specifically argues that "the four year and 10-month CCA
compliance period does not align with an annual review process" and would be better
addressed on an interim basis during GRCs and ultimately decided at the conclusion of the
compliance period.10'
AWEC
73 In its post-hearing brief,AWEC argues against including CCA costs in dispatch because it
will increase the amount actually paid by customers based on a forecast of CCA costs and
does not in any way impact Avista's operations or ability to comply with the CCA.104
99 Staff's Post-Hearing Brief, at¶97.
100 Staff's Post-Hearing Brief, at¶98.
101 Staff's Post-Hearing Brief, at¶99.
102 Staff's Post-Hearing Brief, at¶ 100.
103 WUTC a Avista Corp.,Dockets 240006 &240007,Public Counsel's Post-Hearing Brief¶77
(Oct. 28,2024)(Public Counsel's Brief).
104 YVUTC a Avista Corp.,Dockets 240006 &240007,AWEC's Post-Hearing Brief¶31 (Oct. 28,
2024)(AWEC's Post-Hearing Brief).

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 20
ORDER 08
74 Further AWEC argues there is no statute, rule, or formal requirement mandating inclusion
of CCA costs in dispatch for retail or wholesale sales when forecasting NPE, and the
Ecology guidance on a true-up mechanism that Staff points to for support of its position is
not finalized.'0'
75 AWEC also argues that Staff's proposal needlessly shifts CCA compliance risks from
shareholders to customers, arguing that Staff's proposal artificially imposes a"bad case"
compliance obligation on customers prior to Avista incurring those costs and a
Commission prudence determination.106 AWEC also points out that Staff's position is
inconsistent with other dockets and that if the Commission is to set a policy, it should be
done in Docket U-230161 so that policy and implementation is consistent for all regulated
utilities.10'AWEC argues the same concerns over shifting costs to customers and
uncertainty from Ecology should weigh against inclusion of forecast CCA costs in
wholesale sales transactions in NPE.108
76 Finally,AWEC argues the Commission should refrain from conducting an annual review
and prudence determination of CCA costs because of the uncertainty from Ecology and
because the law includes a four-year compliance period.109
Decision
77 The Commission recognizes the gravity of the need to meet the goals as outlined in the
CCA and the Clean Energy Transformation Act(CETA). The emissions reductions
required by Washington law creates a situation where Washington's regulated utilities are
faced with being first movers on decarbonization compared to most utilities across the
country, a place utilities are often uncomfortable being in. This is all happening in a time
when technologies and emissions reduction techniques are rapidly improving and being
developed.Additionally, as the parties seem to agree, compliance and enforcement rules,
policies, and guidance from Ecology and the Commission are still being developed, and
when combined with the statutory compliance period of four years, there is still
uncertainty in how utilities will comply with the law and how they might achieve their
statutorily required goals.
105 AWEC's Post-Hearing Brief, at¶35.
106 AWEC's Post-Hearing Brief, at¶¶38-39.
107 AWEC's Post-Hearing Brief, at¶¶40-42.
108 AWEC's Post-Hearing Brief, at¶¶43-47.
109 AWEC's Post-Hearing Brief, at¶48.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 21
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78 Due to this uncertainty, the Commission finds it prudent to carefully address the issues
presented by the parties. The Commission is faced with a seemingly precarious balance to
maintain, ensuring that the Commission fulfills its duties to regulate rates in the public
interest, provide guidance for the regulated community, and retain flexibility for the
Commission and the regulated community to achieve ultimate CCA compliance.All of
this must be done in a way that achieves the mandates of CCA and CETA, while
maintaining affordable and reliable service.
79 In balancing these interests, the Commission must make decisions based on the record
before it. Public Counsel and AWEC oppose annual review and prudence determinations
of the CCA costs, arguing that an annual prudence determination is impractical due to the
four-year compliance period plus ten months in which the utilities must comply with
allowance submission requirements."0 We agree.
80 RCW 70A.65.120 and 70A.65.130 discuss the allocation of allowances to both electric
and natural gas investor-owned utilities, respectively. RCW 70A.65.200 discusses
penalties and enforcement.All three sections reference and frame compliance, allowance
allocations, and penalty enforcement around the "compliance obligation" and "compliance
period."RCW 70A.65.020(19) defines "compliance obligation"to mean"the requirement
to submit to the department the number of compliance instruments equivalent to a covered
or opt-in entity's covered emissions during the compliance period." RCW 70A.65.020(20)
defines "compliance period" to mean"the four-year period for which the compliance
obligation is calculated for covered utilities."
81 Given the structure of the CCA, and the timing of the "compliance obligation"which may
significantly impact a utility company's cost of compliance and subsequent penalties, we
find that the costs are unlikely to be known and measurable with finality until the
"compliance obligation" date. Said differently, the Commission finds it would be
premature to conduct prudence reviews of CCA costs and compliance on an annual basis.
To do otherwise may result in the Commission wrongly predetermining prudence when
decisions later turn out to be imprudent, or imprudent when they later appear prudent. This
may inappropriately shift costs to customers before final compliance obligations are
known. Moving forward, as the first compliance period comes to a close, and the rules
surrounding compliance become more developed, the Commission may be able to perform
more frequent reviews in later compliance periods, but at this time finds the potential
perils of annual compliance reviews outweigh the benefits put forward by Staff.
82 Despite our decision to decline annual prudence reviews at this time, Staff's arguments
and witness Wilson's five factors presented for consideration do weigh in favor of
10 See, e.g.,Earle, Exh. RLE-17T at 5:13-19.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 22
ORDER 08
increased scrutiny of CCA costs on an annual basis."' While the compliance obligation
may not be final until the end of the compliance period,Avista and others are making
decisions now which will undoubtedly impact the costs Washingtonians will ultimately
face at the conclusion of the current compliance period. Wilson's first and second factors
are particularly persuasive in outlining just two of many decision points the Commission
feels should be addressed annually.
83 Accordingly, the Commission finds that during Avista's annual submission of updates to
its CCA tracker tariff, the Company shall submit and present information pertaining to
where CCA costs are being included in decision making to include, but not limited to
Integrated Resource Plans (IRPs), Clean Energy Implementation Plans (CEIPs), dispatch,
power purchase, carbon market transactions, and capital projects. This annual report will
be addressed and acknowledged through the Open Meeting process and will help the
Commission assess a utility's progress and decision making leading up to the
Commission's prudency determination at the conclusion of the compliance period.
84 Aside from recommending an annual prudence review as part of the ERM filing, Staff also
recommends the Commission require Avista to account for CCA costs in dispatch.
Specifically, Wilson recommends adjusting the ERM to account for CCA costs by adding
$21,591,885 to account for CCA allowance prices in dispatch and market purchases and
$43,128,017 to account for CCA allowance costs for market sales.112 The adjustments are
calculated using a $38.09 per ton allowance price multiplied by emissions.
85 While the Commission sees merit to Staff's approach, we are concerned that the proposal
is not fully developed and would result in disparate treatment with the approaches taken
with other utilities. These concerns are described by AWEC in their post-hearing brief 113
Further, the price point used for calculating CCA costs remains a point of contention
between the parties.At this time the Commission notes that there is a lack of trading data
on which the Commission can reasonably rely to determine a single price point for CCA
allowances for inclusion in dispatch decisions, considering that the price of CCA
allowances will change multiple times annually.Accordingly, we decline to require CCA
allowance prices and costs in dispatch, market purchases, and market sales at this time.
86 The Commission finds that CCA allowance prices and costs in dispatch, market purchases,
and market sales, and the Commission's policy surrounding their inclusion in NPE, should
be addressed in Docket U-230161 so that policy and implementation is consistent for all
111 Wilson,Exh. JDW-1TCr at 25:4-26:9.
112 Wilson,Exh. JDW-24CT at 7 (Table 1).
113 AWEC's Post-Hearing Brief, at¶¶38-47.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 23
ORDER 08
regulated utilities, and each impacted utility has an opportunity to comment on the issue.
However, regulated utilities should consider accounting for the prices and costs as
proposed by Staff. The Commission will continue to monitor how Avista and others are
addressing CCA compliance in their decision making moving forward and will ultimately
determine whether their actions were prudent when Avista seeks cost recovery and a
prudence determination of CCA costs. Further,Avista and other regulated utilities will
need to demonstrate the impacts of the CCA on their decisions including dispatch, market
purchases, and market sales moving forward. We expect the utilities will continue to
develop compliance strategies in response to the adoption of rules and guidance
established by Ecology and the Commission, as we collectively move towards meeting the
mandates of both the CCA and CETA.
Energy Recovery Mechanism/Net Power Expenses
Avista—Direct Testimony
87 Avista's proposed authorized NPE and revenue in its initial filing is $112.8 million for
RY 1 and $146.4 million for RY2 (Washington-basis).114 Company witness Kalich
provides a list of non-modeled NPE items in Exhibit CGK-3, which includes the Forecast
Error Adjustment of$65.8 million, as well as miscellaneous fuel, transmission, and other
costs related to power supply."' Kalich also notes that forecast NPE rises significantly in
RY2, approximately $89 million, due to the removal of Colstrip coal-fired generation
Units 3 and 4 from Avista's portfolio. This increase is partially offset by a$35 million
decrease in depreciation and fixed O&M Costs.116
ERM
88 Beyond the increase to NPE, the Company also proposes modifying its Energy Recovery
mechanism, or ERM, by moving to a single 95% customer/ 5% Company(95/5) sharing
level applied to the entire difference between actual and authorized power supply costs117
as well as eliminating the deadbands.118 The Company cites Forecast Error, Regional
Resource Adequacy, Lack of Market Liquidity, Carbon Emission Policy, and Changing
114 Kalich, Exh. CGK-IT at 31:9-20.
115 Kalich, Exh. CGK-1T at 23:20-24:6.
16 Kalich, Exh. CGK-IT at 14:23-15:10.
117 Kinney,Exh. SJK-IT at 50:3-5.
118 Kinney,Exh. SJK-1T at 50:9.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 24
ORDER 08
Market Dynamics as the reasons for making their recommended changes to the ERM and
deadbands.119
89 The ERM and deadbands are currently structured as follows:
Table 1: ERM and deadbands
Power Supplyi Rate Bases
Surcharge (Power costs higher than First $4M absorbed by AVA
authorized) Next $6M, 50150 split between customers
and AVA
Over $1OM, 90/10 split between
customers and AVA
$0
Rebate (Power costs lower than First $4M absorbed by AVA
authorized) Next $6M, 50150 split between customers
and AVA
Over $10M, 90/10 split between
customers and AVA
90 Company Witness Kinney argues that deadbands skew risks in favor of one party or the
other, are not an industry standard, and focus utility rate proceedings on power supply
expense deadband management instead of overall costs estimation.120 He further contends
that for deadbands to be beneficial, two criteria must be met at minimum:
• The Company has the opportunity for actions resulting in significant cost
reductions and the commensurate benefits of the deadband, and
• The net power cost forecast must be accurate and without significant error."'
91 Kinney argues that neither criteria is currently met, leaving risk unshared and one party
benefiting at the expense of the other."'
92 While forecast error has always existed, Kinney argues that new Company analysis
prepared for this filing demonstrates that power supply costs cannot be forecasted
accurately for reasons outside of utility control."'
19 Kinney,Exh. SJK-1 T at 50:11-34.
120 Kinney,Exh. SJK-IT at 53:7-9.
121 Kinney,Exh. SJK-IT at 53:9-13.
122 Kinney,Exh. SJK-1 T at 53:13-16.
123 Kinney,Exh. SJK-1T at 54:6-8.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 25
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93 Regarding the Forecast Error Adjustment, Kinney claims that due to volatile market
conditions, the Company is incapable of forecasting power supply costs accurately, and
therefore managing the forecast error is outside of the Company's control.124 Kinney
further testifies that though NPE forecast error has always been present, forecasts continue
to get worse with new and"nearly impossible to predict"variables,121 such as the implied
market heat rate,126 rising market volatility,121 falling market liquidity,121 the CCA,129 and
the increasing value of Avista's thermal generation fleet.130
94 The Company further argues that a shift to a 95/5 split would benefit customers as looking
at individual years of history, customers would have benefitted with the 95/5 approach in
nine of twelve years, or 75 percent of the time.131
95 Beyond the significant forecasting error, Kinney argues that the Commission should re-
consider the removal of deadbands, despite rejecting this request in 2012, due to the
uncertainty caused by CCA regulations.132 The Company considered including a CCA cost
estimate in a pro forma adjustment but decided against it because of uncertainty in the
implementation and impacts of the CCA.133 Kinney contends that depending on
Commission guidance, the Company may have to include carbon costs in its dispatching
decisions, which the Company argues would increase NPE by tens of millions of
dollars.134 Kinney argues that not including this estimate could harm the company if
deadbands remain.13' Kinney also notes that had the Company included an estimate in its
NPE and thus overstated its cost, customers would be harmed by the first $4 million
flowing directly to the Company in the first deadband, and another$1.5 million through
the 50150 sharing band.136
124 Kinney, Exh. SJK-1 T at 50:11-15.
125 Kinney,Exh. SJK-1T at 54:2-9.
126 Kinney,Exh. SJK-IT at 58:6-60:3.
127 Kinney,Exh. SJK-1T at 60:14-62:8.
12'Kinney,Exh. SJK-1T at 62:9-63:2.
129 Kinney,Exh. SJK-1T at 64:3-65:9.
130 Kinney,Exh. SJK-IT at 69:15-71:14.
131 Kinney,Exh. SJK-lT at 54:22-23.
132 Kinney,Exh. SJK-IT at 56:8-10.
133 Kinney,Exh. SJK-1 T at 56:11-12.
134 Kinney,Exh. SJK-IT at 56: 15-17.
135 Kinney,Exh. SJK-IT at 56:17-19.
136 Kinney,Exh. SJK-1T at 56:19-22.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 26
ORDER 08
96 According to the Company, throughout the history of the ERM, sharing bands were a
means to distribute the impacts of varying electric and natural gas prices, along with hydro
variability risk. When the Company's thermal fleet had an expected annual value of$30 to
$50 million, even 10 to 20 percent error resulted in costs falling within the deadbands.
However, with today's annual thermal fleet value estimated at $500 million, that same 10
to 20 percent error becomes multiples of the deadbands and overwhelms Company efforts
to reduce costs.137
97 Kinney asserts that because of a lack of liquidity and the much higher expense of margin
calls to hedge forward transactions, hedging in the forward markets to lock in projected
value no longer is an option for most of Avista's business.138 He further argues that being
unable to capture forward resource value results in the Company taking more of the
financial risk with the current ERM deadbands and recovery structure.139
98 The Company argues that in the short term, the best approach to recover CCA costs is to
have them flow through a 95/5 ERM without deadbands.140 Kinney states that allowing
those CCA costs to flow through the ERM at a sharing level of 95/5 obligates the
Company to pay 5 percent of anticipated CCA costs but avoids disagreements between
parties over the magnitude of costs that cannot be known at this point.141
99 Kinney contends that requesting 100 percent recovery of CCA costs would be the fairest
outcome and reflect the legislation's intent.142 However, as part of an overall package to
simplify the ERM and address increasing forecast costs, he states that the Company is
offering this compromise.143
100 Avista also notes that while the transformation to new markets creates efficiencies and
lower NPE, it also reduces the Company's ability to affect costs.144 Thus, when the
137 Kinney,Exh. SJK-1T at 60:17-21, 61:1.
138 Kinney,Exh. SJK-IT at 62:19-21.
139 Kinney,Exh. SJK-1T at 62:22-23, 63:1-2.
140 Kinney,Exh. SJK-1T at 64:18-19.
141 Kinney,Exh. SJK-1 T at 64:19-20 and 65:1-2.
142 Kinney,Exh. SJK-IT at 65:4-5.
143 Kinney,Exh. SJK-IT at 65:6-9.
144 Kinney,Exh. SJK-1 T at 65:11-16.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 27
ORDER 08
benefits of new markets are reflected in power supply modeling, as is currently the case, it
is reasonable to remove deadbands.145
101 The Company also argues that the existing deadbands were identified as a significant
credit weakness, and that the ERM's current design disadvantages Avista compared to
other regional utilities.146
Colstrip
102 Regarding Colstrip, the Company includes Colstrip's net power supply costs in Pro Forma
Power Supply Adjustment 3.00P and the ERM baseline in RYI. The breakdown of
Washington's Electric RY2 revenue requirement without Colstrip can be seen in Table
2 147
Table 2: Washington Electric RY2 revenue requirement—Colstrip Offset
Breakdown of Washington Electric RY2 Revenue Requirement
($OOOs)
Net Expense/Capital Investment Increase $ 18,618
Colstrip Power Supply Increase $ 59,512
Subtotal- Base Rate Increase $ 78,130
Schedule 99 Colstrip Tracker Reduction $ 24,419
Ovenall Bill Impact S 53,711
EIM Benefits
103 Finally,Avista witness Kalich details the methodology the Company uses to quantify the
value gained from participation in the intra-hour Energy Imbalance Market (EIM)141
145 Kinney,Exh. SJK-lT at 65:17-20.
146 McKenzie, Exh.AMM-1 T at 18:11-14.
147 Andrews, Exh. EMA-IT at 6:15-8:21
148 The acronyms EIM and WEIM are used interchangeably by the parties throughout their
testimony and briefs. They appear as used by the parties throughout their filings.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 28
ORDER 08
offered by CAISO, developed with the help of consulting firm Borismetrics.149 Kalich
states that Avista has determined an EIM system benefit of$5.5 million in 2025.150
Staffs Response Testimony
ERM
104 Staff Witness Wilson testifies that Staff is unconvinced that the current sharing/deadband
schedules provide the Company with material incentives that affect its current resource
decisions.151 Wilson further testifies that considering both base rates and NPE, the cost-
effectiveness of Avista's wind and hydropower procurements could easily have a more
substantial rate impact than the natural gas plants. However, he does acknowledge that
once procured, any impacts of wind and hydropower on NPE are largely indirect and
outside a utility's control.112
105 Staff contends that in the PacifiCorp order, the Commission pointed out that the effect of
the sharing/deadband schedules is to insulate customers from cost increases and provide a
balancing effect between years in which power costs are under- or over-forecast.1" Staff
agrees that this is a reasonable policy position to take and gives it strong deference.154
106 Staff recommends simplifying the current sharing portion of the mechanism to a
symmetric 90/10 sharing."' Staff asserts that this ratio equitably shares risk between
customers and Avista, while continuing to provide the Company with a reasonable
incentive to manage or control power costs.156
107 Additionally, with respect to the deadband, Staff recommends reducing the deadband from
$4 million to $3 million.157 The Commission retained the $4 million deadband in the
149 Kalich, Exh. CGK-1T at 4:14-14:7. The detail provided by Kalich in direct testimony does not
specifically pertain to arguments made in response by intervening parties, since those arguments
consider what is absent from the analysis.
150 Kalich, Exh. CGK-IT at 13:14-14:7.
151 Wilson,Exh. JDW-ITC at 35:19-21.
152 Wilson,Exh. JDW-ITC at 36:1-5.
153 Wilson,Exh. JDW-ITC at 36:8-11.
154 Wilson,Exh. JDW-ITC at 36:11-12.
155 Wilson,Exh. JDW-ITC at 37:3-4.
156 Wilson,Exh. JDW-ITC at 37:4-6.
157 Wilson,Exh. JDW-ITC at 37:7-8.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 29
ORDER 08
PacifiCorp case, which is approximately 2 percent of its net power Costs.158 Since Avista's
proposed NPE is much smaller than that of PacifiCorp, Staff finds it inequitable to expose
Avista to a relatively larger deadband risk.159
Forecast Error Adjustment
108 Staff witness Wilson recommends that the Commission reject Avista's proposed Forecast
Error Adjustment as not justified.160 Wilson describes the Forecast Error Adjustment as a
pre-payment of revenue requirement that Avista expects based on historical NPE trends
but is not itself an expense.161 Wilson argues that"Avista is proposing to include in its
NPE forecast recovery of a revenue requirement that does not yet exist. ,162 While
acknowledging that some drivers of NPE are outside of Avista's control,Wilson also
claims that several significant drivers remain in the Company's control163, and that it is
unreasonable to forecast a cost that may not even occur. 164
109 Wilson also notes concern that Avista does not appear to pay attention to its
responsibilities to help minimize NPE costs to customers in direct testimony.161 Wilson
contends that while there are increased challenges for Avista with respect to hedging, it
has not provided detailed information regarding the carbon allowance or natural gas
markets Avista participates in.166
Errors
110 Wilson identifies several forecast errors in Avista's net power cost filing and recommends
that the Commission accept Staff's corrections to Avista's 2025 and 2026 forecast NPE.167
Wilson also recommends that the Commission direct Avista to update its model to address
the input errors identified by Staff, specifically the Lancaster PPA and the Rattlesnake
158 Wilson,Exh. JDW-ITC at 37:8-9.
159 Wilson,Exh. JDW-ITC at 37:9-11.
160 Wilson,Exh. JDW-1TCr at 4:9-12.
161 Wilson,Exh. JDW-1TCr at 8:1-16.
162 Wilson,Exh. JDW-1TCr at 9:9-10.
163 Wilson,Exh. JDW-1TCr at 9:18-11:5.
164 Wilson,Exh. JDW-1TCr at 14:19-15:3.
165 Wilson,Exh. JDW-1TCr at 11:6-10.
166 Wilson,Exh. JDW-1TCr at 12:1-14:9.
167 Wilson,Exh. JDW-1TCr at 5:6-8.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 30
ORDER 08
Flats Wind Project.168 Avista already acknowledged multiple other errors Wilson identified
in the Company's forecast NPE.161
Colstrip
III Regarding Colstrip, Wilson claims that the modeling assumption used by Avista to
determine the marginal fuel price for Colstrip is dependent on an extremely unlikely
circumstance where Avista does not meet its minimum contractual fuel consumption in
2025. Since Avista is currently projected to exceed the minimum annual amount, Wilson
argues that the marginal price of fuel should be the highest annual marginal price.170
Wilson further argues that failure to dispatch Colstrip to the proper marginal cost would be
imprudent.171
Power Cost Update (In Case of MYRP Rejection)
112 Should the Commission accept Staff's recommendation and reject the MYRP, Staff
witness Erdahl recommends that the Company should be allowed to file a power cost
update with a rate effective date of December 31, 2025. This update would provide Avista
an opportunity to update power costs while removing Colstrip from rates on or before
December 31, 2025. Erdahl recommends that the power cost update also update fuel
expenses and market sales for resale.172
EIM Benefits
113 Staff witness Wilson claims that Avista does not include non-energy expenses and
revenues from the Western Energy Imbalance Market(WEIM), such as congestion
charges. While Wilson notes that Avista's methodology seems reasonable for forecasting
energy transaction costs, Wilson argues that the Company has earned on average $1.4
million per year in non-energy benefits from the WEIM which is not reflected in the
model.173
168 Wilson,Exh. JDW-1TCr at 42:3-6;40:15-41:3;41:5-13.
169 Wilson,Exh. JDW-1TCr at 37:16-38:6.
170 Wilson,Exh. JDW-1TCr at 39:1-40:7.
171 Wilson,Exh. JDW-1TCr at 40:9-13.
172 Erdahl, Exh. BAE-1 T at 15:9-17.
173 Wilson,Exh. JDW-1TCr at 38:13-22. The $1.4 million figure does not include a citation.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 31
ORDER 08
114 Wilson recommends that the Company update its dispatch to include the non-energy
WEIM charges and benefits. Staff does not have an estimate of how this recommendation
would ultimately affect NPE.174
Public Counsel's Response Testimony
ERM
115 Public Counsel contends that the Company's entire argument is based on its self-declared
inability to forecast or prepare for market changes."'Witness Earle argues that the
Company is effectively testifying that it lacks the competency to adapt to normal
occurrences in the market, and as a result the Company wants to shift 95 percent of the
risk for its decision onto ratepayers.176
116 Earle contends that it is apparent that the ERM is working as it was designed to as there
are some years in which costs are shared, and other years in which benefits are shared.177
The existence of years such as 2022 with large shortfalls is concerning and may be an
indication of insufficient hedging.178 Before considering altering the ERM deadbands and
sharing bands, Public Counsel urges the Commission to order Avista to provide a
comprehensive report on its hedging policies and practices.179
117 Earle also contends that both conditions that Avista states are needed for deadbands to be
beneficial are met.180 Earle argues that Avista can take actions to reduce costs, and the
NPE forecast, while not perfect, has a track record that supports the idea that costs are
forecastable.181
118 Public Counsel testifies that the Commission should reject any conclusions from Avista's
historical comparison as being dispositive.182 Public Counsel states that the historical
comparison the Company makes is problematic as it unreasonably assumes that changes to
14 Wilson,Exh. JDW-1TCr at 42:3-6.
15 Earle, Exh. RLE-1 CT at 8:11-12.
16 Earle, Exh. RLE-1 CT at 8:19-20, 9:1-2.
17 Earle, Exh. RLE-1CT at 14:12-15.
17'Earle, Exh. RLE-1CT at 14:15-17.
179 Earle, Exh. RLE-1CT at 14:17-19.
180 Earle, Exh. RLE-1CT at 16:7-11.
18' Earle, Exh. RLE-1 CT at 16:11-13.
182 Earle, Exh. RLE-1CT at 17:5-6.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 32
ORDER 08
the incentive structure would not have changed behavior.183 A proper calculation of the
different outcomes under various risk sharing mechanisms should consider the effects of
the risk sharing mechanisms on NPC variance.184
119 Public Counsel also argues that Avista's justifications for changing the ERM are not new
and that between 2012-2022, actual NPE was less than the authorized level for eight of
those years.185
120 Public Counsel further states that the history of the difference between authorized and
actual NPE shows Avista's claims such as "our forecasts continue to get worse" and
"power supply costs cannot be forecasted accurately, and for reasons outside of utility
control" are unsubstantiated."'
121 Public Counsel also finds Avista's complaints on market liquidity to be unreasonable.187
Earle states that the Company's forward electricity purchases were at low levels in 2020
and 2021 compared to previous years and then disappear from 2022 onwards."' Earle
contends that this is concerning and surprising given the ability of other utilities to buy
electric power forward, contributing to the unreasonableness of the Company's
complaint."'
122 While Public Counsel agrees that Avista should address the uncertainty in the carbon
emissions policy, Earle argues uncertainty is not a reason for inaction and placing nearly
all of the risk on ratepayers."' Contrary to Avista's claims of having no control, Earle
argues that the Company can modify its operations in response to observed costs and
purchase and sell allowances in the market to mitigate risk.191 Additionally, Earle
emphasizes that compliance periods for allowances are four years followed by 10 months
to transfer compliance instruments for the compliance period, allowing Avista to perform
substantial risk mitigation over a period of almost five years.192
183 Earle, Exh. RLE-1CT at 16:15-18.
184 Earle, Exh. RLE-1CT at 17:3-5.
115 Earle, Exh. RLE-1CT at 9:9-10.
116 Earle, Exh. RLE-1CT at 10:20-24.
187 Earle, Exh. RLE-1CT at 13:2-3.
188 Earle, Exh. RLE-1CT at 12:7-8.
189 Earle, Exh. RLE-1 CT at 13:1-3.
190 Earle, Exh. RLE-1CT at 13:5-8.
191 Earle, Exh. RLE-1CT at 13:8-11.
192 Earle, Exh. RLE-1 CT at 13:11-14.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 33
ORDER 08
123 Earle also emphasizes that unplanned changes in the weather are not a new
phenomenon.193 While climate change may make variation more severe, it does not mean
planning cannot occur or contingencies be put into place to handle them.'94
Forecast Error Adjustment
124 Earle recommends that the Commission reject Avista's proposal to add a forecast error
adjustment of$65.8 million to the forecast NPE. Earle states that the adjustment does not
entail actual costs that Avista has incurred, or will incur, on behalf of its customers and the
Commission has repeatedly rejected the premise that it is impossible to forecast NPE.195
125 Citing Avista witness Kinney, Earle describes the Forecast Error Adjustment as the
difference between Avista's forward looking evaluation and after-the-fact evaluation of its
generation resources, which Avista proposes to be $65.8 million on top of the standard
forecast NPE.196 Earle argues that the Forecast Error Adjustment is not a separate cost that
the Company incurs on behalf of ratepayers, and that the ERM already accounts for
various forecast errors.19' Earle claims that the Company's argument that forecasting has
continued to get worse and that power supply costs cannot be forecasted accurately are
disproved by Avista's performance forecasting NPE since the ERM was implemented in
2003. Earle includes the following figure in his testimony, a waterfall graph of Avista's
performance calculating forecast NPE since 2003.19'
19' Earle, Exh. RLE-1CT at 14:2-3.
194 Earle, Exh. RLE-1CT at 14:3-5.
195 Earle, Exh. RLE-1CT at 2:19-26.
196 Earle, Exh. RLE-1CT at 3:18-4:3.
19'Earle, Exh. RLE-1CT at 4:4-11.
19'Earle, Exh. RLE-1CT at 5:8-7:10.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 34
ORDER 08
Figure 1: Waterfall diagram of Avista's (Actual NPE -Authorized NPE)
($million).199
■ Increase ■ Decrease ■ Total
120.0
14.5
100.0 24.8 . ,
`W 90.0 ' 19.2 . 5.0
►W 13.6
.0 60.0 20.7 . - 14.7 • , 48.8
V
40.0 33.8 , -17.6
8.4
6.2 .� 20.0
-15.6 16.4
5.5 . .
� 0.0
U -17.5
-20.0
2003 2004 2005 2006 2007 2008 2009 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022
126 Earle highlights that the 2022 NPE forecast as authorized to be $72.3 million with a final
incurred NPE of$121.1 million, under-collecting by $48.8 million. However,Avista had
calculated its 2022 portfolio error to be $202.7 million, which would have resulted in an
over-collection of$154 million if it had been allowed into the NPE forecast for 2022.200
EIM Benefits
127 Earle finds Avista's estimate of EIM benefits to be unreasonable. Earle asserts that the
Company's modeling methodology contains errors, including gaps in pricing data used in
its regression analysis201 and flawed assumptions that reduce the variability of intra-hour
prices.202 As a result of these flaws, Earle recommends rejecting Avista's estimate of
WEIM benefits.203
1" Earle, Exh. RLE-1CT at 6:5.
200 Earle, Exh. RLE-1CT at 4:10-5:2.
201 Earle, Exh. RLE-1CT at 27:8-28:17.
202 Earle, Exh. RLE-1CT at 28:18-29:13.
20' Earle, Exh. RLE-1CT at 29:14-16.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 35
ORDER 08
128 Earle also recommends that the Commission reject Avista's use of the 2017 E3 study to
support the Company's forecast of EIM benefits since the study is outdated, using prices
and results that are listed in 2017 dollars.204
129 To counter Avista's estimate, Earle points to CAISO's estimated benefits for Avista's
Balancing Authority Area(BAA). Earle claims that CAISO estimates $25.3 million in
benefits annually for the Company's BAA'20' and states that the Company earned $24.1
million in 2022 and$20.1 million in 2023 from WEIM participation.206 Earle also claims
that E3 previously endorsed the CAISO WEIM benefits methodology as an accurate
measure for benefits Puget Sound Energy received from its participation in the WEIM.207
130 Earle provides an alternative "bootstrapping analysis"to calculate the benefits that Avista
receives from EIM participation and recommends that the Commission order Avista to
develop a new forecasting methodology using either this methodology or a different
approach such as Monte Carlo modeling or scenario-based forecasting. The new
methodology should align with CAISO's WEIM benefit estimates.20' Earle also
recommends that the Commission order the adoption of an annual WEIM benefits forecast
of$20.7 million, based on the bootstrapping analysis.209
The Energy Project's Response Testimony
131 The Energy Project argues that the Commission should reject Avista's ERM proposal for
two reasons:
• Individual customers do not understand regional energy market structures, nor can
they make a significant impact on the Company's power costs, and
• In SB 5295 the Legislature directed the UTC to establish and maintain regulatory
processes that measure and incent utility performance.zio
204 Earle, Exh. RLE-1CT at 29:17-6. Earle estimates that the value of EIM benefits from the 2017
E3 study, converted to 2025 dollars,would be$7.4 million instead of$5.5 million.
205 Earle, Exh. RLE-1CT at 30:7-14.
206 Earle, Exh. RLE-1CT at 31:4-6. In Public Counsel's cross testimony, Earle provides the
updated data and does not significantly change the recommendation.
207 Earle, Exh. RLE-1CT at 35:9-11.
20'Earle, Exh. RLE-1CT at 35:12-36:7.
209 Earle, Exh. RLE-1CT at 33:5-9.
210 Stokes, Exh. SNS-1T at 40:5-8,10-11.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 36
ORDER 08
132 Since customers have such little ability to impact power costs, Stokes argues that it is
inappropriate to change the ERM to place nearly all the costs on customers.211
Additionally, TEP argues that moving from a deadband that gives shareholders a $4
million incentive to contain energy costs to one in which shareholders only have a 5
percent incentive runs counter to the Legislature's direction in SB 5295.212
AWECs Response Testimony
133 AVWEC testifies that the ERM is functioning as the Commission intended, and that the
Commission has repeatedly rejected arguments to eliminate deadbands from cost sharing
mechanisms.As such,AWEC recommends that the Commission reject Avista's
proposal.213
134 Mullins argues that none of the issues Avista raises have any relevance to the ERM.214 He
asserts that power costs have always been volatile—that is why the ERM exists.215
Mullins further contends that even if one were to assume that power costs are more
volatile today than they were in the past,Avista's risk is no greater because the deadbands
and sharing bands have remained the same since 2006.216 He argues that the ERM does
not create power cost risk for Avista, it insulates it from this risk by allowing for a true up
of amounts that exceed the deadbands.217
135 Additionally,AWEC contends that like PacifiCorp in its 2023 GRC,Avista argues that
customers have been harmed by the current ERM structure relative to Avista's proposed
95/5 sharing structure. Mullins states that the Commission rejected this argument, noting
that the deadbands have insulated both customers and PacifiCorp from unreasonable risk
and appropriately assign power cost risk.zls
136 Mullins further testifies that the concerns related to policy changes are speculative at
best.219 Mullins states that beyond the CCA,Avista merely references the Energy
21 Stokes, Exh. SNS-IT at 40:8-9.
212 Stokes, Exh. SNS-IT at 40:13-16.
211 Mullins,Exh. BGM-IT at 59:10-13.
214 Mullins,Exh. BGM-1T at 60:1, 61:1.
215 Mullins,Exh. BGM-1T at 61:1-2.
216 Mullins,Exh. BGM-IT at 61:2-5.
217 Mullins,Exh. BGM-IT at 61:5-7.
211 Mullins,Exh. BGM-IT at 61:16-20.
211 Mullins,Exh. BGM-1T at 62:7.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 37
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Independence Act and CETA, stating that"[m]any unknowns exist on the path to
decarbonization that likely are not reflected in our normalized NPE modeling and
forecast. ,220 As such,AWEC contends that deviating from Commission policy and
precedent to the detriment of ratepayers based on speculation is unreasonable.221
137 AWEC asserts that Avista's arguments about organized markets reducing the Company's
ability to affect costs were expressly rejected in PacifiCorp's most recent rate case, with
the Commission finding them to be "unsettling."222
Forecast Error Adjustment
138 Mullins recommends that the Commission reject Avista's proposed Forecast Error
Adjustment, which would reduce the revenue requirement for electric service in RY1 by
$45.2 million.223 Mullins argues that the mark-to-market calculations Avista performed to
generate the Forecast Error Adjustment do not represent a cost to Avista since power
supply expenses are influenced by many other factors.224 Mullins also claims that Avista's
back-casting analysis is best used as a model validation exercise, not a method of
remedying a model that was shown to be invalid.225 Mullins asserts that Avista's
backwards-looking calculation simply demonstrates that there was major market volatility
between 2018 and 2022, the period over which the Company calculated the Forecast Error
Adjustment.226
California-Oregon-Border Sales
139 Regarding California-Oregon-Border (COB) sales, Mullins recommends an adjustment to
NPE to account for COB margins, resulting in a reduction to revenue requirement for
electric services of$142,054 for RY1.227 Mullins notes that Avista has previously included
a line item in Forecast NPE to account for sales at the COB market hub since Avista holds
221 Mullins,Exh. BGM-IT at 62:10-12.
221 Mullins,Exh. BGM-IT at 62:12-14.
222 Mullins,Exh. BGM-IT at 62:17-20.
223 Mullins,Exh. BGM-IT at 44:8-13.
224 Mullins,Exh. BGM-1T at 41:19-42:20.
221 Mullins,Exh. BGM-IT at 43:8-22.
226 Mullins,Exh. BGM-1T at 43:1-7.
227 Mullins,Exh. BGM-IT at 46:8-12.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 38
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a contract with Portland General Electric (PGE) for 100 MW of transmission capacity at
COB.22s
Colstrip
140 Regarding Colstrip's NPE impact, Mullins objects to Avista's use of a mark-to-market
calculation to determine this impact. Mullins claims that since the removal of Colstrip
Units 3 and 4 from rates is the principal driver of the RY2 revenue requirement increase, it
would be inappropriate to determine its rate impact using only a mark-to-market
calculation performed in 2024. Mullins recommends that the Commission require Avista
to perform a full update to NPE for RY2 through a PCORC or a limited update.229 If the
Commission opts for a limited update, Mullins recommends that it be submitted in August
2025 with an update to forward market prices effective November 1, 2025. Mullins'
recommendation includes no modeling updates, only prices, contracts, and resources.230
Mullins also recommends the removal of wheeling costs associated with Colstrip as a part
of the RY2 NPE update, since they will no longer be used to benefit ratepayers once
Colstrip Units 3 and 4 are removed from rates.231
141 Finally, Mullins also recommends the transfer of plant balances associated with Colstrip's
transmission assets to being classified as "plant held for future use" and excluded from the
revenue requirement, while removing associated expenses from the revenue requirement
for RY2. Mullins justifies this recommendation by noting that Avista is transferring all
ownership interest in Colstrip Units 3 and 4 to Northwestern and claims that the Company
has shown no evidence that it will utilize the transmission assets.232
EIMBenefits
142 Mullins claims that Avista's WEIM benefit forecasting does not capture the benefits of
market settlements, such as neutrality charges, flex awards, and greenhouse gas revenues
resulting in an understatement of net power expense.233 Mullins also states that the
Company does not include revenues received for providing carbon free resources into the
221 Mullins,Exh. BGM-1T at 44:14-45:11.
zzg Mullins,Exh. BGM-IT at 55:1-56:2.
231 Mullins,Exh. BGM-IT at 56:3-19.
211 Mullins,Exh. BGM-1 T at 57:1-19.
232 Mullins,Exh. BGM-IT at 57:20-58:21.
211 Mullins,Exh. BGM-1T at 47:6-12; 53:7-14.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 39
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WEIM in its benefits forecast, compared to peer utilities Puget Sound Energy, PacifiCorp,
and Portland General Electric.234
143 To account for the omission of these WEIM benefits, Mullins recommends an increase of
$3.0 million to Avista's WEIM benefits calculation. This recommendation would reduce
revenue requirement by$2.1 million.235
Avistas Rebuttal Testimony
ERM
144 While Avista initially proposed a 95/5 sharing mechanism for the ERM, upon review of
Staff's testimony, the Company is willing to accept a 90/10 sharing of costs and benefits,
but with a slightly modified"deadband."236 The Company supports an asymmetric
deadband, so that when power supply costs are higher than authorized, the Company
would absorb $2.5 million before the 90/10 sharing.231 When actual power supply costs
are lower than authorized, the Company would only retain $2 million, before sharing
90/10 with customers.238
145 Avista contends that the proposed asymmetrical deadbands of$2.5 and $2.0 million are
justified based on the relative size metrics of Avista and PacifiCorp and the Company's
corresponding ability to absorb the "deadband" in a way that would still be meaningful
without being punitive.239
146 The Company also agrees with Staff to eliminate the second asymmetrical sharing band
that currently refunds 75 percent of surplus dollars to customers or equally splits surcharge
dollars.240
234 Mullins,Exh. BGM-IT at 53:15-54:5.
231 Mullins,Exh. BGM-IT at 54:6-15.
236 Christie,Exh. KJC-4T at 13:21-22, 14:1-2.
23' Christie,Exh. KJC-4T at 14:2-4.
231 Christie,Exh. KJC-4T at 14:4-6.
239 Christie,Exh. KJC-4T at 14:15-18.Relative to NPE,Avista's sharing of deviations from
authorized bands is approximately two times that of either PacifiCorp or PSE,which demonstrates
the fairness of moving to a lower sharing band. Kinney,Exh. SJK-17T at 17:16-19, 18:6-8.
240 Kinney,Exh. SJK-17T at 16:13-14.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 40
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147 Avista disagrees with AWEC and Public Counsel's contention that the PacifiCorp order
precludes ERM modifications for Avista.241 Kinney argues that the risk inherent in Avista's
deadbands is more impactful to it given the Company's relative size, which alone should
warrant ERM modification.242 He further argues that the Company's modified proposal
retains the "guardrails" desired by the Commission and keeps the customer-focused intent
of the asymmetry in the second-band, while adjusting the deadband size to a risk level
more in line with Avista's regulated peers.243
148 Avista argues that by retaining customer-favored asymmetry in the deadband, the
Company believes its modified ERM proposal addresses the concerns voiced by Witness
Mullins.244
149 Avista argues that while it is not possible to address CCA fully in this proceeding, because
so many unknowns still exist with CCA, it is prudent, however, to recognize the risk that
may be borne by the Company for these costs in the pro forma period, and to address them
as much as reasonably possible in this proceeding with tools available —namely,by
recognizing recent under-collection of costs by including a forecast error adjustment and
modifying the ERM.241
ISO Regarding Performance Based Ratemaking requirement in ESSB 5295,Avista testifies
that the ERM has not been separately identified by the Commission as an area to apply
performance measures geared towards evaluating how a utility performs. The incentive to
perform is already part of the sharing mechanism.246
151 Avista suggests that Public Counsel misunderstood the forecast error adjustment to include
only market variability associated with generation assets, when in fact the proposed
forecast error represents components of actual costs.247 The Company argues that Public
Counsel's broader argument, that over the life of the ERM the average forecast error was
small, is gravely mistaken.248 Kalich emphasizes that the 20-year average error to which
24' Kinney,Exh. SJK-17T at 19:7-9.
242 Kinney,Exh. SJK-17T at 19:9-11.
243 Kinney,Exh. SJK-17T at 19:24-26, 20:1-2.
244 Kinney,Exh. SJK-17T at 21:4-6.
245 Kinney,Exh. SJK-17T at 22:10-15.
246 Kinney,Exh. SJK-17T at 23:15-18.
247 Kalich, Exh. CGK-7T at 8:9-10, 8:13-14.
241 Kalich, Exh. CGK-7T at 8:14-15.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 41
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Earle cites incorrectly masks very large forecast errors occurring year-to-year and over
contiguous years.249
152 In response to Public Counsel, Kalich states that the market for electricity has
fundamentally changed and opportunities to make forward electricity purchases and
provide beneficial sale transactions on behalf of customers and the Company do not exist
today as they did in the past.250
153 Avista currently defines CCA costs as NPE and these costs flow through the ERM. Kalich
argues that it has no way to lower NPE through actions under the CCA, but that it is only a
question of what the unknown costs will be.251 Kalich argues that Avista should not be
responsible for a large share of CCA costs, claiming that CCA wasn't intended to increase
utility costs for electric utilities.212 However, Kalich notes that CCA costs will almost
certainly increase NPE, and argues that modifying the ERM will help mitigate the issue by
reducing the Company's unreasonable exposure to CCA costs through the ERM.Zss
154 The Company argues that it should not provide a comprehensive report on its hedging
practices and policies before any modification of the ERM is made because it already
provides this information to the Commission.zsa Further,Avista contends that issues
presented in this case will not be solved by modifying hedging policies and practices.255
Kalich states that Earle presents no evidence to refute the primary reason hedging has
become less relevant in today's marketplace, as the market liquidity for forward hedging
has diminished.256
General Forecast NPE
155 Kinney states that the Company has rerun its Power Supply Model, updating wholesale
gas and electricity prices, new and incremental contracts, non-gas fuel prices, and
24'Kalich, Exh. CGK-7T at 8:15-17.
250 Kalich, Exh. CGK-7T at 11:16-20.
25i Kalich, Exh. CGK-7T at 12:15-16.
252 Kalich, Exh. CGK-7T at 12:16-18.
2" Kalich, Exh. CGK-7T at 12:19-20.
254 Kalich, Exh. CGK-7T at 13:6-10.
255 Kalich, Exh. CGK-7T at 13:11-12.
256 Kalich, Exh. CGK-7T at 13:12-16.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 42
ORDER 08
adopting certain positions shared by other parties.As a result, the forecast NPE is reduced
from $175.1 million to $119.0 million.257
156 Kalich testifies that Avista updated wholesale electricity and gas prices to a three-month
average of forward prices for the period ending July 15, 2024. Kalich also states that
suggestions from Staff for the forecast NPE were incorporated, including startup fuel
costs, corrected long-term wholesale power contract revenues, updated marginal dispatch
pricing for Colstrip, increased expected Rattlesnake Flat Wind generation levels, and new
tariff rates associated with BPA transmission and gas transport contracts.258
157 Kinney asks that the Commission make explicit findings of fact with respect to multiple
items, including changing market fundamentals, a large forward premium in the implied
market heat rate (IMHR), the increased value and risk associated with Avista's thermal
fleet, diminished market liquidity that precipitates forecast error, the increased difficulty of
hedging, and the difficulty of the Company to properly forecast NPE.219
158 Kalich suggests convening a new workshop series after the conclusion of the rate case to
revisit power supply modeling methodology, address new changes in the energy space,
inform the new representatives of the intervening parties, and consider alternatives to
AURORA model.261
Forecast Error Adjustment
159 Kinney states that Avista reduced the Forecast Error Adjustment from $65.8 million to
$29.7 million.26i Kinney offers a change to the Forecast Error Adjustment calculation
methodology; using three historical years instead of five, and simply averaging the annual
average of actual ERM variances instead of the average annual difference between the
calculated Forecast Value and Actual Value of NPE.262 Kinney claims that this
methodology consists of actual costs, addressing Public Counsel's concern that the
Forecast Error Adjustment does not consist of costs that Avista has incurred in the past.
Kinney also claims that the new methodology incorporates feedback from AWEC
257 Kinney,Exh. SJK-17T at 3:7-11, 3:18-3:22.
251 Kalich, Exh. CGK-7T at 5:18-6:20.
259 Kinney,Exh. SJK-17T at 5:5-6:17.
260 Kalich, Exh. CGK-7T at 7:10-23.AURORA or Aurora is an energy forecasting and analysis
software.
261 Kinney,Exh. SJK-17T at 3:12-14.
262 Kinney,Exh. SJK-17T at 10:19-11:12.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 43
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criticizing the futility of using a model validation technique for recalibrating results,263 and
that the new methodology for the Forecast Error Adjustment addresses all concerns held
by Staff in Order 07 with which the Commission agreed.264
160 Kinney argues that AURORA modeling methodology, to which all stakeholders previously
agreed, cannot reflect all the changes to input assumptions happening now in the
regulatory and market environments.261 In response to Public Counsel witness Earle's
claim that Avista is providing new modeling changes that have not been vetted by the
Commission, Kalich contends that Avista is not claiming to change its modeling
methodology but is instead listing the Forecast Error Adjustment as a line-item
adjustment, instead of burying it within the AURORA model.266 Further, Kalich rejects
Staff and AWEC's characterization of the Forecast Error Adjustment as simply a mark-to-
market valuation of the Company's generation portfolio , arguing instead that it captures
the entire portfolio since the calculation is based on metrics that capture the entire
portfolio.267
161 Kinney further states that the Forecast Error Adjustment is known and measurable, and
captures underlying offsets because it is based on previously approved values and captures
all power supply expenses.268 Kalich contends that forecast error is neither less nor more
known than other assumptions already making up the forecast NPE value, and that if the
Forecast Error Adjustment is rejected, so too should other NPE pro forma adjustments
used in prior rate cases.269 Kalich also rejects Staff witness Wilson's claim that forecast
error difference is not an expense, calling it a cost"by definition"because it is driven by
differences between authorized and actual expenses.270 He rejects Wilson's assertion that
including the Forecast Error Adjustment is "unprecedented," saying that recovering known
and measurable costs is not unprecedented.171
263 Kinney,Exh. SJK-17T at 12:11-20.
264 Kinney,Exh. SJK-17T at 13:5-15:10.
265 Kinney,Exh. SJK-17T at 10:8-19.
266 Kalich, Exh. CGK-7T at 21:8-22:2.
267 Kalich, Exh. CGK-7T at 15:13-16:13.
268 Kinney,Exh. SJK-17T at 13:5-15:10.
269 Kalich, Exh. CGK-7T at 39:5-41:20.
270 Kalich, Exh. CGK-7T at 24:2-16.
271 Kalich, Exh. CGK-7T at 25:15-26:2.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 44
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162 Kalich also contests Wilson's categorizations of factors as within Avista's control. Kalich
describes hedging costs, physical depreciation, fuel procurement practices, and bilateral
transactions outside of the EIM as outside of utility control.272
163 To support the inclusion of a Forecast Error Adjustment, Kalich claims that the calculated
value of the implied market heat rate (IMHR) --the price of power on the market divided
by the price of natural gas -- has been higher than its realized value in the spot market.
According to Kalich, this discrepancy prevents Avista from being able to realize the
potential economic value that underpins forecasted NPE benefits. Kalich further argues
that including the Forecast Error Adjustment would help to adjust the differences between
forward prices and actuals, and that if it results in an overcorrection, the following rate
case's Forecast Error Adjustment would account for that miss.273
164 Kinney rejects the arguments made by Staff,AWEC, and Public Counsel that the ERM
captures forecast error instead of allocating the results through sharing bands.274
165 Kalich clarifies that in some years, the Forecast Error Adjustment could be a negative
value, such times as when natural gas prices are falling.275
Colstrip
166 Avista witness Kinney states that Colstrip expenses are removed from the 2026 NPE based
on its 2025 net value (market value minus fuel), and that no further power supply updates
to 2026 are necessary.276 Company witness Andrews states that the Company has updated
the value of Colstrip to match the value from the most current power supply baseline for
RY1.As a result, forecast NPE increases by $54.2 million in RY2, partially offset by a
$24.4 million reduction in expenses to Washington customers through Colstrip Tariff
Schedule 99.277
167 Avista rejects AWEC's recommendation that the Colstrip Transmission Assets be removed
from rates. Kinney testifies that Avista still plans to use its Montana and BPA point-to-
point transmission rights to take advantage of Montana wind resources, which the
Company identified as part of its Preferred Resource Strategy in its 2025 IRR Avista also
272 Kalich, Exh. CGK-7T at 26:3-32:9.
27' Kalich, Exh. CGK-7T at 34:3-36:3.
274 Kinney,Exh. SJK-17T at 9:12-21.
275 Kalich, Exh. CGK-7T at 23:8-24:3, 25:4-14.
276 Kinney,Exh. SJK-17T at 3:15-17.
277 Andrews, Exh. EMA-6T at 78:1-80:4.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 45
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plans to maintain transmission rights the Company expects it will need in the future. If the
transmission assets are underutilized,Avista can sell access in short-term contracts to
recover costs. In general,Avista takes the position that the Colstrip transmission assets still
provide value to Avista and its customers.278 Kinney also notes that if Avista were to stop
paying its share of system upgrades and annual maintenance costs for Colstrip
transmission assets, it would be in contract breach.279
California-Oregon-Border Adjustment
168 Kinney rejects AWEC's COB adjustment. Kinney claims that an adjustment for COB
transmission was not included in previous cases and is not included in the power supply
modeling methodology because the Company models an aggregated wholesale electric
market comprised of all markets used by the Company.280
EIMBenefits
169 Company witness Kalich generally defends Avista's methodology for forecasting WEIM
benefits.281 Kalich notes that the Company uses the same methodology that PSE used in a
previously approved general rate case, UE-200980.212 After reviewing response testimony
and consulting with PSE, Kalich states that Avista is adjusting its WEIM benefits forecast
from $5.5 million to $6.6 million due to changes in the baseline model used to calculate
incremental WEIM benefits.283
170 Regarding Public Counsel's recommendation that the Commission order Avista to develop
a valid WEIM benefits forecast methodology, Kalich replies that the Company does not
object to the Commission establishing a specific methodology in its order. However,
Kalich states that a change in methodology would not be available in a timeline suitable
for the current rate case.284
278 Kinney,Exh. SJK-17T at 25:9-30:6.
279 Kinney,Exh. SJK-17T at 28:23-29:3.
280 Kinney,Exh. SJK-17T at 30:7-18.AWEC argues that Avista witness Kinney accepted the
adjustment during the hearing, despite Avista's arguments against AWEC's proposal to continue
modeling sales transactions at the COB market hub.AWEC's Post-Hearing Brief, at¶52(citing,
Hearing Tr. Vol. III at 221:7-23).
281 Kalich, Exh. CGK-7T at 48:19-53:22.
282 Kalich, Exh. CGK-7T at 48:13-18.
283 Kalich, Exh. CGK-7T at 45:18-46:5.
214 Kalich, Exh. CGK-7T at 48:13-18.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 46
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171 Kalich recommends that the Commission reject Public Counsel's recommendation that the
Company use of CAISO's estimates of WEIM benefits instead of its own. Kalich argues
that the CAISO calculation overstates the WEIM benefits that Avista receives,285 and that
the historic data detailing revenues from the WEIM do not factor in the loss of revenue the
Company would have earned in bilateral markets.286 Kalich also argues that the reported
benefit data from CAISO contains only 25 months, a small dataset that occurred under low
hydro conditions.287
172 Regarding AWEC witness Mullins recommendation that Avista include greenhouse gas
revenues, neutrality charges, and Flex Ramp revenues, Kalich states that the Company no
longer receives greenhouse gas revenues since the CCA was passed and that Flex Ramp
revenues are immaterial.As a result, the value of increased WEIM benefits resulting from
Mullins'recommendation should be reduced to $0.9 million.288
173 In response to Staff witness Wilson's recommendation that WEIM benefits be increased
$1.4 million following an analysis of EIM "cost codes," Kalich testifies that cost codes
provided by CAISO are not granular enough to determine whether benefits included in
those cost codes are already being captured in AURORA. Upon review of the cost code
data, Kalich found that an analysis utilizing cost code data would indicate that NPE should
increase by $0.3 million.Avista does not recommend an increase to NPE based on WEIM
cost codes.289
Staff's Cross-Answering Testimony
174 Staff witness Wilson recommends that the system NPE forecast be increased from$175.1
million to $175.7 million, as adjustments to account for CCA costs and removing the
Forecast Error Adjustment nearly balance each other out.29'Regardless of the
Commission's treatment of CCA costs, Staff recommends removing Avista's Forecast
Error Adjustment. Staff further recommends including CCA allowance prices in dispatch
and market purchases.291 Staff's estimate of Washington NPE revenue requirement is
211 Kalich, Exh. CGK-7T at 46:6-47:6.
216 Kalich, Exh. CGK-7T at 44:1-19.
287 Kalich, Exh. CGK-7T at 53:23-54:21.
288 Kalich, Exh. CGK-7T at 43:12-21, 47:7-16. Kalich does not comment on whether the
Commission should accept the resulting$0.9 million increase to EIM benefits.
219 Kalich, Exh. CGK-7T at 47:17-48:5.
290 Wilson,Exh. JDW-24CTr at 19:1-5.
291 Wilson,Exh. JDW-24CTr at 20:4-9.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 47
ORDER 08
increased from $112.8 million to $113.0 million.292 Wilson claims that the $71.15 per CCA
allowance estimate is not reasonable and details the forecasting assumptions that go into
Staff's estimate of CCA costs.293 However, if the Commission determines that the cost of
CCA allowances associated with forecast wholesale market sales should not be included in
NPE as recommended by Staff, Staff's forecast system NPE recommendation would
decrease to $132.4 million with a corresponding reduction to Washington NPE.294
175 Wilson also points out potential errors in Avista's AURORA modeling of unit commitment
when including CCA allowance prices. Wilson does not believe that this is a material
problem requiring immediate action but recommends that the Company investigate this for
future filings.291 In the event the Commission accepts AWEC's position on COB market
sales, Wilson provides minor adjustments to Staff's recommended values for System
Account 447, System Total Revenue, System Total Net Expense, and Washington NPE
Revenue Requirement.296
EIMBenefits
176 In cross testimony,Wilson notes that WEIM benefits are not included in Avista's
calculation of NPE forecast. Wilson further testifies that it is not necessary for Avista to
include WEIM benefits in the NPE forecast, as AURORA does not differentiate between
market platforms. Wilson did not investigate Public Counsel witness Earle's benefits
calculation and does not take a position on whether the Company's or Public Counsel's
WEIM benefits calculations are more accurate, assuming that they are immaterial to an
NPE forecast.297
177 Wilson disagrees with Public Counsel witness Mullins'recommendation to include
greenhouse gas revenues in the EIM benefits forecast. Wilson reaches this conclusion
based on Kalich's testimony that the Company does not participate in California's
greenhouse gas cap and trade program, which would be the source of greenhouse gas
revenue.298
292 Wilson,Exh. JDW-24CTr at 20:1-2.
293 Wilson,Exh. JDW-24CTr at 22:14-26:19.
294 Wilson,Exh. JDW-24CTr at 19:6-9.
295 Wilson,Exh. JDW-24CTr at 21:7-22:12.
296 Wilson,Exh. JDW-24CTr at 27:1-7.
297 Wilson,Exh. JDW-24CTr at 2:21-4:4.
298 Wilson,Exh. JDW-24CTr at 4:15-18.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 48
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178 However, Wilson does agree with Mullins that some WEIM settlement charges are
inappropriately omitted from Avista's forecast of EIM benefits. Wilson's estimate of those
non-energy benefits to be $1.4 million annually.299
179 After reviewing Avista's data request responses providing more detailed WEIM settlement
charge information, Wilson finds reasonable the resulting increased $.5 million adjustment
in forecast NPE.
Public Counsel's Cross-Answering Testimony
ERM
180 In cross-answering testimony, Public Counsel witness Earle reiterates arguments that the
Commission should reject both Avista's and Staff's proposed changes to the sharing bands
because they would make the dead and sharing band mechanism less effective.300
181 Witness Earle contends that Staff's comparison of Avista to PacifiCorp's deadband fail in
two primary ways:
• Staff does not consider that even if Avista's dead band is relatively large
compared to PacifiCorp's, this could mean PacifiCorp's is too small, and
• Staff provides no reason why the width of the dead band should be based
on proposed power costs alone.311
182 As such, Public Counsel argues that the Commission should reject both Avista and Staff's
proposals as unwarranted and unsupported by the factual record and maintain the current
ERM deadband and sharing bands.301
183 Earle supports AWEC's recommendation for an update to Avista's forecast NPE in August
2025, with an additional update of forward market prices effective November 1, 2025.
This would reduce forecast lag from 14 months to two months.303
299 Wilson,Exh. JDW-24CTr at 5:1-7.
300 Earle, Exh. RLE-17T at 3:12-14.
30' Earle. Exh. RLE-17T at 3:19-20,4:1-7.
302 Earle. Exh. RLE-17T at 4:11-13.
303 Earle, Exh. RLE-17T at 6:16-7:18.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 49
ORDER 08
184 Based on CAISO's newly released estimate of 2024 WEIM benefits, Earle makes a minor
adjustment to Public Counsel's previous recommendation, and recommends the
Commission order an adoption of an annual WEIM benefits forecast of$20.1 million.304
AWECs Cross-Answering Testimony
185 In cross-answering testimony, Mullins continues to argue that the Commission should
reject Avista's ERM proposal, assert:305
• The ERM is functioning as intended,
• Avista's arguments are irrelevant and unconvincing, and
• The Commission rejected similar arguments in PacifiCorp's 2023 GRC.
186 He states that Staff's conclusion that a 90/10 split is equitable is at odds with the
Commission's decision in the PacifiCorp GRC,306 and that Staff provides no evidence to
support its contrary conclusion.307
187 Mullins argues that Staff's rationale for a reduction to the deadband does not consider the
rapid growth and higher volatility experienced and noted by the Commission with respect
to PacifiCorp's power costs.308
188 Mullins argues that Avista's forecast power costs are at a similar level to when
PacifiCorp's PCAM was first established ($112 million in the current case compared to
$108 million when PacifiCorp's PCAM was established).309 As a result, Mullins
emphasizes that the Commission's PacifiCorp order supports maintaining the ERM
structure as is.
NPE
189 Mullins recommends the Commission not direct Avista to alter its modeling of CCA costs
in its NPE forecast, given the uncertainty of Avista's ability to monetize its no-cost
304 Earle, Exh. RLE-17T at 8:1-15. Earle's previous recommendation was an annual EIM benefits
forecast of$20.7 million in response testimony.
30'Mullins,Exh. BGM-8T at 2:29-30, 3:1-2.
306 Mullins,Exh. BGM-8T at 3:10-14.
307 Mullins,Exh. BGM-8T at 3:14-15.
301 Mullins,Exh. BGM-8T at 3:15-19.
309 Mullins,Exh. BGM-8T at 5:7-11.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 50
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allowances and the fact that the relevant Ecology rulemakings have not yet occurred.310
Mullins states that Staff's recommendation of handling the removal of Colstrip from rates
is consistent with AWEC's. Mullins would support Staff's recommendation provided that
AWEC's recommendations for wheeling costs, transmission assets, and scheduling and
modeling parameters are met.311 Mullins also provides backup options to remove Colstrip
from rates if the Commission rejects the MYRP,Avista files a new rate case in 2025, and
the effective date of that rate case is after December 31, 2025.312
Decision
Restructuring the ERM
190 The Commission has previously addressed the purpose of risk sharing through
mechanisms like the ERM, most recently in Dockets UE-230172 and UE-210852. There
we reiterated that power cost risk sharing mechanisms are intended"to encourage
effective management and reduction of power costs."313
191 The sharing mechanisms provide guardrails to ensure a utility manages fuel price
volatility and does not engage in overly risky behavior because the guardrails ensure the
utility will share in cost overruns with customers.314
192 Like PacifiCorp,Avista points to several factors that it claims necessitate changes to the
ERM, including "nearly impossible to predict"variables,315 such as the implied market
heat rate,316 rising market volatility,317 falling market liquidity,318 the CCA,319 and the
increasing value of Avista's thermal generation fleet.320
311 Mullins,Exh. BGM-8T at 12:18-13:8.
31 Mullins,Exh. BGM-8T at 18:1-19.
312 Mullins,Exh. BGM-8T at 18:20-19:9.
313 WUTC a PacifiCorp, Dockets UE-230172&UE-210852¶389 (Mar. 19, 2024).
314 See, WUTC a PacifiCorp, Dockets UE-230172&UE-210852¶390(Mar. 19, 2024).
315 Kinney,Exh. SJK-1T at 54:2-9.
316 Kinney,Exh. SJK-IT at 58:6-60:3.
317 Kinney,Exh. SJK-1T at 60:14-62:8.
318 Kinney,Exh. SJK-1T at 62:9-63:2.
319 Kinney,Exh. SJK-1T at 64:3-65:9.
320 Kinney,Exh. SJK-1T at 69:15-71:14.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 51
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193 We recognize that during the past three to four years, energy markets have looked
somewhat different for Avista, as they have for all utilities. However, the evidence in this
case shows that the ERM is working as it should for now.321
194 AWEC and Public Counsel correctly argue that fuel prices have been volatile since the
ERM was implemented in 2006.322 During that time fracking was just starting and natural
gas was becoming more available and at a lower cost. The ERM functioned through a
Great Recession and then through record low interest rates and a booming stock market.
The ERM is intended to share risks in good times and in bad, to ensure that the utility
retains a certain level of risk even when external pressures increase, because ultimately the
utility has control, or at least some level of control, over the resources it procures and the
contracts it enters for fuel and power. There is inherently informational asymmetry, where
the utility knows far more about its operations and choices than intervenors and certainly
than customers.
195 To ensure that rates remain just and reasonable, the utility should carry a certain level of
risk through the ERM or a similar mechanism.
196 We are not convinced here that comparisons to the relative size of the risk that other
utilities face means Avista's ERM should be modified.As Avista points out, each utility is
different.Avista's resource position is different than from PacifiCorp's or Puget Sound
Energy's.12' Because of this, a simple comparison of relative risk through the dead and
sharing bands is unconvincing and as Public Counsel and AWEC point out, perhaps raises
the question of whether instead of decreasing the bands for Avista, the bands should not be
increased for other utilities.
197 Accordingly, the Commission denies Avista's and Staff's proposals to modify the ERM at
this time. This is not to say that the Commission simply will not modify the ERM under
any circumstances. We are open to entertaining changes to the ERM, however, as AWEC
and Public Counsel rightfully point out, there is a modeling issue present, as evidenced by
Avista's admissions in relation to the Forecast Error Adjustment. The Commission finds
that the parties should address the modeling errors, and only then might the Commission
revisit the issue, if necessary, to assess whether further adjustments are needed.
Forecast Error Adjustment
321 See, Kalich,Exh. CGK-7T at 23:1-7; see also Mullins, BGM-1 T at 60:14-61:6; BGM-8T at
2:29-30.
322 See,Avista Corp.,Docket UE-060181, Order 3¶3 (June 16, 2006).
323 Avista's Post-Hearing Brief, at¶¶74-81.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 52
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198 We next address Avista's proposal to add a forecast error adjustment to their baseline NPE.
On direct, the Company proposed a forecast error of$65.8 million, which it reduced on
rebuttal to $29.7 million.Avista argues the Commission should approve the new forecast
error,using a new methodology, as the new forecast error is known, measurable, considers
any indirect offsets, and is generally supported in the record by contracts, receipts, ledgers,
and other proof as are other approved adjustments like median hydro, averages for
outages, and forward market prices.324 No other party supports this adjustment.
199 Staff argues the Commission should reject the forecast error adjustment "as arbitrary, and
thus as unfair, unjust, or unreasonable."325 Staff argues the revised forecast error
adjustment (1) is untested and only offered on rebuttal, (2) unfairly shifts power cost risks
away from Avista, and(3) is unknown,unmeasurable, and normalized on a biased
sample.326
200 Public Counsel argues the proposal lacks analytical rigor, does not meet the known and
measurable standard, and fails to match with offsets.327 Further, Public Counsel argues that
the events and costs represented in 2021, 2022, and 2023, represent a small sample in
time, which was impacted by a series of unfortunate events, all of which make basing an
adjustment for 2025 and 2026 on events during that time extremely problematic.328
Finally, Public Counsel notes the adjustment only improves Avista's results and provides
Avista a windfall.329
201 We largely agree with Staff and Public Counsel. While we do find the issues Avista is
facing to be problematic, we find that as with the ERM, the methodology Avista uses to
forecast power expenses needs to be re-examined, and that a large adjustment, which
Avista would collect from customers to account for modeling errors, is not just or
reasonable.
324 Avista's Post-Hearing Brief, at¶¶56-59, 61.
325 Staff's Post-Hearing Brief, at¶66.
326 Staff's Post-Hearing Brief, at¶¶67-87 (Oct. 28, 2024) (citing, Wash. Utils. & Transp. Comm'n
v Harbor Water Co., Inc., Docket U-87-1054-T, 1988 Wash. UTC Lexis 68, * 37(May 7, 1988);
Kalich, Exh. CGK-7T at 19:14-20; Wash. Utils& Transp. Comm'n a PacifiCorp, Docket UE-
100749, Order 06, 11-12¶ 14 (Mar. 25,2011);Avista Corp.,Dockets UE-090134,UG-090135 &
UG-060518, Order 10, at 21 ¶45).
327 Public Counsel's Post-Hearing Brief, at¶¶62-63.
328 Public Counsel's Post-Hearing Brief, at¶¶64-65.
329 Public Counsel's Post-Hearing Brief, at¶68.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 53
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202 The Commission expressed some concerns with the forecast error adjustment in Order 07
of this docket,but ultimately decided that the record needed to be further developed on the
$65.8 million adjustment.As Staff points out, that record was not developed because
Avista revised the error amount and changed the methodology on rebuttal.
203 While the Commission understands Avista's change in methodology and adjustment on
rebuttal, the Commission has held"at some point, the company's positions must be made
clear in order for the other parties to respond to those positions. That point is prior to
rebuttal. The parties in a rate case should not have to constantly respond to a moving
target.5�330
204 Here, the record is not well developed on Avista's updated proposal, in part because the
proposal changed on rebuttal. For an adjustment of this magnitude, the Commission
encourages companies to vet such proposals with parties ahead of time and allow
reasonable time and opportunity for response.
205 Further, as Staff, Public Counsel, and AWEC point out, the original and revised proposal
do not meet the known and measurable standard. "Washington uses a hybrid test year
approach that allows pro forma adjustments only for known and measurable changes—not
budgeted or projected changes—that occur, generally within a reasonable time after the end
of the test year."331 Further, "[a]n event is `known' if it occurred during or shortly after the
historical test year and it is `measurable' if it is not an estimate, projection, or product of a
budget forecast.',332
206 Moreover, as Public Counsel states,Avista's proposal "does not help predict future gas or
electricity prices, the implied market heat rate, or how forward prices are inadequate
inputs because they collapse as they reach real time."333
207 We agree with Public Counsel and note that Public Counsel's criticism gets to the
underlying problem with the forecast error adjustment. Rather than identifying known and
measurable causes of the error, and recommending modeling adjustments to account for
those errors, the Company notes the error is and remains present. The Company averages
"0 Wash. Utils. & Transp. Comm'n a Harbor Water Co., Inc., Docket U-87-1054-T, 1988 Wash.
UTC Lexis 68, * 37 (May 7, 1988).
331 Pac. Power&Light Co., Dockets UE-140762,UE-140617,UE-131384 &UE-140094, Order
08, 3¶8.
332 Public Counsel's Post-Hearing Brief, at¶55 (Oct. 28, 2024) (citing, Wash. Utils. & Transp.
Comm'n v Avista Corp., Dockets UE-090134&UG 090135 (consol.) Final Order 10¶43 (Dec.
22, 2009)).
333 Public Counsel's Post-Hearing Brief, at¶62.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 54
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recent unfavorable amounts to calculate a solution which might cover the error but does
not solve the underlying condition. In fact, the exact cause of the error appears to remain
elusive and is not known.
208 Because the Company does not persuasively support the proposed forecast error
adjustment, and because the proposal fails to meet the known and measurable standard,
the Commission rejects inclusion of the forecast error adjustment.
209 However, we agree with Avista that further discussions by all parties should take place in
relation to the ERM and forecast error. Witness Kalich suggested convening a new
workshop series after the conclusion of the rate case to revisit power supply modeling
methodology, address new changes in the energy space, inform the new representatives of
the intervening parties, and consider alternatives to or modifications to the AURORA
model.ssa We agree with this suggestion and find, following the close of this proceeding,
that Avista shall convene a workshop series with interested parties to address modeling
inputs, power supply modeling methodology, use of AURORA, and a changing energy
landscape. These conversations should include discussions regarding inclusion of CCA
costs and address the forecast error as well as other issues raised by the parties in this
proceeding.
210 Based on the evidence in the record and the Commission's denial of the forecast error
adjustment, the Commission authorizes a Washington Total Power Supply Base of
$34,116,983 for rate year 1, and $85,733,975 for rate year 2.
Western Energy Imbalance Market (WEIM)Benefits
211 Avista justifies their WEIM benefits methodology by claiming it is the same as that PSE
used and the Commission approved in their rate case in Docket UE-200980.335 However,
Staff, Public Counsel, and AWEC each suggest adjustments to Avista's WEIM benefits
calculation methodology.
212 AWEC proposes to include greenhouse gas (GHG)revenues in the evaluation of WEIM
benefits. However,Avista argues that those revenues are no longer available after passage
of the CCA.336 In its post-hearing brief,AWEC argues that despite Avista's arguments that
334 Kalich, Exh. CGK-7T at 7:10-23.
331 Kalich, Exh. CGK-7T at 48:13-18.
116 Kalich, Exh. CGK-7T at 43:12-21, 47:7-16.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 55
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GHG revenues are no longer received,there must be exceptions and the Commission
should at least adopt Avista's own recalculation of$0.9 million.337
213 We disagree.Avista asserts and the record shows that Avista is not receiving GHG
revenues.338 Despite AWEC's assertion that there are exceptions, pointing to the testimony
of witness Kalich, the Commission finds such exceptions to be speculative and generally
unsupported by the record. For clarity,AWEC argues Avista received some GHG revenues
in 2022 and 2023.Avista admits this in Exhibit CGK-7T.339 However, as Kalich testifies
and the record shows, the revenues that AWEC asserts should be included are based on
transactions in 2022. The transactions through 2022 decreased to a negligible amount in
the test year of 2023 before ceasing in the later part of 2023.340 To adopt an adjustment
based on an assertion of exceptions—or revenue which the record shows is no longer
being received—would violate the known and measurable standard. Therefore, we find
that AWEC's proposed adjustment should be rejected.
214 AWEC and Staff propose to include other non-energy benefits in the evaluation of
benefits.341 Specifically,AWEC proposes the Commission should order Avista to adjust
for WEIM settlement transactions. Staff witness Wilson agrees some WEIM settlement
charges are inappropriately omitted from Avista's forecast of WEIM benefits. Wilson's
estimate of those non-energy benefits is $1.4 million annually.342 However,Avista uses an
approved methodology to calculate those benefits, which does not produce surplus
revenues that need to be redistributed.Accordingly, we reject the adjustments proposed by
AWEC and supported by Staff for including additional non-energy benefits.
215 Finally, Public Counsel proposes adopting CAISO's estimate of WEIM benefits, which
would result in $20.1 million in benefits. On rebuttal,Avista witness Kalich argues that the
CAISO calculation overstates the WEIM benefits that Avista receives and does not factor
in the loss of revenue that would have been earned by the Company in bilateral markets.
Kalich also argues that the reported benefit data from CAISO contains only 25 months, a
small dataset that occurred under low hydro conditions.On this, we agree with Avista.
216 The CAISO estimate does not account for the opportunity cost of leaving the bilateral
market, thus it should not be used to calculate WEIM benefits for Avista at this time as the
337 AWEC's Post-Hearing Brief, at¶51 (citing, Hearing Tr. Vol. III at 221:7-23).
33'Kalich, CGK-7T at 47:14-15; fil. 53.
33'Kalich, CGK-7T at 47:14-15; fn. 53.
340 Kalich, CGK-7T at 47:14-15; fil. 53.
341 See,Wilson, Exh. JDW-24CTr at 5:1-7.
342 Wilson,Exh. JDW-24CTr at 5:1-7.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 56
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evidence suggests its adoption would likely result in an overestimation of benefits not
likely to be realized.Accordingly, the Commission finds the WEIM benefits calculation
methodology proposed by Avista, resulting in $6.6 million in benefits, reasonable and
rejects the proposals to adjust WEIM benefits put forward by Staff, Public Counsel and
AWEC.
Colstrip
217 AWEC also requests the Commission order Avista to remove Colstrip transmission assets
from rates and to file a Power Cost Only Rate Case (PCORC) or other limited update to
rates to improve Avista's mark-to-market valuation of Colstrip in RY2 before the costs of
Colstrip Units 3 and 4 are removed from rates.
218 We reject both proposals at this time. First,Avista has identified as part of its Preferred
Resource Strategy in its 2025 IRP the use of the assets for transmission of Montana wind
resources. Further, as Avista points out, if underutilized,Avista will sell access through
short-term contracts to recover costs. Either use would provide value to Avista and its
customers. Indeed, if Avista stopped paying its share of transmission upgrades and annual
maintenance, it would be in breach of contract. We find that as of today,Avista's
transmission assets are used and useful and the Company has provided evidence and
testimony showing that they will remain so.Accordingly, we find that the Colstrip
transmission assets should remain in rates at this time. However, if the assets cease to be
used and useful, we will revisit the issue in the next GRC.
219 Second,Avista argues, and we agree, that a further power supply update to update the
mark-to-market valuation of Colstrip in 2026 is not necessary.As Avista provides, the
Company updated the value to match that from the most current power supply baseline for
Rate Year 1. While AWEC argues that valuation may not account for offsetting benefits
from dispatching other resources, there is no evidence supporting the need for an update
and the Commission does not find that the benefits would outweigh the costs of such a
proceeding.Accordingly, we reject AWEC's proposals.
California-Oregon-Border Adjustment
220 AWEC recommends "an adjustment to NPE to account for COB margins,resulting in a
reduction to revenue requirement for electric services of$142,054 for RY 1."343
343 Mullins,Exh. BGM-1 T at 46:8-12.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 57
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221 In its post-hearing brief,AWEC argues that Avista witness Kinney accepted the adjustment
during the hearing.344 While Avista does not directly address the COB adjustment in its
post-hearing brief, the Company notes in a footnote the following:
An adjustment for COB transmission was not included in previous cases and is not
included in the agreed power supply modeling methodology. One primary goal of
the Workshops on power supply modeling was to simplify inputs. The parties
agreed to a balanced modeling approach that included a single wholesale electric
market and a single wholesale natural gas market, instead of representing all
markets used by the Company. The parties agreed this simplification was fair and
no further adder for COB transmission was included in the power supply
methodology.345
222 From reviewing the hearing transcript, however, it does appear Avista accepted the
adjustment.34'Accordingly, the Commission finds that the adjustment AWEC proposes to
account for COB margins should be made.
Capital Projects and Timing/Classification of Provisional Plant
Avista's Direct Testimony
223 Avista witness Benjamin provides testimony regarding the Company's overall approach
for the inclusion and classification of capital projects (plant or plant additions) and the
Company's proposal to continue the existing provisional plant review methodology.
Witnesses Alexander, DiLuciano, Manuel, Howell, and Hydzik provide the business cases
related to the capital projects included in the Company's MYRP proposal."'
224 Benjamin testifies that the Company uses a test period ending on June 30, 2023, includes
pro forma adjustments for July 2023 (actuals), and expected additions through December
2023. Further, Benjamin asserts that plant additions through 2024 are classified as "pro
forma" on an End of Period(EOP) basis as the Commission already approved that rate
base in its 2022 GRC. Therefore, only capital projects for 2025 and 2026 are classified as
provisional and are included on an Average of Monthly Averages (AMA) basis.348
344 AWEC's Post-Hearing Brief, at¶52 (citing,Hearing Tr.Vol. III at 221:7-23).
345 Avista's Post-Hearing Brief, at fn. 121.
346 Hearing Tr. Vol. III at 221:7-23
347 Benjamin, Exh. TCB-3.
34'Benjamin, Exh. TCB-1T at 8:12-9:3, 10:19-11:2.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 58
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Benjamin testifies that provisional plant is categorized according to the Commission's
Used and Useful Policy Statement.349
225 Regarding the pro forma classification of 2023 and 2024 plant additions, Benjamin
appears to contemplate that the 2023/2024 plant additions remain subject to the
Provisional Capital Reporting process as ordered in the 2022 GRC, despite the change in
terminology.3so Benjamin proposes that the 2025 and 2026 plant additions be subject to
the same provisional reporting and review requirements as ordered in the 2022 GRC.
Further, the Company intends to update the actual capital additions through 2023 and any
changes to the expected additions through 2026.351
226 Benjamin's testimony incorporates the "Pro Forma Studies"provided by Company
witness Schultz which results in an approximate increase to net plant of$305 million for
electric and $72.5 million for natural gas over the course of the MYRP.352 Benjamin
testifies these balances include all direct Operations & Maintenance (O&M) offsets, a 2
percent O&M efficiency adjustment for those business cases without direct offsets,
offsetting revenues attributed to growth, incremental reductions to depreciation expense,
and net impact to net plant when including retirements occurring over the rate plan.353
Staff's Response Testimony
227 Staff witness Erdahl makes two recommendations related to provisional plant. First,
Erdahl disagrees with the Company's reclassification of provisional plant from its 2022
GRC to traditional pro forma for the plant additions in 2023 and 2024.314 Erdahl states that
"[p]ro forma plant is not refundable," arguing customers should retain the benefits of the
34'Benjamin, Exh. TCB-IT at 12:11-17. The Commission notes that Avista does not utilize the
exact categories specified in the Used and Useful Policy Statement(specific,programmatic, and
projected)but rather four categories (large or distinct,programmatic,mandatory and compliance,
and short-lived). However, this is consistent with the way the Company classified provisional plant
in its 2022 GRC. See In re Commission Inquiry into the Valuation of Public Service Company
Property that Becomes Used and Useful After Rate Effective Period, Docket U-190531,Policy
Statement on Property that Becomes Used and Useful After the Rate Effective Date(Jan. 31,
2020). Herein referenced as the Used and Useful Policy Statement.
350 Benjamin, Exh. TCB-1T at 28:15-29:1.
35' Benjamin, Exh. TCB-IT at 29:2-30:17. Benjamin also provides testimony that reiterates that
provision plant review process as established in the 2022 GRC at Exh.TCB-lT at 30:18-32:32
352 Benjamin, Exh. TCB-lT at 26:24-27:13.
353 Benjamin, Exh. TCB-lT at 18:9-21.
354 Erdahl, Exh. BAE-1 T at 9:1-3. 2023 Provisional Plant was under review at the time response
testimony was due. The Provisional Plant for 2024 would not be under review until April 2025.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 59
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review process including potential refunds.355 Further, Erdahl contends reclassifying plant
between MYRPs creates duplicative work for Staff and other parties as the same plant
would be evaluated at three separate points in time (past GRC, retrospective plant review,
and current GRC). Erdahl also argues that these evaluation points create the possibility of
inconsistent prudency findings by the Commission.356
228 Second, Erdahl proposes that Avista be required to establish separate tariff schedules for
plant that is provisionally approved in rates, like those created in PSE's 2022 GRC.351
Erdahl argues this process provides clear delineation between plant that is approved into
rate base and that rate base which is subject to refund. However, citing "administrative
efficiency," Staff proposes these tariffs for Avista's next GRC, not in this proceeding."3 58
229 Erdahl also provides Staff's opinion that the methodology employed to develop the rate
case should prevent double counting of rate base from a company's prior GRC.
Specifically, Erdahl testifies that Avista employed a new modified historical test year
rather than building incrementally from the prior proceeding.359
230 Staff witness Sofya Shafran Atitsogbe Golo (Atitsogbe) provides testimony expressing
concern about Avista's distribution system planning and the initial prudency of associated
investments. While Staff does not request a prudency determination now, they recommend
the provisional distribution plant be included in rates, subject to refund, and comply with
two proposed conditions during the annual provisional plant review process, which are
discussed below.161 Staff argues the Commission should allow these investments on a
provisional basis to avoid immediate negative financial impacts and provide "balance[ ]for
regulatory compliance with the practical necessity of maintaining a stable and reliable
distribution system for customers."361
355 Erdahl, Exh. BAE-1T at 9:3-5.
356 Erdahl, Exh. BAE-1T at 9:17-22.Alternatively, Erdahl recognizes that the Commission could,
in this proceeding, order refunds subject to review for"pro forma"plant if the Commission does
not accept Staff's position of retaining the provisional plant status. Erdahl,BAE-1T at 10:3-10.
35' Wash. Utils. & Transp. Conan n a Puget Sound Energy, Dockets UE-220066 and UG-220067
(consolidated), Settlement Agreement Joint Testimony,Exh. JAP-SEF-JJJ-UT at 20:5-22:10.The
concept for a separate tariff was proposed by PSE in its direct testimony(SEF-1Tr) and then
incorporated into the settlement agreement.
35'Erdahl, Exh. BAE-1 T at 10:13-21.
35'Erdahl, Exh. BAE-1T at 8:12-18.
360Atitsogbe,Exh. SSAG-1T at 30:13-19.
361 Atitsogbe,Exh. SSAG-1T at 30:20-21.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 60
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231 Atitsogbe expresses specific concerns about Avista's lack of planning for distributed
energy resources (DERs) and evaluation of non-wire alternatives (NWAs).Atitsogbe
emphasizes that distribution planning exists in various utility filings (e.g., IRPs, Clean
Energy Action Plans CEAPs, and CEIPs)that Staff rely upon when evaluating investments
in a GRC.362 Further,Atitsogbe points to various statutory requirements and Commission
rules that require specific utility actions within utility distribution planning efforts.363
232 Staff's analysis finds five distinct deficiencies with the Company's distributed energy
resources (DER) integration efforts. These include: (1) non-compliance with the DER
rules; (2) an incomplete DER potential study; (3) failure to meet conservation and demand
response goals; (4) unclear project coordination; and (5) delayed implementation of its
Advanced Distribution Management System(ADMS).Atitsogbe contends these issues
demonstrate the Company's failure to meet its obligations in distribution planning.364
Further,Atitsogbe contends that distribution investments account for the majority of total
plant investment during 2025, and nearly half in 2026, leading to Staff's concern that the
Company continues to undertake costly distribution investments that reinforce the
traditional grid structure rather than transitioning to a modern grid.361
233 Regarding NWAs,Atitsogbe contends that an evaluation of investment alternatives must
be considered in determining prudency.366 Atitsogbe testifies that only one project made
mention of NWAs, and that the Company failed to provide any details of the analysis
conducted.367 Further,Atitsogbe argues the Company failed to follow its own internal
"playbook"to evaluate NWAs.368
234 Staff recommends Avista comply with two conditions during the provisional plant review
process; otherwise, the provisional distribution plant should be refunded to customers.
362 Atitsogbe,Exh. S SAG-1T at 13:12-14:10.
363 Witness Atitsogbe includes references to: RCW 19.405.010(1); WAC 480-100-610(4); RCW
19.280;WAC 480-100-620;WAC 480-100-640; Laws of 2023, Chapter 200, sec. 1;Avista's 2022-
2023 Electric Biennial Conservation Plan,Docket U-210826; RCW 19.285;Northwest Power Act
in 16 USC Chapter 1211;Avista's 2021 CEIP, Docket UE-210628, Order 01 (June 23, 2022).
364 Atitsogbe,Exh. SSAG-lT at 19:8-20:14.Witness Atitsogbe acknowledges the Company
proposed three projects that may assist in accommodating DERs but maintains it is not sufficient
to meet their planning obligations.
365 Atitsogbe,Exh. SSAG-lT at 7:1-5, 8:2-6, 16:14-18.
366 Atitsogbe,Exh. SSAG-lT at 21:12-14.Atitsogbe references footnote 34 in the Commission's
Used and Useful Policy Statement interpreting the property valuation provision of RCW
80.04.250.
367 Atitsogbe,Exh. SSAG-lT at 22:14-17.
368 Atitsogbe,Exh. SSAG-1T at 22:1-6. The playbook is provided in Atitsogbe Exh. SSAG-2.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 61
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First,Atitsogbe proposes requiring additional data for the past five years that includes:
financial data related to distribution system investments for the preceding five years;
interconnection charges; information about routine operational activities by category for
projects exceeding $2 million; data and narrative for distribution system O&M costs; and
a five-year forecast for both distribution plant and O&M expenses.369
235 Second,Atitsogbe recommends conditions be placed on Avista's 2025 electric IRP to
ensure the Company "conducts a comprehensive, transparent, and forward-looking
distribution planning [process]."370 These requirements include information about DERs
in Avista's distribution system, compliance with RCW 19.280.100(2)(e), and specific
requirements for its grid development scenarios.371
AWEC's Response Testimony
236 AWEC witness Mullins testifies that the MYRPs and provisional plant review process
have resulted in greater administrative burden, created capital spending budgets that are
difficult to challenge, and which shift risk to ratepayers. He notes that they are not
permitted but not required under R CW 80.28.425 (MYRP Statute). Mullins calls for the
Commission to limit the forecasted capital allowed in rates and revise the provisional plant
review process from a portfolio approach to a project-by-project review.372
237 Mullins argues the statutory changes that shift determination of a utility's revenue
requirement away from the modified historical test year and limited pro forma adjustments
have not curbed the frequency of rate cases, reduced t administrative burden, or provided
appropriate protections against utility cost escalations. Mullins contends that instead, rate
cases have become more complicated, contain aggressive forecasting assumptions,
provide no incentive for utility cost containment, and provide for a review period that is
irrelevant so long as the utility spends within the approved budget. Further, Mullins takes
issue with Avista including capital expenditures for business cases not included in its 2022
GRC during the provisional plant review process.373
238 For these reasons, Mullins recommends a `course correction'to limit capital project costs
to plant in service on or before the rate effective date for each rate year within the MYRP.
369 Atitsogbe,Exh. SSAG-1T at 26.
370 Atitsogbe,Exh. SSAG-1T at 27:18-19.
371 Atitsogbe,Exh. SSAG-1T at 27:21-29:14. RCW 19.280.100 requires a ten-year plan for
distribution system investments and analysis ofNWAs.
372 Mullins,Exh. BGM-1 T at 12:3-13:2.
373 Mullins,Exh. BGM-1T at 5:15-7:3, 7:17-8:10.

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Mullins argues that not only is the statutory language allowing MYRPs permissive, but
that the Commission's Used and Useful Policy Statement also affirms the Commission's
intent for the continued use of the modified historical test year approach.374
239 For RY1, this recommendation would limit capital expenditures to those in service on or
before December 21, 2024. However, Mullins recognizes this approach still requires
projected costs and therefore recommends that Avista submit a compliance filing with an
attestation confirming that all estimated plant through December 21, 2024, was placed in
service.Additionally, Mullins proposes the Commission require this attestation on a
project-by-project basis with a refund for any underspent project with costs exceeding $1
million. Further, if the Commission does not accept AWEC's recommendation to limit
capital additions or the attestation process, Mullins argues that the Commission should
still adopt a project-by-project methodology for the provisional plant review filing.375
240 For RY2, Mullins testifies that due to the complexities of removing Colstrip from rates, it
may be more efficient to limit this GRC to a single year. However, if the Commission
authorizes a two-year rate plan, Mullins recommends the same limitations and attestation
process occur for the second year (calendar year 2025).376
241 Mullins contends this approach would eliminate the need for the after-the-fact capital
review process, thus mitigating the administrative burden of MYRPs.AWEC's
recommendations would reduce electric total rate base by $25.8 million for RY1 and$9.0
million for RY2. For natural gas,AWEC would reduce total rate base by$3.2 million in
RY1, with an increase of$5.9 million for RY2.377
Avista's Rebuttal of Staff
242 Company witness Andrews responds to Staff witness Erdahl's testimony regarding the
classification of pro forma and provisional plant, the request for an extended review
period, and Staff's proposal for separate tariffs to track provisional plant.Avista is
"amenable"to Staff's classification of plant, and supportive of the extended review period,
but disagrees with creating separate tariff schedules for provisional plant.378
374 Mullins,Exh. BGM-1T at 9:9-11:10, referencing the MYRP Statue RCW 80.04.250 and
paragraph 20 of the Commission's Used and Useful Policy Statement.
371 Mullins,Exh. BGM-1T at 11:13-12:6.
376 Mullins,Exh. BGM-IT at 13:5-18.
377 Mullins,Exh. BGM-IT at 13:20-14:3.
371 Andrews, Exh. EMA-6T at 3:18-4:11.

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243 While Avista does not oppose Staff's position regarding the classification of projected
plant,Andrews testifies that the Company's classification of provisional plant for 2023
and 2024 (included in the 2022 GRC) was not intended to circumvent the established
review process.Andrews agrees to maintain the classification of provisional plant for any
projected plant beyond the test year.379
244 However,Andrews disagrees with Staff's perspective that changing the label of
provisional plant creates duplicative review and the possibility of inconsistent prudency
determinations.Andrews argues that the existing provisional plant review process would
remain intact despite the naming convention and that many of Avista's projects are
ongoing, as demonstrated in other Company witnesses'testimony and supporting business
cases.Andrews argues that these business cases are not changing,just the project funding
levels. Combined with an extended review timeframe from four to six months,Andrews
submits that the fact that business cases remain unchanged further alleviates pressures for
Staff and other parties to complete review of these filings.380
245 The Company also disagrees with Staff's proposal for separate tariffs to track provisional
plant.Andrews argues the utilization of separate tariffs introduces complexity and
additional burden by requiring: (1) the review of revenue requirement through both base
rate and individual trackers, (2) the Company to adjust its accounting system and
processes, and (3)management of additional tariffs which could lead to errors with more
complicated rate structure.Andrews also points to the Commission's Used and Useful
Policy Statement that allows for either process. Finally, she contends that the deferral
process for any required refunds is reasonable, especially given that no refunds have yet
been required through the provisional plant review for 2022 or 2023.311
246 Avista witness DiLuciano responds to Staff witness Atitsogbe's testimony related to the
Company's electric distribution system planning. DiLuciano wholly disagrees with Staff's
assessment of the Company's distribution system planning, its determination that Avista
has not met the prudency standard, and its claims that the Company has not complied with
various RCWs, WACs, and Commission orders.382
247 First, DiLuciano states the Company has already demonstrated through direct testimony
and exhibits that it has met the prudence standard with a"robust planning standard that
sets the foundation,"for its distribution planning and investments. DiLuciano testifies the
171 Andrews, Exh. EMA-6T at 11:4-12:12.
"0 Andrews, Exh. EMA-6T at 13:3-14:17.
"'Andrews, Exh. EMA-6T at 15:2-16:16.
382 DiLuciano,Exh. JDD-3T at 3:4-4:1.

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business cases in this proceeding contain the necessary documentation, including
consideration of alternatives,that Staff claims is lacking.383
248 Second, DiLuciano takes issue with Staff's assertions that the Company has not changed
its planning process related to an increased focus on DERs as required by RCW 19.280,
and that it is not making progress to modernize its distribution grid. He cites the
Company's refinements in its distribution planning and subsequent collaboration with
Modern Grid Solutions (MGS) to integrate new approaches including NWAs.384 Further,
DiLuciano testifies that the Company has also engaged with interested parties through its
Distribution Planning Advisory Group (DPAG) and its transmission planning process.385
DiLuciano argues that Avista has made progress in meeting RCW 19.280.100 as
evidenced by: (1) deployment of grid-monitoring capable smart devices, (2)utilization of
Advanced Metering Infrastructure data, (3)publication of its ten-year plan, (4) and
inclusion its 2023 electric IRP of a chapter related to DERs and data specific to Avista's
territory.386
249 Next, DiLuciano provides examples of projects that help inform the Company in its
interconnection process, hosting capacity assessment, DER behavior, or document Avista's
consideration of DERs in its grid modernization efforts. These projects included a
collaboration to refine microgrid designs, battery installation to reduce load on a
substation transformer, considerations of rooftop solar to mitigate capacity constraints, and
consideration of batteries for part of the North Spokane transmission system.387
250 While DiLuciano argues that although the Company did not meet its 2022-2023
conservation targets, it employed adaptive management efforts in an attempt to reach the
targets but was hampered by circumstances that were both unforeseen and extraordinary in
nature. DiLuciano references the continued COVID-19 emergency and lasting impacts
such as supply chain issues, labor shortages, and high interest rates and inflation.Also,
DiLuciano testifies that notwithstanding those efforts and impacts, there was no material
strain placed on the distribution system from the missed targets.388
383 DiLuciano,Exh. JDD-3T at 4:4-21.
384 DiLuciano,Exh. JDD-3T at 5:1-6:19. MGS is the consulting firm that assisted Avista with its
NWA/DER Playbook referenced by Staff and Sierra Club.
385 DiLuciano,Exh. JDD-3T at 9:5-10:12.
386 DiLuciano,Exh. JDD-3T at 14:1-11.
387 DiLuciano,Exh. JDD-3T at 10:14-11:7, 11:18-12:10.See JDD-7, JDD-8, and JDD-9 for the
referenced business cases.
38.DiLuciano,Exh. JDD-3T at 16:14-17:14.

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251 To refute Staff's claim that it failed to comply with the Commission's order in Avista's
2021 CEIP filing,389DiLuciano testifies that the Company's DER Potential Assessment
was published on June 17, 2024, and provides the report in Exh. JDD-IOt.
252 Finally, DiLuciano responds to Staff's proposal to require two conditions for the annual
review process to determine the recovery of distribution provisional plant. First,
DiLuciano argues that the financial information and data that Staff requests in Condition 1
are already provided to the Commission as part of the business cases filed in GRCs.
Requiring further reporting, he says, would create a burden for the Company. Further,
DiLuciano references Staff compliance letters from Avista's 2023 provisional plant review
that finds the documentation provided in the filing to be in compliance and sufficient.390
253 Regarding Staff's second condition requiring additional analysis in Avista's 2025 IRP,
DiLuciano testifies the draft IRP will be filed in September 2024 with a final draft due on
January 2, 2025. Therefore, DiLuciano argues that with a rate effective date of December
21, 2024, in this proceeding, the Company does not have adequate time to complete the
extensive analysis required for compliance with such a condition.391
Avista's Rebuttal ofAWEC
254 Company witness Andrews disagrees with AWEC's position and recommendations related
to capital projects. First, she identifies a modeling error in RY2 capital adjustment; namely
that Mullins fails to adjust Accumulated Deferred Federal Income Taxes (ADFIT)when
moving from an AMA basis to an EOP basis, resulting in an overstated reduction in
revenue requirement of$859,000 and$96,000 for electric and natural gas, respectively.
Andrews contends the capital investments excluded by AWEC contain projects needed to
maintain energy reliability for customers.392
255 Next,Andrews argues that AWEC's position "upsets the new regulatory paradigm...."393
Andrews contends that the Legislature and Commission, respectively, acknowledge the
3s9 DiLuciano,Exh. JDD-3T at 12:13-14. The DER Potential Assessment was published on June
17, 2024,with response testimony due in this case on July 3, 2024. It does not appear this
assessment was filed with the Commission in either Docket UE-210628 (2021 CEIP)or the 2022
GRC docket.
390 DiLuciano,Exh. JDD-3T at 20:24-22:13.
391 DiLuciano,Exh. JDD-3T at 22:15-3. DiLuciano provides additional testimony as to why
incorporating Condition 2 into the 2027 IRP is also inappropriate. See, DiLuciano, Exh. JDD-3T at
23:6-25:12.
392 Andrews, Exh. EMA-6T at 18:11-12.
"'Andrews, Exh. EMA-6T at 18:18.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 66
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need for a more flexible regulatory rate setting process, as evidenced by the passage of
ESSB 5295 and the Commission's subsequent Used and Useful Policy Statement.
Andrews argues that the statute and policy guidance provides for that flexibility while
continuing certain regulatory principles.394
256 Andrews also takes issue with Mullins' claim that utilities lack incentive to limit the
amount of capital investment and to subsequently ensure they spend to approved budgets.
To the contrary,Andrews contends that the Company's capital planning process neither
results in funding every request nor provides automatic funding at the level of funding
requested.Additionally,Andrews opines that the time to prepare for and complete the
adjudication process together with the subsequent period of the proposed MYRP requires
estimates months and years in advance. Therefore,AWEC's proposal would penalize a
utility by"freezing" funding for specifically identified projects so far in advance given
that operational needs change over time.395
257 Finally,Andrews claims that the Company experienced earnings erosion despite the rate
plan authorized in the 2022 GRC.Andrews references testimony of other Company
witnesses to support this statement.396
Public Counsel's Cross-Answering Testimony
258 In cross-answering, Public Counsel witness Garrett supports AWEC's position limiting the
capital investments allowed for recovery in a MYRP as it better aligns with the used and
useful standard and provides rate protections to customers. Garrett also references the
treatment in Nevada which aligns with AWECs proposal.391
AWEC's Cross-Answering Testimony
259 In cross-answering,AWEC witness Mullins opposes Staff's proposal to create separate
provisional plant tariffs.AWEC's specific concern is regarding the potential design of the
schedules which may negatively impact Schedule 25 (Extra Large General Service) and
references a particular Schedule 25i customer that receives a discount under Schedule
25 398
394 Andrews, Exh. EMA-6T at 18:18-22:4.
39s Andrews, Exh. EMA-6T at 23:6-26:2.
396 Andrews, Exh. EMA-6T at 27:5-15.
197 M. Garrett, Exh. MEG-9T at 5:1-6:13. While Garrett appears to agree with AWEC, it does not
appear that Public Counsel formally adopted those adjustments to Public Counsel's proposed
revenue requirement on cross-answering.
39a Mullins,Exh. BGM-lT at 16:17-17:18.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 67
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Decision
260 The Commission declines to adopt AWEC's proposed project-by-project review process
and proposal to limit the level of authorized plant to that in service at the time of filing.
When CETA was enacted, the legislature amended RCW 80.04.240, mandating the
Commission"establish an appropriate process to identify, review, and approve public
service company property that becomes used and useful for service in this state after the
rate effective date."399
261 On January 31, 2020, in establishing a process as mandated by the legislature, the
Commission issued a Policy Statement in Docket U-190531, which establishes "a process
for the provisional recovery in rates of rate-effective period property, subject to refund,
where the property, investment or project in question does not meet the current standards
for inclusion in rates prior to rates becoming effective."400 The Policy Statement was
clearly intended to provide flexibility and not be overly prescriptive.401
262 We agree with AWEC that Commission policy mandates that rate-effective period
investment recovery is subject to and dependent on the request meeting longstanding
ratemaking practices and standards.402 We also recognize and agree with Staff,AWEC,
and TEP that the process can and should be improved. However, we do not agree with
AWEC that the solution should be to review provisional capital on a project-by-project
basis. Rather, we agree with Staff, as supported by TEP and agreed to by Avista, that to
allow for additional evaluation, the review process should be extended to six months.
263 Further, while not specifically addressed in post-hearing briefs, we agree with Staff
regarding the classification of plant and naming conventions as addressed by Staff witness
Erdahl.403 Avista accepted Staff's position on classification in testimony prior to the
evidentiary hearing,but opposed Staff's position that renaming of plant could cause
double counting.404 We do not agree. If during its review process, Staff encounters
potential double counting, it would in turn raise concerns for the Commission. The
potential risk of double counting outweighs any arguments to the contrary.
399 RCW 80.04.250(3).
400 Docket No. U-190531,Policy Statement¶20 (Jan. 31,2020).
401 See, Docket No. U-190531,Policy Statement¶¶30-31 (Jan. 31, 2020)
402 See, Docket No. U-190531,Policy Statement¶¶28-29 (Jan. 31, 2020).
403 Erdahl, Exh. BAE-1 T at 9:1-5, 17-22.
404 Andrews, Exh. EMA-6T at 11:4-12:12.

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264 Staff also requests the Commission require Avista to use a separate tariff for provisional
plant filings. The Commission declines to adopt Staff's request at this time. The
Commission agrees with Avista that requiring a separate tariff now would add additional
complexity and administrative burden to the process.As the Commission has noted, the
intent of the Commission's policy following the changes to RCW 80.04.250 are to
maintain adherence to longstanding ratemaking principles, while also maintaining
flexibility and supporting a streamlined process.40' Implementing a separate tariff sheet at
this time would reduce flexibility and streamlining within the process. However, if review
of provisional plant continues to be problematic, the Commission may revisit Staff's
proposal.
265 We believe this approach is consistent with the intent of the legislature and Commission
policy and that extending the review period will address several the concerns raised by
Staff and TEE
266 TEP raises two additional points: the first is to disallow new business cases from being
included in the review, and the second is to enter a final order following conclusion of the
review. First, we decline to disallow new business cases at this time.Allowing new
business cases is consistent with the Commission's Policy Statement to allow flexibility
and further the reduction of regulatory lag. However, the decision is non-precedential on
this point and the Commission will continue to monitor the number and cost of new
business cases in the future and may disallow their addition in the future if circumstances
warrant doing so.
267 Second, we concur with TEP that there is a need for greater formality and transparency in
the Provisional Plant review process. Despite our desire to maintain flexibility, and not be
overly prescriptive, we provide further clarification on the Commission's expectations for
Provisional Plant filings. Specifically, the Commission requires Avista, and will require
other companies, to conform to the following when submitting Provision Plant filings:
1) Identify whether a business case is identified in the Clean Energy
Implementation Plan(CEIP);
2) Identify whether a business case is required for CETA and/or CCA
compliance;
3) Identify each new business case and provide a narrative for business need;
4) Provide information on an annual and cumulative rate-effective period
basis;
5) Provide a narrative that explains the filing structure and how worksheets fit
together; and
405 Docket No. U-190531,Policy Statement¶28 (Jan. 31,2020).

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 69
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6) Maintain consistent naming conventions.
268 These requirements should allow for greater transparency and clarity for parties reviewing
the filing.Additionally, in recognition of TEP's concerns, and our own concerns in this
case and following consideration of provisional plant filings at a recent open meeting,406
the Commission will require more formality in the review process. We require Avista and
other utilities to present their future provisional plant filings for discussion and
consideration at Open Meetings.
269 The Commission's intent in providing this additional guidance and requiring Provisional
Plant filings to be presented through the Open Meeting process is to maintain flexibility,
further streamline the process, and to adhere to the intent of the changed statutes, but also
ensure transparency and clarity, to ensure confidence in the process, and to address the
concerns of Staff, TEP, and others in the process. The Commission will continue to
monitor this process moving forward and assess whether further changes are needed at a
later time.
Decarbonization —Line Extension Allowances, Non-Pipe Alternatives, Customer
Reporting, and Planning
270 Avista witness Jason R. Thackston references the Company's 2023 Natural Gas IRP401 and
summarizes the Company's approach to decarbonizing its natural gas system.
The Company's clean energy future also encompasses natural gas resources, as
natural gas is one of the cleanest burning fossil fuels, and plays a key role in
reducing carbon emissions, particularly when used directly by customers in their
homes rather than electricity generation to meet the same need. The Company's
strategy includes diversifying and transitioning from conventional fossil fuel
natural gas to RNG, hydrogen, other renewable fuels, and reducing consumption
via conservation and energy efficiency. The Company will purchase carbon offsets
as necessary to meet the CCA compliance obligations."
271 Both NWEC and the Sierra Club take issue with this approach, and in particular criticize
the Company's practices regarding line extension allowances (LEAs), residential gas
equipment incentives, and analysis of non-pipe alternatives (NPAs).
406 See, Dockets UE-240779 and UG-240780.These dockets were discussed during the regularly
scheduled November 7, 2024, Open Meeting, at which time TEP and the Commission expressed
concerns over how the provisional plant process had been handled during the compliance period in
June and July of 2024,see also Docket UE-220053.
407 See, Docket UG-220244.
40'Thackston,Exh. JRT-1T at 9:2-9.

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Line extension Allowances
272 NWEC witness Gehrke testifies that in the 2022 General Rate Case (GRC), the
Commission accepted and approved a stipulation that requires Avista to phase out natural
gas line extension allowances (LEAs) by 2025. To ensure a glidepath to phasing out
LEAs, NWEC recommends that the Commission require Avista to discontinue offering
LEAs for Schedules 131, 132, and 146 on January 1, 2025. NWEC also recommends that
the Commission require Avista to cease offering service under the Company's Rural Gas
Service Connection (Schedule 154).409
273 According to NWEC, the 2022 GRC agreement outlined Avista's plan to gradually phase
out natural gas LEAs over three years. Under the settlement, for 2023, LEAs would be
determined using a net present value method based on a two-year timeframe. In 2024, the
calculation would be based on a one-year timeframe. Finally, in 2025, the Company
would not offer any allowance for natural gas line extensions.410 The Coalition continues
to support the agreement from the 2022 GRC.411
274 NWEC contends that Avista has only partially implemented the agreed-upon changes.412
On December 14, 2022, the Company requested a revision of Schedule 151. In this tariff
revision, the Company implemented the proposed reduction of the LEA for tariff
Schedules 101, 102, 111, 112, and 116.413 For Schedules 131, 132, and 146, the tariff
states that Avista will calculate LEAs on a case-by-case basis.414
275 Sierra Club witness Dennison also notes that Avista still provides a subsidy for new
buildings that rely on gas in the form of its electric LEA, which is available to both all-
electric and mixed-fuel new construction projects.411 Since Avista can still offer LEAs for
mixed-fuel buildings, he says, new gas infrastructure may be built that could be
considered a stranded asset in the near future. To close this "loophole," Dennison
recommends the Commission direct Avista to only offer line extension allowances for
401 Gherke, Exh.WG-1 T at 10:14-15.
410 Gehrke, Exh.WG-1 T at 11:3-7.
411 Gehrke, Exh.WG-1 T at 11:9.
412 Gehrke, Exh.WG-1 T at 11:12.
41' Gehrke, Exh.WG-1 T at 11:12-14.
414 Gehrke, Exh.WG-1 T at 11:15-16.
411 See e.g.,Avista Schedule 51, Line Extension, Conversion, and Relocation Schedule:
Washington.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 71
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new buildings that are fully electrified as this is in alignment with statewide
decarbonization goals and mandates.
276 Sierra Club witness Dennison also notes that Avista still provides a subsidy for new
buildings that rely on gas in the form of its electric LEA, which is available to both all-
electric and mixed-fuel new construction projects.416 Since Avista can still offer LEAs for
mixed-fuel buildings, he says, new gas infrastructure may be built that could be
considered a stranded asset in the near future. To close this "loophole," Dennison
recommends the Commission direct Avista to only offer line extension allowances for
new buildings that are fully electrified as this is in alignment with statewide
decarbonization goals and mandates.
277 In its post-hearing brief, Avista reiterates that it does not oppose NWEC's proposal related
to the line extension allowances for non-residential customers. However, it opposes Sierra
Club's proposal to prohibit electric LEAs for customers installing natural gas or propane.
Avista suggests that if such a policy matter were to be considered, that it should not be in
this proceeding.417
278 AWEC also asks the Commission to reject this proposal. Witness Kaufman suggests that
Sierra Club's recommendation may be at odds with RCW 80.28.090411 and RCW
80.28.100.419 AWEC says Sierra Club's recommendation may result in"an unreasonable
preference for electric-only service under RCW 80.28.090, despite the fact that Avista
maintains an obligation to provide natural gas service."420 Moreover, Kaufman argues that
the proposal would be inequitable because only a portion of customers would be eligible
for the line-extension allowance, and in some cases customers not eligible for the
extension could be double charged.421
Gas Equipment Incentives
279 Sierra Club witness Dennison recommends that Avista phase out mid-stream incentives
for residential gas appliances like furnaces and water heaters that may prompt builders to
416 See e.g.,Avista Schedule 51, Line Extension, Conversion, and Relocation Schedule:
Washington.
417 Avista's Post-Hearing Brief, at¶ 169.
41'RCW 80.28.090(Unreasonable Preference).
419 RCW 80.28.100(Rate Discrimination).
420 Kaufman, LDK-6T at 6:20-7:1.
421 Kaufman, LDK-6T at 7:20-8:2. AWEC offers a secondary recommendation that if the
Commission accepts Sierra Club's recommendation,that the Commission exempt large non-
residential customers under Electric Schedule 25 customers from this process.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 72
ORDER 08
install new gas infrastructure to serve these appliances.422 For natural gas equipment
appliances, Dennison recommends the Company re-appropriate 20 percent of the budgeted
residential gas incentives in its current Biennial Conservation Plan (BCP)421 to incentives
for residential building envelope and electrification readiness measures as well as require
the Company to offer information related to electrification for customers who inquire
about natural gas rebates or incentives.
280 Avista opposes this proposal. Witness Bonfield states that under RCW 80.28.380 the
Company must demonstrate that"the target will result in the acquisition of all resources
identified as available and cost-effective. "424 He interprets "all to indeed mean all,"
thereby allowing Avista the ability to cast a wide net when it examines resources and
conservation measures required by law. He states that if the Company were to accept
Sierra Club's recommendation on this topic, it would be in violation of existing applicable
decarbonization laws and rules.425
281 Moreover, Bonfield states that accepting this proposal would arbitrarily increase rates for
electric customers. He notes that the Company has already dedicated $2 million(on an
annual basis) from its CEIP to address electric customers' energy endeavors, many of
which include building envelope upgrades to replace natural gas equipment with efficient
electric equipment.426
282 NWEC also disagrees with Sierra Club's recommendation, noting that the 2024-2025
Biennial Conservation Plans (BCP) were just approved in January 2024.427 Any
substantive changes to these offerings, it says, should be made in the next BCP.
Non-Pipes Alternatives
283 Sierra Club witness Dennison argues that NPAs can decrease the need for expansion of
any current gas infrastructure, which he argues represents substantial avoided costs.428
Dennison says the 2022 GRC Settlement requires Avista to consider NPAs in its gas
system distribution planning process in future IRPs, and requires the EEAG to weigh in on
422 Dennison,Exh. JAD-IT at 15:17-20.
423 See Docket UG-230898.
424 Bonfield, Exh. SJB-5T at 46:8-9 (emphasis in original).
425 Bonfield, Exh. SJB-5T at 46:20-47:2.
426 Bonfield, Exh. SJB-5T at 48:8-16.
427 See Docket UG-230898.
428 Dennison,Exh. JAD-IT at 20:10-12.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 73
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how Demand Side Management(DSM)programs can be used as NPAs.121
284 Although Avista is required to examine NPAs with the Energy Efficiency Advisory Group
(EEAG), in a data request to the Company, Avista confirmed"it has not performed an
analysis of non-pipe alternatives in WA."430 Dennison concludes that Avista failed to
evaluate the possibility of NPAs for specific projects and failed to engage with the EEAG
in the 2023 IRP process on this very topic. When pressed for more information on the
extent of Avista's analysis on potential NPAs, the Company informed Dennison that
NPAs are "relatively new and the Company has little experience with NPAs to date.""'
Dennison argues Avista should have some familiarity with analyzing NPAs because the
Oregon PUC ordered the Company to essentially do the same thing in its Order
acknowledging Avista's 2023 Natural Gas IRP in Oregon.112
285 Dennison then recommends that Washington adopt Oregon's NPA framework which is
more prescriptive than what the 2022 GRC Settlement Agreement requires, and which he
believes addresses many of the concerns Avista raised in previous data responses.433 He
recommends that for the 2025 IRP, the Commission require Avista to perform analyses
using this framework on at least five projects (even if they exceed $500,000) to gain
experience with NPA analyses.
286 On rebuttal, Avista witness DiLuciano states that the 2022 Settlement agreement does not
explicitly require any type of NPA analysis, but rather only to consider NPAs when
conducting gas system planning. Therefore, he says, Avista has complied with the
settlement agreement and has evaluated NPAs when considering reinforcement
alternatives not related to safety, compliance, or road moves that exceed $500,000.434 He
says "[t]his process and methodology was presented to the Company's EEAG at its Fall
2023 meeting. At that time, no advisory group members expressed concern or offered
suggestions on altering the proposed methodology."435
429 See Final Order 10/04,No. UE-220053,UG-220054,Appendix A, at 11-12.
430 Dennison,Exh. JAD-IT at 24:14-15.
431 Exh. JAD-9,Avista Response to Sierra Club Data Request SC-017.
432 Exh, JAD-4, Oregon PUC, Order No. 24-156,No. LC 81 at Appendix A, P. 71.
433 Dennison,JAD-IT at 28:5-16. The language included in the brackets within the quotation
reflect Washington specific thresholds and requirements.
434 DiLuciano,Exh. JDD-3T at 26:18-23.
43'DiLuciano,Exh. JDD-3T at 26:20-23.

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287 The Company does accept Sierra Club's recommendation to adopt the OPUC framework
for NPA analyses but declines to do so in the 2025 IRP. Avista notes that the next IRP is
due by April 1, 2025, leaving little time to complete such an analysis. Furthermore, the
Company believes conducting these analyses for"practice" is not the best use of Avista's
time and resources, which are ultimately paid by customers.436
288 Kaufman also addresses Sierra Club's recommendation to adopt the Oregon PUC
framework to analyze NPAs. AWEC agrees that Avista should adopt the framework,but
disagrees that the Commission should be overly prescriptive based on an entirely different
proceeding that unfolded in a different state. AWEC recommends allowing Avista to
maintain the ability to exercise discretion when it comes to conducting NPA analyses for
Washington customers.437
Decarbonization Planning
289 Dennison highlights the settlement stipulations from the 2022 GRC discussed above and
asserts that Avista has "continued on a business-as-usual trajectory" and"has not
adequately begun making the transformative changes that will be needed to meet its
decarbonization obligations..."43s Dennison asserts this continued lack of attention to
CCA obligations is reflected in Avista's 2023 IRP, as the Company indicates it intends to
comply with the CCA by primarily relying on"CCA allowance purchases, with some
synthetic methane in later years, a very small amount of energy efficiency, and no
electrification. 13' Dennison believes that this approach will create significant financial
risks for customers, and that Washington will exceed the CCA statewide emissions caps,
especially as other utilities pursue similar strategies.44o Dennison points to the most recent
Cascade Natural Gas (CNG) IRP441 that similarly relies on allowance purchases, and notes
that although the Commission has not acknowledged Avista's IRP, it declined to
acknowledge CNG's IRP for over-reliance on CCA allowance purchases.
290 To address this alleged deficiency, Dennison recommends the Commission direct Avista
to complete a decarbonization plan by March 2027, with the following elements:
436 DiLuciano,Exh. JDD-3T at 30:23-28.
437 Kaufinan, Exh. LDK-6T at 10:2-13.
438 Dennison,Exh. JAD-7:18-8:2.
439 Dennison,Exh. JAD-IT at 8:5-7.
440 Dennison,Exh. JAD-IT at 8:9-12.
441 See Docket UG-220131.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 75
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1) Incorporate findings from the Company's Targeted Electrification Pilot,
2) Evaluate a range of decarbonization and CCA compliance measures
including evaluation of building electrification as a proactive resource
strategy,
3) Address opportunities to coordinate Avista's efficiency and electrification
measures with available funds and programs including IRA and
Washington's HEAR program,442
4) Analyze at least one scenario in which Avista's annual gas system emissions
are no greater than its share of the statewide CCA emissions cap, without
relying on additional allowances and estimate the percentage reduction in
gas system throughput by 2030 and identify strategies that would decrease
natural gas rate base by the same percentage by 2030.443
291 Dennison further recommends that, in alignment with the 2021 State Energy Strategy, the
Commission require Avista to conduct a Targeted Electrification Pilot with targets to
engage 5,000 customers through electrification assessments and for Avista to provide at
least 1,000 rebates for electrification equipment and include provisions to conduct
engagement and outreach to low-income customers or customers within Named
Communities.
292 Avista responds that it believes the Preferred Resource Strategy selected in the 2023
Natural Gas IRP is a decarbonization plan, and provides one with the lowest reasonable
cost while complying with all known laws, rules, and environmental policies. Because that
plan is within the IRP,Avista believes any concerns with the Company's decarbonization
efforts should occur within the context of the IRP.
293 AWEC also disagrees and believes Sierra Club relied on an erroneous interpretation of the
CCA's requirements and reliance on the OPUC's criticism of Avista in their IRP
proceeding.As such,AWEC asserts that Sierra Club `s recommendation essentially
renders decarbonization a"planning goal. ,444 AWEC says Avista's goal should be to meet
CCA requirements in a cost-effective manner.445 If the Commission mandates a plan,
AWEC recommends a decarbonization study similar to that undertaken by Puget Sound
Energy to identify cost-effective decarbonization measures.446
442 See Home Electrification and Appliance Rebates Program.
am.
443 Dennison,Exh. JAD-1 T at 45:11-46:2.
444 Kauftnan, Exh. LDK-6T at 10:20-11:3
441 Kauftnan, Exh. LDK-6T at 12:8-17.
446 AWEC's Post-Hearing Brief, at¶ 111.

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294 NWEC largely supports Sierra Club's recommendations. With regard to the Targeted
Electrification Pilot, it recommends that the Pilot target 40 percent of its customers from
low-income or Named Communities, which aligns with the federal Justice40 initiative and
is a ,similar in construct to PSE's Targeted Electrification Pilot which has a 30 percent
requirement.447 NWEC also recommends that Avista be required to install a minimum of
25 no-cost, electric-only heat pumps during the pilot period.448 Alternatively, if the
Commission does not accept this recommendation,NWEC recommends the Commission
require Avista to work with the EAAG and Conservation Resources Advisory Group
(CRAG) to address low-income electrification efforts.449
Decision
295 Washington voters approved Initiative Measure No. 2066 in the recent General Election.
In pertinent part, the initiative adds limits to the Commission's authority to approve, or
approve with conditions, multiyear rate plans. Specifically, section 4 of the initiative
amends RCW 80.28.425, adding the following limitations:
(12) The commission shall not approve, or approve with conditions, a
multiyear rate plan that requires or incentivizes a gas company or large
combination utility to terminate natural gas service to customers.
(13) The commission shall not approve, or approve with conditions, a
multiyear rate plan that authorizes a gas company or large combination utility
to require a customer to involuntarily switch fuel use either by restricting
access to natural gas service or by implementing planning requirements that
would make access to natural gas service cost-prohibitive.450
296 While the election occurred and its results were certified following the parties' submission
of briefs in this proceeding, the initiative has the force of law, and the Commission must
follow the initiative's directives, unless and until the effect of initiative is stayed or
reversed by a court of law.
447 Gehrke, Exh.WG-8T at 4:7-12.
44' Gerhke, Exh.WG-8T at 4:14-16.
449 Gehrke, Exh.WG-8T at 5:4-12.
411 Initiative Measure No. 2066, approved Nov. 5, 2024.

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297 Sierra Club and NWEC propose a number of programs and changes to Avista's natural gas
service both in response to Avista's 2023 Natural Gas IRP and provisions in the 2022 GRC
Settlement, including natural gas decarbonization plans, changes to line extension
allowances, or LEAs, non-pipe alternatives, or NPAs, and equipment incentives, many of
which appear to run counter to the initiative's directives. We address each in turn.
Decarbonization Plan
298 Avista's strategy for natural gas decarbonization to comply with its CCA obligations is set
forth in its 2023 Natural Gas IRP. This strategy includes diversifying and transitioning
from conventional fossil fuel natural gas to RNG, hydrogen, other renewable fuels, and
reducing consumption via conservation and energy efficiency. The Company will
purchase carbon offsets as necessary to meet the CCA compliance obligations.451 The
Company's approach to decarbonization to meet its CCA compliance obligations was
proposed in its 2023 Natural Gas IRP, and as it is not proposed in this proceeding for
approval, we decline to address it.
299 Sierra Club's witness Dennison requests the Commission direct Avista to adopt a
Decarbonization Plan, that among other elements,would "identify strategies that would
decrease natural gas rate base by the same percentage by 2030,"which we interpret to
mean the removal of gas assets from its system, and the possible termination of customer
usage of natural gas.452 This element of the proposed plan would appear to be explicitly
prohibited by the initiative. Without further briefing or legal analysis of the effect of the
initiative on the Commission's authority and how companies may pursue decarbonization
of their energy systems to meet CCA and CETA requirements while complying with the
provisions of the initiative,we find it inappropriate to adopt Sierra Club's decarbonization
proposal.
Line Extension Allowances
300 NWEC proposes the Commission require Avista to discontinue offering LEAS for
Schedules 131, 132, and 146 on January 1, 2025, in keeping with the provisions of the
2022 GRC Settlement. NWEC also recommends that the Commission require Avista to no
longer offer service under the Company's Rural Gas Service Connection (Schedule
154).453 Sierra Club supports NWEC's proposals and recommends the Commission direct
"' Thackston,Exh. JRT-1T at 9:2-9.
452 Dennison,Exh. JAD-1 T at 45:11-46:2.
451 Gherke, Exh.WG-1 T at 10:14-15.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 78
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Avista to only offer LEAS for new buildings that are fully electrified, and no longer allow
Avista to offer LEAS for mixed-fuel new construction projects.454
301 While Avista does not oppose NWEC's proposal relating to LEAS for non-residential
customers, it opposes Sierra Club's proposal to prohibit electric LEAs for customers
installing natural gas or propane. Avista suggests that the Commission should not
determine such a policy decision in this proceeding.455 AWEC is silent on NWEC's
proposal but does not support Sierra Club's, arguing that limiting LEAS to electric-only
customers to incentivize the curtailment of gas would be inequitable and possibly
discriminatory.456
302 The elimination of LEAs for non-residential customers was originally agreed to in the
20222 GRC Settlement and neither Avista nor AWEC oppose this treatment. However,
both Avista and AWEC object to the limitation of electric LEAS to electric-only
customers. This proposal goes beyond what the parties appear to have agreed to in the
2022 GRC Settlement, and appears to be contrary to the prohibition in Initiative 2066 for
the Commission to "approve, or approve with conditions, a multiyear rate plan that
authorizes a gas company or large combination utility to require a customer to
involuntarily switch fuel use either by restricting access to natural gas service or by
implementing planning requirements that would make access to natural gas service cost-
prohibitive."For these reasons, we reject Sierra Club's proposal.
Gas Equipment Incentives
303 Sierra Club recommends that Avista phase out mid-stream incentives for residential gas
appliances like furnaces and water heaters that may prompt builders to install new gas
infrastructure to serve these appliances.45' Specifically, Sierra Club recommends Avista
use 20 percent of the budgeted residential gas incentives for natural gas appliances in its
current BCP and use this amount for incentives for residential building envelope and
electrification readiness measures.45' Sierra Club also recommends the funds be used for
the Company to offer information related to electrification for customers who inquire
about natural gas rebates or incentives.
414 See e.g.,Avista Schedule 51, Line Extension, Conversion, and Relocation Schedule:
Washington.
455 Avista's Post-Hearing Brief, at¶ 169.
456 AWEC's Post-Hearing Brief, at¶¶ 105-7.
457 Dennison,Exh. JAD-1T at 15:17-20.
458 See Docket UG-230898.

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304 NWEC opposes Sierra Club's recommendation to reappropriate funds for natural gas
appliance incentives, noting that the 2024-2025 BCPs were just approved in January 2024,
and any substantive changes to these offerings should be made in the next BCP.419
305 Avista opposes Sierra Club's proposal, arguing that pursuing the proposal would put the
Company in violation of existing applicable decarbonization laws and rules.460 The
Company also argues that adopting the proposal would result in arbitrarily increasing rates
for electric customers, and that the Company has already dedicated $2 million(on an
annual basis) from its CEIP to address electric customers' energy endeavors.461
306 We reject Sierra Club's proposal as contrary to the BCPs that the Commission approved
earlier this year. We do not reach the question of whether approving Sierra Club's
proposal would be inconsistent with Initiative I-2066.
Non-Pipeline Alternatives
307 Turning to Non-Pipeline Alternatives(NPA), Sierra Club recommends that the
Commission adopt the Oregon Public Utility Commission's (OPUC)NPA framework,
which is more prescriptive than what is required in the 2022 GRC Settlement.462 Sierra
Club further recommends the Commission require Avista in its 2025 IRP, to perform NPA
analyses using the Oregon framework on at least five projects (even if they exceed
$500,000) to gain experience with NPA analyses.
308 Avista supports adopting the Oregon NPA analysis, and including NPA analysis in
situations where an NPA is not selected, and where the project is unrelated to safety,
compliance, or road moves and which exceeds a threshold of$500,000 for individual
projects or groups of geographically related projects.463
309 The Commission acknowledges Avista's agreement to adopt the OPUC NPA framework,
as well as Initiative I-2066.464 The Commission has a statutory obligation to ensure fair
459 See Docket UG-230898.
460 Bonfield, Exh. SJB-5T at 46:20-47:2.
461 Bonfield, Exh. SJB-5T at 48:8-16.
462 Dennison,JAD-IT at 28:5-16. The language included in the brackets within the quotation
reflect Washington specific thresholds and requirements.
463 Avista's Post-Hearing Brief, at¶ 157.
464 The implications of the passage of Initiative I-2066 remains uncertain.The initiative is
currently being litigated and the parties were not asked to specifically brief I-2066 in this case.
Despite this,the Commission expects Avista to evaluate NPAs within the law.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 80
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and reasonable rates for customers while promoting energy conservation all while
balancing the will of Washington voters. We do not find that applying the Oregon NPA
analysis runs counter to the provisions of the initiative that prohibit the Commission from
authorizing "a gas company or large combination utility to require a customer to
involuntarily switch fuel use either by restricting access to natural gas service or by
implementing planning requirements that would make access to natural gas service cost-
prohibitive."NPAs are planning tools to assist the utility in making cost-effective
decisions and do not mandate fuel switching, restricting access to natural gas, or making
gas service cost-prohibitive.
310 As such, the Commission understands the value of NPA analyses, as well as how demand
response programs and energy efficiency programs result in conservation and by
extension, lower costs for customers through avoided capital expenses. On balance, the
Commission approves Avista's adoption of the OPUC framework on NPAs, with the
following exceptions:
• Avista must examine the relationship between any NPA and the Climate
Commitment Act (CCA), but may not assume that all CCA allowances will be
purchased at the ceiling price.
• Avista must provide an explanation of the resulting investment selection (either the
NPA or a traditional investment) that compares the costs of both projects, but
Avista is not required to rank or score any NPA in its evaluation process.
311 Although the Company indicates it has completed a cursory NPA analysis in Oregon, the
Company has not performed any such analysis in Washington. As the Commission
foresees NPA analyses becoming more commonplace in the future, it is imperative that
Avista gain familiarity with these types of analyses.
312 As such, the Commission orders Avista to conduct two NPA analyses on natural gas
distribution projects related to customer growth for any potential projects that exceed
$500,000 using the criteria otherwise adopted above. The Commission orders the
Company to submit these analyses in a compliance filing for this docket no later than
December 31, 2025.
Equity—Low-Income Assistance and Disconnections, Language Access Plan, and
Energy Burden Analysis/Reporting
Equity

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313 In the final order resolving the Company's 2022 GRC,465 the Commission approved a
Settlement Stipulation to include certain equity provisions and required Avista to
demonstrate its progress towards incorporating the four tenets of equity466 into its capital
planning process. The Commission agrees with Avista that the Compliance Filing due
December 31, 2024, is the correct venue to evaluate compliance with Settlement
Stipulations from the 2022 GRC.Accordingly, as indicated in Avista's direct testimony,
we expect the filing to: (1) "identify and prioritize the needs of Named Communities in
capital planning;" (2)weigh"the distributional impacts the Company's business decisions
and processes"467 by addressing equity through its Customer Benefit Indicators (CBI),461
Customer Experience Journey;469 wildfire equity plan;470 and (3) interconnect it to existing
business policies, practices, and procedures.471
Low-Income Assistance Disconnections
314 In 2001 the Commission approved Avista's Low-Income Rate Assistance Program
(LIRAP) to collect funding through"electric and natural gas tariff surcharges on Schedule
92 and 192,,,472 disburse funding to low-income households pursuant to WAC 194-40-
030,473 provide financial assistance to households unable to afford their energy bills and
avert disconnection of utility services.
315 Avista provided extensive testimony regarding the benefits customers received in response
to the implementation of its enhanced customer and bill assistance programs. In October
2023,Avista implemented My Energy Discount(MED), as part of its portfolio of
461 See Dockets UE-220053, et. al., Order 10/04,pgs. 24-28 IT 71-78.
466 The four tenets of equity are distributional justice,procedural justice,recognition justice, and
restorative justice.
467 Thackston,Exh. JR-1 T at 15:1-3.
468 CBI metrics represent"equity areas identify by Avista's EAG that are most at risk to
disproportional outcome"in conjunction with the Company's 2021 CEIP to monitor and track
progress towards clean energy goals."Thackston, Exh,JRT-1T at 17:2-10.
46'The Customer Experience Journey is a cross-functional team of employees that collaborate with
customers to design a"human-centered Experience Design methodology"to focus on customer
needs from the outside in rather the inside out. Thackston, Exh, JRT-1T at 17:12-20.
47o Thackston,Exh,JRT-IT at 17:22-29.The equity wildfire equity plan will prioritize customer
and community input for those living in rural and high-fire risk areas.
471 Thackston,Exh. JRT-1T at 19:3-6.
472 Dockets UE-240006&UG-240007 (consolidated),Bonfield, Exh. SJB-1T at 16: 3-5.
473 "`Low-income'means household incomes that do not exceed the higher of eighty percent of
area median income or two hundred percent of federal poverty level, adjusted for household size."
WAC 194-40-030.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 82
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assistance options under its LIRAP. MED's automatic enrollment mechanism eliminates
critical barriers for customers that historically limited participation in providing aid to
those in need. With these barriers reduced, Avista maintains that within the first three
months of the program, customer saturation in the overall LIRAP increased by 10
percent;474 and the Company provided more than $3.1 million to 26,306 customers'475
which resulted in more customers being served in the first three months of MED's rollout
than an entire program year.476
Decision
316 No party provided response testimony opposing Avista's enhanced customer and bill
assistance programs. Thus, the Commission finds that the data Avista presented on MED's
impacts over the ten-month period of October 2023 to July 2024 to be persuasive. During
this period, Avista distributed approximately $14.9 million dollars in bill credits to
approximately 4 1,110 active participants and the Company's saturation rates for its overall
LIRAP programs rose to 29 percent.477
Disconnection Policies
317 Regarding Avista's existing disconnection policies, TEP testifies that Avista's use of
credit codes as a determinant for service disconnections violates the equity tenets
established by the Commission by inordinately burdening marginalized and vulnerable
populations, including communities of color, low-income customers, customers without
college degrees and more.478 TEP explains that Avista relies on criteria, such as the
number of times a customer has been past-due over the previous 12 months, and the
number of months since the customer was last eligible for disconnection, as part of its
calculation to determine a customer's credit code. This in turn sets a timeline for a
customer's disconnection based on a past-due threshold amount that triggers the
collections process.479 TEP maintains that this approach results in customers with lower
credit codes having lower disconnection thresholds and shortened timelines compared to
customers with higher credit codes. TEP argues that any credit coding criteria related to a
474 Bonfield, Exh. SJB-1T at 23:20-24:1.
475 Bonfield, Exh. SJB-IT at 19:11-17.
476 Bonfield, Exh. SJB-IT at 19:2-6.
47 Bonfield, Exh. SJB-5T at 7:12-13.
471 Stokes, Exh. SNS-IT at 3:10-20.
479 Stokes, Exh. SNS-IT at 9:15-10-7. See also Table 1, Exh. SNS-3,Avista Response to TEP DR
012.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 83
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customer's disconnection or arrearage history should be removed.480 Instead, TEP
recommends that the credit coding criteria be based only on two factors: (1) a customer's
current arrearage amount; and(2) duration of time in arrears. TEP also recommends that
Avista conduct a robust review of its existing credit codes with the (EAAG and Equity
Advisory Group (EAG).481
318 On rebuttal, Avista rejects TEP's recommendation on the basis that its disconnection
policies are sound and use of its credit codes "aim to reduce or eliminate potential
disconnections through early intervention and collaborative solutions,"which includes
connecting customers to various assistance programs, outreach and translation efforts if
necessary.482 Avista highlights the effectiveness of its enhanced assistance programs and
notes that 35,000 of the 41,000 customers enrolled in the MED have seen their credit score
improve which has reduced both past-due notices and disconnections for customers.
Avista further argues that TEP's viewpoint of distributional equity is "inconsistent with
the holistic picture of the current conditions faced in those communities," and
demonstrates a"fundamental misunderstanding of its credit code scoring methodology.483
However, because Avista acknowledges that the term"credit code"may imply the use of a
credit-scoring methodology, the Company agrees to revise its terminology with the EAAG
and EAG to prevent confusion and better align with the approach it is taking"to analyze
payment probability on all customer accounts."484
Decision regarding Avista's Disconnection Policies
319 As we noted in Dockets UE-220066 and U220067 (Consolidated) Order 32 and Docket
UE-210918 Order 18, when there is a clear increase in arrearages overtime and a marginal
impact in collecting such arrearages, a phased dunning approach is warranted'48s but only
after customers receive targeted outreach informing them of the Company's "bill
assistance, arrearage management, and other programs for which they may be eligible."486
Accordingly, we reaffirm the effectiveness of the dunning process as in the public interest
because it motivates customers to obtain assistance, take prompt action on past-due
480 Stokes, Exh. SNS-IT at 3:10-13.
481 Stokes, Exh. SNS-IT at 14:11-18.
482 Bonfield, Exh. SJB-5T at 12:7-8.
483Bonfield,Exh. SJB-5T at 11:1-3.
484 Bonfield, Exh. SJB-5T at 13:22-23 and 15:1.
485 YVUTC a Puget Sound Energy, Dockets UE-220066 and UG-220067 (Consolidated) Order 32,
Docket UG-210918 Order 18, at(May 16,2024) at 15 149.
486 WUTC a Puget Sound Energy, Dockets UE-220066 and UG-220067 (Consolidated) Order 32,
Docket UG-210918 Order 18, at 17¶56.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 84
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balances, and avert service disconnection. For this reason, we reject TEP's proposal to
prioritize customers for disconnection based on the current arrearage amount and the
duration of current arrears.
320 While the Commission acknowledges Avista's acceptance of TEP's recommendation487 to
review its disconnection policies with EAAG and EAG, we are not ordering Avista to
comply with any specific timelines as recommended in TEP's testimony.488 However, we
do require Avista to submit evidence documenting its collaboration with six months of the
date of this order.
Low-Income Needs Assessment and Energy Burden Data Analysis
321 In direct testimony, both TEP and NWEC recommend that Avista update and refine its
metrics to better understand the needs of its underserved customer base,489 and conduct a
new Low-Income Needs Assessment(LINA) requiring the Company to identify low-
income customers by fuel type at the household level.49' TEP explains this would result in
Avista gaining a better understanding of energy burden by fuel type and allow it to tailor
its outreach. NWEC also recommends that Avista conduct a new LINA that: (1)updates
customer income data; (2) assesses energy burden for newly enrolled LIRAP customers;
and (3)provides data for customers with fewer than 12 months of usage data in its Energy
Burden Analysis (EBA) to simulate energy burden over time as a function of factors that
increase customer bills.491
322 To further assess the extent of energy burden within Avista's service territory, TEP
provides a"hyper-granular" analysis of un-affordability facing Avista's customers in light
of the proposed rate increases in this MYRP. This analysis uses a stratified approach for
multiple variables to isolate specific customer needs by breaking down geographic data to
the Census Tract level, and then breaking down income levels in each Census Tract for
quintiles492 to identify the scope of affordability and assistance needs for mostly
487 Bonfield, Exh. SJB-5T at 18:30 - 19:6.
481 Stokes, Exh. SNS-1T at 15:3-11.
419 Stokes, Exh SNS-1T at 29:17-21.
490 Stokes, Exh. SNS-IT at 29:17-21.
491 Thompson, Exh. CT-IT at 20:6-16.
492 The Census Bureau rank orders incomes from the highest to lowest in each geographical area. It
then divides the rank ordering into five equal parts, each part of which is referred to as a
"quintile".A quintile represents 20 percent of population for a given area. It should be noted that
quintile ranges can change for each Census Tract. The lowest quintile of income in one Census

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 85
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homogenous populations within specific Census Tracts. This analysis is then overlaid with
the Department of Health Environmental Health Disparities Map493 to denote Highly
Impacted Communities (HIC) and Vulnerable Populations.494 TEP relies on this data to
show that Avista's current rates are unaffordable and that further proposed increases for
2025 and 2026 will only exacerbate unaffordability and increase the energy burden within
Avista's service territory.495 TEP further argues that this ultimately will result in increased
disconnections that disproportionately impact customers with the lowest incomes496 that
reside in HICs.497
Decision on Low Income Needs Assessment and Energy Burden Data
323 TEP's analysis skillfully articulates the "breadth and depth"498 of existing un-affordability
by segmenting the population by income quintiles and fuel type.499 While the insights
gained from this robust analysis have immense value for the Commission, Avista, and
external parties,500 the evaluation lacks information on the other half of the energy burden
equation. Namely, the evaluation does not incorporate any data related to the enhanced
energy assistance programs that Avista rolled out in October 2023. For this reason, the
Commission rejects TEPs recommendations to require Avista to use the stratification
framework for an Energy Burden Analysis and Performance Based Ratemaking (PBR) for
2022 metrics 12, 13, 14, and 15 and 2024 metrics 7, 8, and 9.501 However, we believe that
the insights provided from the stratification framework are invaluable and should be
explored with input from Avista, Staff, and other interested parties so that a holistic
assessment of the scale of energy burden can be further evaluated in the current
Commission-led rulemakings in Docket(s) U-210800 (for arrearage and assistance data)
and U-210590 (for PBR metrics).
Tract may be $20,000 on average,whereas in a more affluent Census Tract,the lowest quintile
may be $60,000 on average. Colton, Exh RDC-1T at 7-8.
493 Information by Location I Washington Tracking Network(WTN)
494 Colton,Exh RDC-1T at 7-8.
495 Colton,Exh RDC-IT at 10-11.
496 Colton,Exh. RDC-1 T at 8:1-9.
497 Colton,Exh RDC-1T at 8:20-30.
498 Colton,Exh. RDC-1T at 12:3.
499 Colton,Exh. RDC-IT at 52:3-17.
500 Colton,Exh. RDC-1T at 48.
501 See Appendix A,Docket Nos. UE-240006 and UG-240007,Commission Ordered Performance
Metrics, at 9-10.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 86
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324 Further, because Avista agreed in its rebuttal testimony to maintain current reporting
requirements for the annual Disconnection Reduction Reports and COVID-19 Arrearage
and Assistance reporting in U-210800, and to expand the annual LIRAP reports, we agree
that a new LINA and EBA are unnecessary at this time. It is important for the Commission
and all interested parties to examine the full effects of Avista's Bill Discount Rate and
Arrearage Management Plan, which will not be fully realized until October 2025. Only at
that time will we have a comprehensive understanding of the full impacts and benefits
these programs have on customers.
325 Accordingly, as set forth in Avista's rebuttal testimony, we expect the revisions in the
Company's annual LIRAP reports to include:
1) An assessment of Energy Burden for customers participating in the MED
program,502 and an analysis of the revised program structure that became effective
October 1, 2023.503
2) Updated saturation rates for low-income customers by fuel type, (beginning in
early 2026);504
3) Updated reporting metrics that identify arrearage and disconnection
demographics,505 customer participation geography, demographics, data and
trends, including impacts to named communities;506 and
4) An analysis of the revised program structure that became effective October 1,
2023.511
326 On balance, we find that the above revisions and expanded reporting are sufficient at this
time and would like to acknowledge the on-going work that investor-owned utilities are
conducting in coordination with the Department of Commerce as required by RCW
502 Bonfield, Exh. SJB-5T at 26:8-12.
503 Bonfield, Exh. SJB-5T at 27:28-38.
504 Bonfield, Exh. SJB-5T at 27:44-28:5
505 Bonfield, Exh. SJB-5T at 27:11-15.
sob Bonfield, Exh. SJB-5T at 27:20-24.
507 Bonfield, Exh. SJB-5T at 27:28-38.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 87
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19.405.120 to fully evaluate energy burden and assistance offerings.sos
327 Additionally, to further refine data specific to investor-owned-utilities, the Commission
directs Staff, investor-owned utilities, and other interested parties to collaborate and assess
the potential use of the stratification methodology in the rulemakings in Dockets U-
210800 and U-210590, and to explore various avenues to promote data accessibility.
328 The Commission also retains the current reporting requirements and cadence for the
COVID-19 data in Docket U-210800 moving forward and will require Avista and other
regulated energy utilities to continue providing Disconnection Reduction Reports,
COVID-19 Data Reports, and PBR metrics until the conclusion of the two rulemakings in
Dockets U-210800 and U-210590.
329 While the Commission wishes to promote accessibility, data security is paramount to
ensuring trust as more customers use Avista's programs. The Commission acknowledges
the value demographic data can have for utilities as they seek to identify and address
disparities, inform program design and improvements, and measure the impacts across
different groups.509 Accordingly, the Commission requires Avista to work with the EAAG
and EAG to establish a framework to collect and transmit customer demographic data
(similar to the demographic data collected in the LIRAP510) for those enrolling in
Distributed Energy Resource (DER) programs. However, given privacy concerns that
impact the collection of demographic data, customer participation will not be required but
instead will be optional and only collected after customer consent is provided.
Language Access Plan
330 Next, although TEP and NWEC recommend that Avista create a Language Access Plan
(LAP) in coordination with the EAAG and EAG to increase participation in its LIRAP
programs'5l1 we find that Avista continues to make progress with its Multi-Language
Strategy(MLS), that examines the needs of multilingual customers. This is evidenced by
Avista's online web platform,which translate account, energy, safety and outage
information in Spanish and ongoing efforts the Company is exploring to provide these
same services online in other languages and in its mobile application and Interactive Voice
Response systems. Avista is also layering its MLS with the Public Participation Plan
508 See Energy assistance for low-income households—Washington State Department of
Commerce
509 Thompson, Exh. CT-IT at 16:20-17:5.
510 Thompson, Exh. CT-IT at 17:8-23.
51 Stokes, Exh SNS-IT at 37:13-23 and 38:1-5.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 88
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(PPP) within the CEIP and is working with the EEAG and EAG to develop and prioritize
other language access projects.'12
331 While we recognize that Avista has not adopted a separate LAP, we believe its MLS
achieves the same underlying goals given the on-going collaboration between Avista and
relevant advisory groups. As such, we do not find any value in duplicating this work,
especially since the effort related to language access is iterative. Therefore, we reject TEP
and NWEC's recommendation that Avista develop a separate LAP but expect Avista to
continue working towards addressing language access needs and meeting customers where
they are.
The Multi-Year Rate Plan
332 Pursuant to RCW 80.28.425,Avista submits an MYRP that would begin with new base
rates effective December 2024 (RY1) and December 2025 (RY2). For RY1, the proposed
increases reflect an electric base rate relief of$79.3 million or 13.1 percent and natural gas
base rate relief of$17.3 million or 13.6 percent effective December 2024. For RY2 of the
rate plan, the proposed increases reflect an electric net request of$53.7 million or 11.7
percent and natural gas base rate relief of approximately $4.6 million or 3.2 percent
effective December 2025.1
Table 1: Proposed Rate Increases for MYRP2
Fuel p Ry13 RYI Increase RY2 RY2 lncrea&-.�
Electric $79.3 Million 13.1 Percent $53.7 Million 11.7 Percent
Natural Gas $17.3 Million 13.6 Percent $4.6 Million 3.2 Percent
Combined Total $96.6 Million 26.6 Percent $58.3 Million 14.9 Percent
Avista's Direct Testimony
333 This is the Company's second MYRP proposal since SB 5295 was enacted in 2021.
Company witness Vermillion posits that"for the most part"the first MYRPs13 worked as
intended with respect to recovery of capital investments, although the Company has not
been able to fully recover its authorized rate of return under the MYRP format. Vermillion
sit Bonfield, Exh. SJB-5T at 33:1-6.
5"Avista 2022 General Rate Case UE-220053 and UG-220054.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 89
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further testifies that although the MYRP construct allows for more timely cost recovery
for capital additions, recovery of expenses continues to lag.514
334 Witness Vermillion acknowledges the larger increases proposed in RY1 by stating this
request represents an attempt to "close the regulatory lag in Year 1 and set a proper base
for a MYRR"Avista argues that it is extremely important that the Commission approve a
revenue requirement that"gets the first year right." The Company opines that if the
revenue requirement for RY1 is insufficient for the recovery of capital investment and/or
expenses, even after inclusion of revenues expected in the first year of a rate plan, the
utility would underearn in the first year having a"carry-over" effect in every subsequent
rate years 15
Staff's Response Testimony
335 Staff witness Erdahl recommends the Commission reject Avista's proposed two-year
MYRP.516 Staff notes that RCW 80.28.425(9) requires the Commission to align, to the
extent practical, the timing of approval of a MYRP of an electrical company with its CEIP
filed pursuant to RCW 19.405.060. Under WAC 480-100-640(1),Avista is required to file
its next CEIP by October 1, 2025, and Staff believes approval of this filing as a traditional
rate case will allow Avista to develop its next rate case in conjunction with finalization of
its CEIP.511
336 Staff asserts that MYRPs are intended to eliminate regulatory burden, yet 2024 is the
second cycle in a row in which both Avista and Puget Sound Energy have simultaneously
filed rate cases. This clustering of rate cases results in additional filings that create
unnecessary burdens on the Commission, Staff, and intervenors.As such, Staff
recommends denying Avista's proposed MYRP in order to offset the simultaneous rate
cases and allow for more time and resources to be dedicated to individual rate cases which
is in the public's interest. Further, Staff states that Avista is the natural candidate for
moving the filing cycle given that it must file its CEIP in 2025, and PSE will not do so
given the recent legislation in ESHB 1589.518
AWEC's Response Testimony
514 Vermillion, Exh. DPV-IT at 5:4-7.
515 Exh. DPV-1T at 24:7-16.
516 Erdahl, Exh. BAE-1 T at 6:22.
517 Erdahl, Exh. BAE-1 T at 7:3-9.
518 Erdahl, Exh. BAE-IT at 7:19-8:2.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 90
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337 Witness Mullins testifies that the MYRP construct may disincentivize the Company to rein
in expenses. Mullins explains that:
"... if a utility has an approved budget in a rate case, it will have an
incentive to spend up to that budget to avoid needing to issue a refund to
customers in an after-the-fact capital review...setting rates based on
budgetary forecasts provides little assurance that those rates are just and
reasonable because there is no objective way of determining the
reasonableness of a budget. Thus, the utility has an incentive to inflate its
budget in a rate case which, if approved, gives it a corresponding incentive
to invest more capital than it otherwise would under an [sic] historical test
year approach."519
338 Mullins substantiates this claim by noting that during the ratemaking process, neither the
parties nor the Commission have the opportunity to objectively determine the
reasonableness of a utility's capital spending. Mullins explains that in the spending
reported in a compliance filing520 to the 2022 GRC,521 the actual spending does not match
up with the capital forecasts provided by Avista in the beginning of the GRC. Mullins
notes that although the initial forecasts and actual expenses are wildly different,Avista still
claims these capital expenses were reasonable.
339 Mullins states that"setting utility rates based on budgets is problematic because there is
no objective way to assess the reasonableness of a budget . . . .»122 As such, Mullins
recommends the Commission only include capital that is "demonstrated to be used and
useful on or before the rate effective date of the respective rate years to be considered in
the revenue requirement."523
340 AWEC's primary recommendation is to limit the capital investment allowed into rates for
each year of the MYRR However, witness Mullins recommends that approving a single
year revenue requirement might be appropriate "given deficiencies in how Avista
519 Mullins,Exh. BGM-1T at 7:17-8:1.
520 See e.g. Docket No. UE-220053 &UG-220054,Avista Compliance Filing(Provisional Capital
for 2023),Attachment A, (March 29,2024)(The absolute error in capital spending was 73.8%, yet
Avista claims that it spent more than its forecast,warranting no adjustment to provisional capital
included in rates in the 2022 GRC.)
521 2022 Avista GRC UE-220053 and UG-220054.
122 Mullins,Exh. BGM-IT at 9:5-6.
121 Mullins,Exh. BGM-1T at 9:21-22.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 91
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evaluated the removal of Colstrip 1 and 2 from rates."524 Mullins acknowledges a single
year revenue requirement may be more efficient given that the removal of Colstrip from
rates is the single greatest factor in this proceeding.525
Avistas Rebuttal Testimony
341 Avista witness Christie rejects Staff's recommendation to only accept one year of the two-
year rate proposal. Christie states that Staff justifies this recommendation by citing
regulatory burden and alignment with the CEIP filing due next year. Christie argues that
rejection of the MYRP would result in additional administrative burden requiring another
filing to accomplish what the Company is attempting in this filing.526
342 Christie acknowledges the burden of simultaneous rate cases from multiple utilities but
opines "[w]hile a staggering of major rate filings by utilities would relieve some of the
administrative burden on Staff and the parties, it does not override the Commission's
ultimate responsibility to provide timely rate relief where warranted. ,121 Christie provides
further argument in opposition of Staff's recommendation:
• Decreased credit ratings would impact customers through further absorption of lost
return on equity of approximately 70 basis points;
• The Company does not have the means to file another rate case immediately
following this filing;
• Rejecting the Company's MYRP is contrary to the intention of the MYRP statute,
which is to provide certainty to the Company and its customers; and
• There are no meaningful investments or costs of compliance related to the CEIP
included in this GRC (other than what was contemplated in the previous CEIP).528
AWEC's Cross Answering Testimony
343 AWEC witness Mullins acknowledges Staff's recommendation to reject the second year of
the MYRR While AWEC does not take a position,with witness Mullins noting that the
majority of the revenue requirement in RY2 is driven by the removal of Colstrip from
rates.AWEC states that if the Commission rejects RY2, it will still need to address the
costs related to the removal of Colstrip at some point. Even in light of RCW 80.28.425(9),
AWEC does not believe there is any practical benefit to aligning a MYRP with a CEIP and
524 Mullins,Exh. BGM-IT at 13:5-7.
525 Mullins,Exh. BGM-IT at 13:5-10.
121 Christie,Exh. KJC-4T at 23:12-14.
52' Christie,Exh,KJC-4T at 24:7-9.
121 Christie,Exh. KJC-4T at 25:17-20.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 92
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asserts that simultaneous rate cases will likely occur in the future even if the Commission
rejects RY2.129
Parties'Briefs
Avista's Brief
344 Avista disagrees with the proposals submitted in response to its multiyear
rate plan(MYRP). To that point, Avista observes that "what sets this case apart are the
dramatic changes in the landscape against which Avista operates" including, among other
things, "proposals that would undermine the multiyear rate plan(MYRP) legislation,
striking at its very core, i.e., rejection of more than a one year plan (Staff) or disruption of
the "portfolio"approach to subsequent "provisional" capital review (AWEC)."sso
345 The Company disagrees with Staff's argument that there is a burden associated with
processing a two-year rate plan.Avista claims that"Staff's proposal to ignore Rate Year 2
(RY2) overlooks the fact that $54.2M of the $69.3M RY2 request on rebuttal is simply
removal of Colstrip. The remaining $15M is mostly a continuation of capital and expense
items already reviewed in Rate Year 1 (RY 1)." 'Avista goes on to claim a one-year plan
would cause Avista to lose 9 to 12 months of additional rate relief that would be covered
in RY2, and such a result would be, in effect, the Commission ordering zero rate relief for
Rate Year 2.532
Staffs Brief
346 Staff reiterates its arguments that: 1) the Commission should deny Avista's MYRP and
approve the filing as a traditional one-year rate case so that the Company's subsequent
MYRP can align with its CEIP due October 1, 2025, ; and 2)the Commission should deny
Avista's MYRP in order to ease the administrative crush on the Commission and interested
parties, making for a better ratemaking process.533 On brief, Staff introduces a third
argument for rejecting Avista's MYRR Specifically, Staff asserts that rejection of the
529 Mullins,Exh. BGM-8T at 15:8-12.
530 Avista Post-Hearing Brief, at¶2. The issue of the"portfolio"with regard to "provisional"
capital review will be addressed elsewhere in this order. However,we note that in AWEC's
testimony it also opposed the Company's MYRP. See Mullins, Exh. BGM-1T at 7:17-8:1.
531 Avista's Post-Hearing Brief, at¶ 11.
532 Avista's Post-Hearing Brief, at¶ 11.
533 Staff's Post-Hearing Brief, at¶6.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 93
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MYRP would allow the Commission to evaluate Avista's next MYRP in light of the equity
report it will make in two months.534
347 With regard to the equity report, Staff states that"if the Commission approves a two-year
rate plan, it will go four years between meaningful looks at equity in Avista's operations in
the company's rate cases. Given the Legislature's incorporation of equity into
ratemaking535 and the Commission's directive that equity take center stage in utility
operations,536 the Commission should not accept that kind of a suspension in reviewing
Avista's equity practices."537 Staff concludes that the Commission"should treat this case
as a traditional rate filing and review Avista's practices in light of its equity compliance
filing in the company's next rate plan filing next year."538
AWEC's Brief
348 AWEC continues to contest the Company's MYRP based on the Company forecasting its
expenses for its budget in a rate case versus recovering the actual expenses.539 AWEC
continues its argument that the MYRP disincentivizes the Company from reigning in
expense, expanding its argument that the process incentivizes Avista to spend up to its
capital forecast developed in its internal capital investment process.54'Although Avista
witness Andrews states, "The Company's long-standing practice has been to constrain the
level of capital investment each year,"AWEC is not convinced.541 In fact,AWEC argues
that the Commission's reliance on Avista's internal capital investment process "has the
effect of making the regulated the regulator and bases the reasonableness of the
Company's investments on its own internal recommendations."542 AWEC raises similar
concerns about Avista's forecasted budget expense versus actual incurred expense in its
discussion of the Company's Miscellaneous O&M expense.543
Decision
534 Staff's Post-Hearing Brief, at¶6.
535 Staff's Post-Hearing Brief, at¶18 (citing,RCW 19.405.010(6);RCW 80.28.425(1)).
536 Staff's Post-Hearing Brief, at¶ 18 (citing,Cascade at 19-20¶59).
537 Staff's Post-Hearing Brief, at¶ 18.
538 Staff's Post-Hearing Brief, at¶ 18.
539 AWEC's Post-Hearing Brief, at¶10; See also,Mullins, Exh. BGM-1T at 7:17-8:1.
541 AWEC's Brief,¶10.
541 AWEC's Brief,¶10 referencing Andrews, EMA-6T at 23:6-7.
542 AWEC's Brief,¶10.
543 AWEC's Brief,¶¶85-88.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 94
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349 In determining whether to approve the Company's MYRP, it is helpful to review the
language of RCW 80.28.425, the Multi-Year Rate Plan statute. The pertinent language of
RCW 80.28.425(1)provides:
...[E]very general rate case filing of a gas or electrical company must
include a proposal for a multiyear rate plan as provided in this chapter. The
commission may, by order after an adjudicative proceeding as provided by
chapter 34.05 RCW, approve, approve with conditions, or reject, a
multiyear rate plan proposal made by a gas or electrical company or an
alternative proposal made by one or more parties, or any combination
thereof. The commission's consideration of a proposal for a multiyear rate
plan is subject to the same standards applicable to other rate filings made
under this title, including the public interest and fair,just, reasonable, and
sufficient rates. In determining the public interest,the commission may
consider such factors including,but not limited to, environmental health
and greenhouse gas emissions reductions, health and safety concerns,
economic development, and equity, to the extent such factors affect the
rates, services, and practices of a gas or electrical company regulated by the
commisslon.544
350 Additionally, and previous to the Multi-Year Rate Plan statute, RCW 80.28.020 conferred
broad powers upon the Commission to establish just, reasonable, or sufficient rates for
regulated utility companies, when the Commission determines that rates are insufficient to
yield a reasonable compensation for the service rendered.14' RCW 80.01.040(3)
empowered the Commission to regulate in the public interest before RCW 80.28.425
further expanded those powers.546
351 As was stated previously,Avista filed its MYRP with effective dates of December 2024
for RY 1 and December 2025 for RY2 seeking: 1)proposed increases reflecting an electric
base rate relief of$79.3 million or 13.1 percent and natural gas base rate relief of$17.3
million or 13.6 percent in RY1; and 2) proposed increases reflecting an electric net request
of$53.7 million or 11.7 percent and natural gas base rate relief of approximately $4.6
million or 3.2 percent in RY2.547
544 RCW 80.28.425(1).
545 RCW 80.28.020.
546 RCW 80.01.040(3).
547 Vermillion, Exh. DPV-1T at 3:1-10.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 95
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352 Staff opposes the Company's MYRP and wants the Commission to approve Avista's filing
as a traditional rate case in conjunction with finalization of its CEIP in October 2025.141
Staff also believes that an Avista MYRP filed in 2025 would relieve and reduce regulatory
burden upon the Commission, as well as reduce the burden upon Staff and intervening
parties, as Avista and Puget Sound Energy(PSE)have simultaneously filed MYRPs. In
short, Staff argues that staggering the MYRPs of Avista and PSE would be in the public
interest.549
353 AWEC also opposes Avista's MYRR AWEC argues that approval of Avista's forecasted
budget related to its MYRP removes the incentive for the Company to limit expenses, and
would encourage the Company to spend up to that approved budget. Moreover,AWEC
believes that this would negatively impact ratepayers as rates would be based on
forecasted budgets, and that the Company could subject ratepayers to inflated rates, as
there is no incentive to control expenses.550 AWEC opines that during the MYRP process,
neither the parties nor the Commission have the opportunity to objectively determine the
reasonableness of a utility's capital spending. AWEC adds "setting utility rates based on
budgets is problematic because there is no objective way to assess the reasonableness of a
budget . . . .99551
354 For the above reasons, Staff and AWEC recommend denial of the Company's MYRP, and
both recommend treating Avista's filing as a traditional rate case for the Commission to
approve only a single year of the Company's proposed rates.
355 Upon review of the evidence and testimony, we find Avista's arguments to be more
persuasive. We are reminded that the purpose and intention of the MYRP statute is to
provide stability and assurance to the Company and the ratepayer. To that point, we are
persuaded that adopting Staff's proposal would result in the loss of up to a year of rate
relief that is covered in RY2552 as well as the effect of the removal of Colstrip in rates in
RY2 sss
356 Given that the parties and the Commission have fully litigated this case, restricting rate
recovery to the first year would result in a waste of all of our resources, and would likely
be considered credit negative by credit rating agencies. Contrary to Staff's and AWEC's
54' Erdahl, Exh. BAE-1T at 7:3-9.
549 Staff's Brief,¶6;Erdahl, Exh. BAE-1T at 7:19-8:2.
551 Mullins,Exh. BGM-1T at 7:17-8:1.
551 Mullins,Exh. BGM-IT at 9:5-6.
552 Avista's Brief,¶11.
553 Avista's Brief,¶11.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 96
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assertions, holding a full proceeding and ruling on Avista's current filing and directing the
Company to make a subsequent filing in 2025, does not provide the Commission with
regulatory relief,but actually compounds regulatory burden with back-to-back Avista rate
cases.As such, we do not see alignment with Avista's CEIP as practical in this case, in
accordance with RCW 80.28.425(9), given the regulatory burden.
357 We also believe that not only would there be a tremendous regulatory burden placed upon
the Commission, but requiring a subsequent filing would also have a negative impact on
the Company. Given the time, expense, and resources it would take to file another rate
case on the heels of this one may unduly burden the Company financially.Again, we must
also consider what the impact may be on the credit rating of the Company if we remove
the certainty of the MYRP and instead approve a single year of rates. Ultimately, relieving
the Commission and intervening parties of the regulatory burden on one hand may result
in adverse impact on the ratepayers in the form of rates on the other hand if they have to
absorb lost return on equity.
358 In light of the foregoing, and to ensure just, reasonable, or sufficient rates, we reject
Staff's and AWEC's recommendation to deny the Company's MYRP and reject their
recommendation to treat Avista's filing as a traditional rate case. We remind the parties
that regulating in the public interest is not a one-sided proposition; we must consider the
interests of Staff, the intervenors, the Company, and the ratepayers.554 In this instance we
believe that the adverse impact of denying the two-year MYRP on the Company would
have also negatively impacted its customers as well. In addition, denying the MYRP
would likely negatively impact the Company's financial ability to provide safe and
reliable service. Therefore,we conclude that it is in the public interest to leave intact and
accept a two-year MYRP for Avista.
Performance Measures and Other Reporting
Direct Testimony—Avista
Performance Metrics
359 The Company proposes to reduce the number of performance measures agreed to in the
2022 GRC Settlement. In that settlement, the Company agreed to report on 92 initial
metrics and develop three additional metrics related to reliability.555 In this proceeding, the
Company proposes to edit several metrics to better align with how the data is presented
554 Fed. Power Comm'n a Hope Nat. Gas Co., 320 U.S. 591, 603, 64 S. Ct. 281, 288, 88 L. Ed.
333, 345(1944).
555 Bonfield, Exh. SJB-IT at 2:26—3:24.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 97
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and recommends eliminating metrics that: do not align with the regulatory goals,
outcomes, and principles outlined in the Commission's Interim Policy Statement
Addressing Performance Measures and Goals, Targets, Performance Incentives, and
Penalty Mechanisms (Interim Policy Statement) in Docket U-210590; are similar to
certain financial metrics ordered by the Commission in its 2022 GRC; and those that are
reported elsewhere. This results in a total of 48 proposed metrics.556
360 Additionally, for the nine Commission-ordered metrics from the 2022 GRC,Avista
proposes to adjust the reporting date to February 15 for publicly available data and then
May 1 for the remaining date to coincide with the quarterly data.557
361 Finally,Avista recommends the Commission not establish any performance incentive
mechanisms (PIM) within this proceeding. In the alternative, if the Commission finds a
PIM is required by RCW 80.28.452(7) [sic], the Company proposes the same customer
service PIM from its 2022 GRC.ssa
Recurring Reporting
362 As part of the 2022 GRC Settlement, the Company agreed to provide recommendations
regarding the streamlining of existing reporting requirements.Avista proposes to eliminate
the following reports:
• WA Distributed Generation Annual Report
• WA Electric and Natural Gas Decoupling Mechanism Report
• Energy&Emissions Intensity Metrics Report
• 1-937 Report
• Critical Infrastructure Report
• Essential Utilities Services Contacts Report
• Annual Disconnection Reduction Report
• Monthly Credit & Collections COVID-19 Report
• Quarterly Credit& Collections COVID-19 Report
556 Bonfield, Exh. SJB-1T at 7:13 —8:10.
557 Bonfield, Exh. SJB-IT at 11:1-11. The Company was originally required to file twice in
February and once in April until confidentiality due to FERC filings was an issue.
558 Bonfield, Exh. SJB-IT at 11:14-18. The alternative PIM consists of six measures, a$500,000
incentive or penalty given certain performance, and approval for a Deferred Accounting
Mechanism to address any incentive or penalty in the Company's next rate proceeding. Bonfield,
Exh. SJB-IT at 11-15.We assume the statutory reference is for RCW is 80.28.425(7). No other
party proposed establishing a PIM in this proceeding.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 98
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363 Witness Bonfield provides rationale for eliminating each report which includes duplicative
information available elsewhere, consolidating information within another filing,
uncertainty of the value of report, and that certain information can be made available by
request.559
364 Further,Avista proposes to modify the reporting of the following three reports:
• Energy Recovery Mechanism Review Filing (annual and quarterly report rather
than annual and monthly)
• Purchased Gas Adjustment Activity Reporting (quarterly instead of monthly)
• Natural Gas IRP and Workplan(aligning frequency with electric IRP with a
progress report due two years after the IRP is filed).560
Staffs Response Testimony
365 Staff witness Erdahl recommends the Commission require Avista to maintain three of the
metrics that the Company proposes to eliminate as the metrics were ordered by the
Commission in the PacifiCorp 2023 GRC in Docket UE-230172.16' Staff also proposes a
new metric related to connection timelines for new service requests.162 Erdahl argues the
new metric is in the public interest to both ensure utility responsiveness during the current
housing crisis and to support new state building codes related to Electric Vehicle Charging
Infrastructure.563
366 Finally, Staff requests the Commission order Avista to continue filing its Critical
Infrastructure Report. Erdahl testifies the Company proposed to eliminate this report in
Docket U-210151 related to the Commission's Inquiry into Reducing the Administrative
Burden, however, Erdahl notes the Commission did not relieve the Company of that filing
requirement in that proceeding and should not do so here.161
NWEC's Response Testimony
367 As part of its effort to advance equity,NWEC witness Thompson proposes that Avista
maintain two performance metrics related to non-pipe alternatives (NPAs). Thompson
559 Bonfield, Exh. SJB-IT at 27:12—28:20. See also Bonfield, Exh. SJB-4. Bonfield recognizes
that a legislative change may be required related to the I-937 reporting requirement.
560 Bonfield, Exh. SJB-IT at 28:23—29:14.
56' Erdahl, Exh. BAE-1 T at 12:3-16.
162 Erdahl, Exh. BAE-1 T at 13:5-14.
163 Erdahl, Exh. BAE-1T at 13:17— 14:11.
164 Erdahl, Exh. BAE-1 T at 12:17— 13:2.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 99
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argues the clean energy targets mandated by CETA and the necessary balance between
utility and customer-level resources that more directly benefit Named Communities
supports NWEC's position. While NWEC proposes to maintain the metric that separately
tracks emissions avoided by NPAs, it is amenable to eliminating this metric conditioned
on Avista continuing to report the carbon intensity metric.s65
368 Additionally, while not formally requesting a new metric, Thompson recommends the
Commission require Avista to collect customer demographic data for all current and future
DER program offerings like the data collected through its bill discount program. While
Thompson provides that a customer may opt out of providing such information, the
Company should not require such information to determine program enrollment eligibility.
Finally, Thompson recommends Avista maintain its practice of de-identification and data
aggregation to protect individual customer demographics.566
369 NWEC also responds to Avista witness Bonfield's proposal to eliminate the Annual
Disconnection Reduction Report. Thompson does not agree with Bonfield's claim that the
information is available in other reports. Rather, Thompson argues the same level of
granularity does not exist in the COVID reporting,the CEIP, or PBR metrics and parties
would lose useful information regarding the demographics of the disconnections.567
TEP' Response Testimony
370 TEP witness Stokes argues that Avista should maintain seven metrics that were proposed
for elimination and provides edits for three of those metrics, modifies three metrics
retained by Avista, requests a draft metric from the Interim Policy Statement be amended
and required for Avista, and proposes one new metric.
371 Witness Colton provides analysis that crosses both equity issues and performance
measures related to the affordability metrics, arrears and disconnections, and energy
burden. Colton makes several recommendations including: (1) continuing to require
certain affordability and energy burden metrics be reported by census tract and zip code;
(2)using the stratification methodology proposed for the energy burden assessment for
related PBR metrics; and(3) revising the arrears metric to include the accounts and dollars
that were paid on time.561
565 Thompson, Exh. CT-IT at 14:13 — 16:17.
566 Thompson, Exh. CT-IT at 16:20— 18:11.
567 Thompson, Exh. CT-IT at 19:4-18.
568 Colton,Exh. RDC-IT at 51:13—52:29, 60:28—61:16.The impacted metrics include: Metric
12, 13, 14, and 15 for stratification, and Metric 4 related to arrears.

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372 Colton argues that requiring both census tract and zip code reporting allows for"cross-
tabulation of data.',569 For example, census data may be compared to the American
Community Survey, while zip code data may be compared to the Census Bureau's Zip
Code Tabulation Areas, providing the ability for more robust analysis.570 Alternatively, if
the Commission retains only census tract data, TEP recommends the Company be required
to maintain"crosswalk files"that indicate the allocation of census tracts over zip codes.571
Summary of TEP metric recommendations
373 Metric for Clarification
TEP recommends that Avista explicitly include natural gas in its reporting for residential
disconnections.572
374 Interim Policy Statement Metric to Amend and Require for Avista
TEP recommends the Commission amend its interim metric regarding the average
residential bill by including low-income customers as a separate subset for the data
reporting. Stokes argues this provides a better level of granularity about rate impacts to
specific communities.573
375 Metrics to Maintain
TEP disagrees with Avista's proposal to eliminate the Operations and Maintenance (O&M)
metric. Stokes argues that this metric provides insight into the utility's financial
management and may be helpful in comparing against other utilities'performance.171
376 TEP proposes the Commission require Avista to maintain two metrics related to energy
burden and modify a third. Relying on Colton's analysis and testimony, Stokes argues that
the two metrics that calculate high-energy burden should be maintained,"' with the
569 Colton,Exh. RDC-1T at 57:17.
570 Colton,Exh. RDC-IT at 55:9-19, 57:5—58:2.
571 Colton,Exh. RDC-IT at 58:5-7.
572 Stokes, Exh. SNS-IT at 18:19— 19:5.
571 Stokes, Exh. SNS-IT at 18:4-17.
574 Stokes, Exh. SNS-1T at 25:1 —26:6. Stokes provides a simple comparison of Avista and PSE
data with no conclusions about the trend or underlying cause for the differences.
575 Stokes, Exh. SNS-IT at 19:7-12.These metrics (originally designation as Metrics 13 and 14)
were maintained by Avista on direct(Metrics 7 and 8)and combined into a single metric on
rebuttal(Metric 8).

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 101
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additional requirement of reporting by stratification provided by Colton.576 Stokes then
adopts TEP's proposal in the PBR docket to designate single-fuel energy burden at 2
percent for natural gas and 4 percent for electric.577 Further, Colton recommends the
Commission modify the arrearage metric to include the number of accounts and dollars
that were paid on-time allowing interested persons to understand the substantiality of the
arrears.578
377 Next, TEP addresses three Equitable Service metrics that it proposes to maintain and/or
edit. First, witness Stokes recommends the Commission require Avista to continue
reporting its metric related to low-income participation in DR, DER, and renewable
energy programs. Stokes testifies the limited data available indicates little participation by
low-income customers in these programs. However, with that limited data, Stokes testifies
that conclusions about trends are not possible and believes this information is important to
evaluate performance of these programs as part of the clean energy transition. Further,
TEP recommends the Commission edit the language of this metric to replace the
participation language with measuring by those directly benefitting from the program.579
378 The other two Equitable Service metrics are related to electric vehicle programs. Stokes
provides the same rationale from the above metric to maintain the low-income
participation in electric vehicle programs metric. Further, Stokes argues the language
should be changed from electric vehicle to electric transportation programs as proposed in
the PBR docket. Stokes testifies this change better reflects and strengthens the business
case for utility investment in these technologies. TEP also proposes to modify this metric
to replace the participation language with measuring those directly benefitting from the
program.580 Additionally, TEP argues the metric related to electric vehicle supply
equipment be maintained. Stokes testifies this data is necessary to ensure Named
Communities have equitable access to electric vehicle ownership and "contextualizes
Avista's measurement of electric transportation spending. ,511
379 Finally, TEP proposes the Commission require Avista to maintain the metric related to
NPAs and the metric related to incremental spending in Named Communities.512 Stokes
576 Colton,Exh. RDC-1 T at 60:1-4.
57 Stokes, Exh. SNS-IT at 20:10-20.
578 Colton,Exh. RDC-1T at 61:1-16.
579 Stokes, Exh. SNS-1T at 21:12—22:9, 24:1-2.
580 Stokes, Exh. SNS-1T at 22:12—24:7.
581 Stokes, Exh. SNS-IT at 26:9-20.
512 Stokes, Exh. SNS-1T at 27:8-11.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 102
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argues these metrics, "show[ ] whether Avista is equitably deploying financial resources
that aid the transition away from gas service," and"measuring overall incremental
spending in Named Communities shows whether Avista is making consistent, yearly
investment that promote equity in its operations and support underserved customers."583
380 New Metric
TEP proposes a new metric to report the net plant in service per customer for electric and
natural gas. Stokes argues this metric would provide insight into capital investment trends
and an indication of how a utility chooses to replace aging assets.584
Recurring Reporting Recommendations
381 TEP opposes Avista's elimination of the decoupling, disconnection, and COVID reports.
Additionally, Colton contends that reported data is not easily accessible for the PBR
metrics, disconnection and arrearage reports, or the energy burden analysis. Colton argues
this information is useful to those outside the usual GRC parties, for example those groups
working on affordable housing issues or agencies responsible for distributing federal
funds. Therefore, TEP recommends the Commission require Avista to post these data sets
and reports to their website rather than providing solely through various dockets with the
Commission.585
382 Further, Colton makes a general recommendation that the affordability and energy burden
related PBR metrics and reports discussed in their testimony be provided at a monthly data
level. Colton testifies this granularity is necessary to understand the relationship of the
data for the different seasons of the year. However, Colton does not necessarily propose
the metric and reports be filed monthly but believes it reasonable to file the monthly data
sets at a greater interval such as quarterly, semi-annually, or annually.586
383 Responding specifically to the COVID report, Colton contends that Avista witness
Bonfield inaccurately represents the COVID information as duplicative of information
provided in other reports. Colton testifies the following components are not otherwise
available: (1) length of disconnection, number of disconnection notices, number of
accounts, but for the moratorium that would have been disconnected; (2) information
related to various fees charged in relation to disconnection or reconnection; (3)
information about long-term payment arrangements; (4) information on medical payment
583 Stokes, Exh. SNS-IT at 27:14-16.
584 Stokes, Exh. SNS-IT at 28:3-8.
585 Colton,Exh. RDC-1T at 28:7—29:6.
586 Colton,Exh. RDC-IT at 55:22—56:12.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 103
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arrangements; (5) information about customer deposits; (6) number of premises receiving
bill assistance; and (7) past due balances by zip code.587
384 TEP also proposes three modifications to the COVID report. First, for the arrearage
metric, Colton recommends including not only the dollar amount in arrears but also the
number and dollar amount that were paid on time.588 Second, in additional to reporting
total arrears and age of the arrears, Colton proposes to require reporting by the number of
accounts for both total and age of the arrears. Finally, Colton asserts that the name of the
report should be changed to "Arrearage Report" or to "Arrearage and Disconnection
Report"noting that the information is no longer only relevant due to the COVID
pandemic and resulting economic state of emergency.589
385 Addressing the Disconnection Reduction Report, again Colton argues that Avista witness
Bonfield incorrectly argues the information is duplicative. While Colton acknowledges
one data point(total disconnections for nonpayment) is available through either the PBR
metrics or COVID report, the remainder of the reporting requirements per the 2019 GRC
settlement in Dockets UE-190334, UG-190335, and UE-190222, are not provided
elsewhere.590 Colton argues eliminating this required data will hinder the Commission and
others in evaluating the affordability of Avista rates.591
386 Finally, Colton recommends that Avista include the number of disconnections for
nonpayment, number of accounts in arrears, and the dollars of the arrears, and provide the
data per their energy burden stratification recommendation contained in earlier sections of
their testimony.592
387 Stokes proposes the Company maintain the Quarterly Decoupling Report arguing not all
information contained in this report is available during the annual adjustment filing. The
data not available in the annual filing includes the number of new customers excluded
from decoupling, separately identifying the electric and gas weather components, and a
workpaper that provides the native formula-based calculations supporting the annual
adjustment.Alternatively, if the Commission discontinues this report, TEP proposes the
587 Colton,Exh. RDC-IT at 58:10—59:18.
588 This same information was recommended in response to Metric 4 by witness Colton.
589 Colton,Exh. RDC-1T at 60:28—62:3.
590 Colton,Exh. RDC-IT at 62:8—63:10. See Table 17 at page 62 for the none required data points
in the COVID report.
591 Colton,Exh. RDC-IT at 63:12-18.
592 Colton,Exh. RDC-IT at 64:5-8.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 104
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Company be required to include the information described above and the docket numbers,
both electric and gas, for the annual decoupling reports filed within the past five years.593
Avistas Rebuttal Testimony
Performance Metrics
388 On rebuttal, witness Bonfield wholly changes the Company's position on performance
metrics. The Company now proposes that the Commission should only require Avista to
report on the performance metrics included in its August 2, 2024,Alternative Forms of
Regulation Policy Statement for Initial Reported Metrics (Metrics Policy Statement).
Further, the Company also adopts the timing for filing PBR metrics (annually with the
Commission Basis Report).594 Avista argues the Commission has now determined the
appropriate metrics to evaluate utility performance during a WRP, and that the annual
filing significantly reduces administrative burden. Finally,Avista argues the Metrics
Policy Statement renders both its direct case proposal and all other parties'proposals
moot, and argues that because those parties also participated in the PBR docket, they had
the opportunity for input on utility performance metrics.595
389 Avista also responds to NWEC's proposal to collect the demographic data for all existing
and future DER programs. Bonfield contends the Company is unable to collect this
information for two reasons. First, Bonfield testifies that many of Avista's DER programs
are administered in partnership with community partners or at the distributor level,
therefore, the Company does not have direct access to such data. If the Commission were
to require the collection of this data, Bonfield contends the workload would be placed on
those already resource constrained partners. Second, Bonfield argues the data that is
available to the Company is distributed across multiple systems with inadequate security
to protect customer information when sharing cross-departmentally. Finally, Bonfield
asserts requiring this data collection would take time and financial resources to create a
platform and require changes to partner processes as well.596
Recurring Reporting
s9s Stokes, Exh. SNS-1T at 40:20—42:4.
594 Commission Basis Reports(CBA) are required within four months of the end of a utility's
fiscal year by WAC 480-100-257.All Washington regulated utilities follow a fiscal calendar year
therefore CBA's must be filed no later than May 1 each year.
595 Bonfield, Exh. SJB-5T at 38:14—39:17.
596 Bonfield, Exh. SJB-5T at 28:10—30:13.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 105
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390 Bonfield both clarifies and revises the recurring reporting obligation discussed in direct
testimony and acknowledges the Company's intent for each report was not entirely clear.
Avista clarifies it proposed to eliminate the following reports:
• WA Distributed Generation Annual Report;
• Energy &Emissions Intensity Metrics Report [requires waiver from WAC 480-
109-300(1)];
• Critical Infrastructure Report;
• Essential Utility Services Contracts Report [requires waiver from WACs 480-100-
268 and 480-90-268];
• Equity Report;
• Monthly Credit & Collections COVID-19 Report; and
• Quarterly Credit& Collections
391 Further, Bonfield clarifies that direct testimony intended to modify the following reports:
• Commission Basis Report [remove wood pole reporting];
• PGA Activity Reporting [changed frequency which requires waiver from WAC
480-90-233(5)];
• MYRP Metrics [changed filing timeline]59'
392 Critical Infrastructure Report-Response to Staff
Avista disagrees with Staff's proposal to maintain the Critical Infrastructure Report,
arguing it is unsure of the value of the information as much of the data remains static, and
that Staff did not provide testimony establishing the need for the report. Further, simply
combining the report with the reliability report as Staff recommends does not alleviate the
burden of providing the information. Finally, Bonfield testifies that no action has been
taken because of this report, but that the information can be made available upon
request.598
393 Disconnection Reduction Report—Response to NWEC and TEP
Witness Bonfield agrees with NWEC and TEP, that not all information contained in the
Disconnection Reduction Report is duplicative, therefore,Avista agrees to maintain the
report until such time as a decision is made in the Commission's Customer Notice and
Fees Rulemaking in Docket U-210800. However,Avista does not agree with TEP's
recommended additions to the report or applying the stratification analysis. Bonfield
597 Bonfield, Exh. SJB-5T at 40:18—41:25. The decoupling report was not contained in this
revised list. However,Bonfield provides later testimony explaining that omission when rebutting
TEP's response position.
598 Bonfield, Exh. SJB-5T at 42:10-17.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 106
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testifies that the additional information requested in this report is already provided either
within the report or other reporting by the Company. Further, Bonfield argues the
company has not previously performed the calculations using stratified energy burden and
is uncertain of the additional value gained.59'
394 COVID Reporting (monthly and quarterly) —Response to TEP
The Company also agrees to maintain the COVID Reporting until the Commission makes
determinations in rulemaking docket U-210800, as with the Disconnection Report.Again,
witness Bonfield does not agree with TEP's recommended modifications to the reports.
First, Bonfield questions the value or use gained by adding the number of accounts and
dollars that paid on time. However, Bonfield provides the rulemaking docket referenced
above is a more appropriate setting to discuss this issue. Second, Bonfield contends the
additional information requested(arrears by number of accounts and dollar amounts) is
already available in either the COVID Reporting or within the Customer Benefit
Indicators of its CEIR Finally,Avista takes no position on the title of the report but
believes the issue of potentially consolidating arrears and disconnection data is also more
appropriate in the rulemaking proceeding.600
395 Decoupling Report—Response to TEP
Bonfield testifies the Quarterly Decoupling Report was already discontinued by the
Commission in Order 01 of Docket U-210151. However, as requested by TEP, the
Company will continue to include the information in all future decoupling annual
adjustment filings.611
NWEC' Cross Answer
396 In cross-answering testimony, Thompson supports many of TEP's recommendations
regarding performance measures, including five measures to maintain,602 six measures to
maintain and edit,603 and includes TEP's proposed metric related to net plant per customer.
Thompson argues that many of TEP's recommendations are easy to integrate, directly
599 Bonfield, Exh. SJB-5T at 42:20—43:11.
600 Bonfield, Exh. SJB-5T at 43:14—44:9.
601 Bonfield, Exh. SJB-5T at 44:12-21.
602 One of the proposed metrics to maintain was not eliminated by Avista nor a recommendation
from TEP to maintain(Metric 1)and another the Company agrees to maintain on rebuttal(Metric
26).
603 The Company retains but consolidates two of the metrics being proposed to maintain and edit
(Metrics 13 and 14).

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 107
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align with the Commission's Interim Policy Statement, and provide a more robust
reporting to better evaluate the deployment of clean energy in Named Communities.604
Parties'Briefs
Avista
397 In briefing,Avista proposes to modify two of its reporting metrics related to affordability
and energy burden to align with the Commission's recent policy statement on reported
performance metrics in Docket U-210590.60s Avista further recommends that the
Commission require the Company to report the metrics contained in the Commission's
Initial Reported Performance Metrics contained in its August 2, 2024, policy statement.606
Avista also argues that performance incentive mechanisms are unnecessary for the purpose
of this rate case.607 Finally,Avista agrees to maintain its Annual Disconnection Reduction
and COVID-19 Arrearage reporting, but disagrees with Staff's position that it should
maintain its Critical Infrastructure Report.608
Staff
398 Staff generally agrees with Avista's proposal to reduce the metrics it reports from 92 to 48
metrics, but it recommends that the Commission require Avista to retain four metrics and
add one additional metric.619 Staff argues that the Commission should require Avista to
retain three metrics that the Commission recently required PacifiCorp to report, to
facilitate comparison of utility performance, and another metric that is necessary to assess
utility security.610 Staff also requests that the Commission direct Avista to report a new
metric related to connection timelines for new services requests for newly constructed
dwellings.611 Staff also urges the Commission to reject Avista's arguments that the
Commission should limit reportable metrics to those metrics contained in the recent policy
604 Thompson, Exh. CT-4T at 6:9—7:12.
605 Avista's Post-Hearing Brief, at¶ 158.
606 Avista's Post-Hearing Brief, at¶ 158.
607 Avista's Post-Hearing Brief, at¶ 158.
608 Avista's Post-Hearing Brief, at¶ 158.
609 Staff's Post-Hearing Brief, at¶ 19.
610 Staff's Post-Hearing Brief, at¶ 19.
61 Staff's Post-Hearing Brief, at¶ 19.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 108
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statement on metrics, because the policy statement reflects a minimum, as opposed to a
maximum, level of reporting.612
TEP
399 In briefing, TEP requests that the Commission order Avista to adopt a metric regarding
low-income customer saturation rates by household and fuel type, as well as TEP's
proposed affordability and equity metrics.613
Sierra Club
400 Sierra Club requests that if the Commission approves a performance incentive mechanism
for Avista, that the Commission establish customer engagement targets of 5,000 home
electrification assessments and 1,000 electrification rebates over an 18-month period
related to Sierra Club's proposed targeted electrification pilot for Avista.614
NWEC
401 NWEC supports the inclusion of 51 performance metrics suggested by Avista in the event
that the Commission declines to limit required metrics to those metrics contained in the
August 2, 2024, Policy Statement.615 Regarding collection of customer demographic
information for current and future DER programs,NWEC agrees with Avista's proposal to
raise this issue with the Company's applicable advisory groups.616 NWEC further notes
and appreciates Avista's agreement to maintain its annual customer Disconnection
Reduction Report.611
402 Turning to Avista's energy burden analysis,NWEC discusses four points. First,NWEC
argues that the Commission should require Avista to include updates to customer income
and usage data as a basis for reporting saturation rate and other metrics in its annual
LIRAP reports.618 Second, NWEC agrees with Avista's decision to assess energy burden
for customers enrolled in the LIRAP MED and include this information in its annual
612 Staff's Post-Hearing Brief, at¶20.
6" The Energy Project's Post-Hearing Brief,at¶¶39, 58(citing, Stokes, Exh. SNS-10).
614 Sierra Club's Post-Hearing Brief, at¶41.
615 NWEC's Post-Hearing Brief, at¶54 (citing,Bonfield,Exh. SJB-2; Bonfield,Exh. SJB-6).
616 NWEC's Post-Hearing Brief, at¶55.
617 NWEC's Post-Hearing Brief, at¶56.
618 NWEC's Post-Hearing Brief, at¶57.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 109
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LIRAP report.619 Third, NWEC states that it is reasonable for Avista to include normalized
household service data for customers with less than 12 months of usage data as part of its
PBR reporting.620 Lastly, NWEC indicates that Avista's proposal to discuss simulating
energy burden over time as a function of factors that increase bills with its Energy
Assistance Advisory Group to determine feasibility and value is reasonable.621
403 Finally,NWEC voices support for TEP witness Stokes'recommendations regarding
Avista's disconnection policy, PBR metric reporting, low-income customer identification,
language access, and the Company's quarterly decoupling report and incorporates the
arguments made in its Cross-Answering Testimony.622
Decision
404 The Commission appreciates the Parties'thoughtful and constructive arguments regarding
various proposed changes to the PBR metrics on which Avista will be required to report.
As noted in the August 2024 Policy Statement regarding reported metrics, the process of
selecting and refining utility metrics is iterative, and the Commission commends the
continued efforts of the Parties to both revise existing metrics and propose new metrics for
consideration.623 The Commission fully anticipates that PBR metrics will continue to be
reviewed and refined in the coming year and looks forward to additional robust
discussion.
405 As a threshold matter, the Commission rejects Avista's invitation to limit reported metrics
to only those metrics identified in the Commission's August 2024 Policy Statement.As
explained in the Policy Statement, the metrics that were developed in that proceeding were
not intended to be a final, comprehensive set of metrics for all utilities,624 and the
Commission fully encouraged parties to suggest new or additional metrics in the context
of a multi-year rate plan proceeding.625 Furthermore,while the Commission remains
619 NWEC's Post-Hearing Brief, at¶57.
62'NWEC's Post-Hearing Brief, at¶57.
62' NWEC's Post-Hearing Brief, at¶57.
622 NWEC's Post-Hearing Brief, at¶58.
623 In re Proceeding to Develop a Policy Statement Addressing Alternatives to Traditional Cost of
Service Rate Making, Docket U-210590, Policy Statement Addressing Initial Reported
Performance Metrics, 3 110(Aug. 2,2024) (Policy Statement Addressing Initial Reported
Performance Metrics).
624 policy Statement Addressing Initial Reported Performance Metrics, 3¶ 10 ("In doing so, we
reiterate our view that a comprehensive PBR framework cannot be established with finality at this
juncture.").
625 policy Statement Addressing Initial Reported Performance Metrics, 5¶ 16.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 110
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sensitive to redundant reporting requirements, as utilities continue to report various
metrics, the reported data may demonstrate that further adjustments and metrics are
necessary to adequately and efficiently monitor a utility's operations and progress with
state energy policies.626 Therefore, it is inappropriate to limit reported PBR metrics to
those identified in the August 2024 Policy Statement.
406 In reviewing the proposed changes to the reported metrics, the Commission has attempted
to balance considerations of efficiency regarding the scope and quantity of data required
by the metrics with the need to establish a reasonable baseline of data to evaluate utility
performance. The Commission generally agrees with Avista's proposal to eliminate
reporting requirements that are duplicative of data already reported elsewhere.627 The
Commission also considered additional modifications to reported metrics to consolidate
and simplify the collection of data where possible. Similarly, in evaluating new or
modified metrics proposed by the Parties, the Commission reviewed whether the reported
data would be helpful to evaluate utility performance and whether the requested data could
be found in existing reporting requirements.
407 Having considered all of the Parties' arguments regarding PBR metrics, the Commission
determines that it is reasonable to require Avista to report on the metrics contained in the
August 2024 Policy Statement, reduce the number of overall metrics reported to avoid
duplication, and require the Company to report on several modified or new metrics.
Appendix A, attached to this Order, contains a description of the changes to PBR metrics
in this proceeding as well as additional reasoning for the decision to require, retain,
modify, or remove a particular metric. Finally, the Commission declines to require any
performance incentive mechanisms (PIMs) for Avista as part of this rate case and
anticipates further discussion of how to best utilize PIMs after additional review and
analysis of the baseline data reported by Avista and other regulated utilities in the context
of either a future rate case or proceeding in Docket U-210590.
408 As shown in Appendix A, the Commission has reduced the number of PBR metrics on
which Avista will be required to report to 33. These metrics consist of 12 metrics that have
been refined or proposed during this proceeding and the 21 metrics contained in the
Commission's Policy Statement Addressing Initial Reported Performance Metrics,
including the metrics established pursuant to RCW 80.28.425(7).628 In many cases,
metrics were removed because the same information can be found in other reporting
required by the Commission, such as information reported as part of Customer Benefit
626 Policy Statement Addressing Initial Reported Performance Metrics, 4¶ 12.
627 Bonfield, Exh. SJB-IT at 7:12—8:15.
628 Policy Statement Addressing Initial Reported Performance Metrics, 7¶22 —21 ¶ 82.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 111
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Indicators, or were already incorporated into other required PBR metrics. The
Commission also authorized the removal of metrics where no parry opposed removal, as
the lack of opposition suggests that the metric provides little value in reviewing Avista's
operations. Similarly, the Commission declined to require a metric if the proposed
measurement involved too many factors outside Avista's control because the metric would
provide limited insight into the effect of Avista's operational decisions.
409 Similar to its review of PBR metrics, the Commission has attempted to balance the need
for regular information from Avista to evaluate its performance with the goal of reducing
the administrative burden on the Company caused by duplicative or inefficient reporting
requirements. To that end, the Commission determines that it is reasonable to eliminate
some of Avista's reporting requirements, consolidate duplicative requirements into other
existing reporting obligations, and maintain other reporting until such time as the
Commission may consider modifications with input from all utilities subject to the
reporting.Appendix B, attached to this Order, contains the Commission's disposition of
each reporting issue raised in this proceeding and the reasoning for the Commission's
determination.
Cost of Capital
Avistas Direct Testimony
410 The Company's proposed capital structure is 51.5 percent debt and 48.5 percent equity,
with a proposed cost of debt of 4.99 percent, a proposed 10.40 percent ROE, and a
requested overall rate of return(ROR) in this proceeding of 7.61 percent.629
Avista Proposed of i
Amount Percent Cost •
Total Debt $2,743,700,000 51.5% 4.99% 2.57%
Common Equity $2,588,899,805 48.5% 10.40% 5.04%
Total $5,332,599,805 100% 7.61%
411 Company witness Christie explains that maintaining a 48.5 percent common equity ratio is
necessary since Avista is dependent on raising funds in capital markets and a solid
financial profile will assist the Company in accessing debt capital markets on reasonable
terms.63' Additionally, Christie contends that a 48.5 percent common equity ratio solidifies
629 Christie,Exh. KJC-1T at 14:8-11.
610 Christie,Exh. KJC-IT at 14:13-18.
611 Christie,Exh. KJC-IT at 14:20-23.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 112
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Avista's current credit ratings and moves them closer to the long-term goal of having a
corporate credit rating of BBB+.632
412 Company witness McKenzie also argues that a common equity ratio of 48.5 percent is a
reasonable basis on which to calculate the overall rate of return for three primary reasons:
1) Avista's requested capitalization is consistent with the Company's need to support
its credit standing and financial flexibility,633
2) The proposed common equity ratio is consistent with the range of capitalizations
for the proxy utilities and their utility operating subsidiaries,634 and
3) The requested capitalization reflects the importance of an adequate equity layer to
accommodate operating risks and recognize the impact of off-balance sheet
commitments, such as purchased power agreements.635
413 McKenzie notes that for the 22 firms in the Utility Group, common equity ratios on
December 31, 2022, ranged between 33.0 percent and 63.5 percent and average 44.0
percent.636 McKenzie elaborates that Value Line expects an average common equity ratio
for the proxy group of utilities of 44.8 percent for its three-to-five year forecast horizon,
with the individual common equity ratios ranging from 27.0 percent to 59.5 percent.637
414 McKenzie further notes that the Commission has previously observed that"[i]t is
appropriate ... to afford more weight to forward considerations than to historic conditions
as we determine the appropriate equity ratio to be embedded in prospective rates."638
415 Christie testifies that the Company's proposed weighted average cost of equity is in-line
with other utilities' authorized weighted average cost of equity, and that its present
weighted average cost of equity is at the low end of actual, commission-authorized
values.639 Christie elaborates that if the Commission carries over the existing ROE of 9.4
percent and 48.5 percent equity component, the weighted cost of equity would be 4.56
percent.64o
632 Christie,Exh. KJC-IT at 15:1-3.
633 McKenzie. Exh.AMM-1T at 10:13-16.
634 McKenzie. Exh.AMM-1T at 10:17-18.
635 McKenzie. Exh.AMM-1T at 10:21-23.
636 McKenzie, Exh.AMM-1T at 38:2-4.
637 McKenzie, Exh.AMM-1T at 38:7-9.
638 McKenzie, Exh.AMM-1T at 38:10-12.
639 Christie,Exh. KJC-1T at 15:8-11.
640 Christie,Exh. KJC-1 T at 16:1-2.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 113
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416 Christie also contends that the proposed 10.40 percent ROE is reasonable to maintain
Avista's financial integrity.641 Witness McKenzie backs up this assertion by stating that
four out of five cost of equity methods the Company implemented produced an ROE of
10.4 percent.642 McKenzie posits that challenges to the Company's credit standing,
pressure of funding more than $1.5 billion of capital expenditures over 2024-2026,
Avista's reliance on hydroelectricity, the impact of the existing ERM on price volatility
exposure to wildfire, and Avista's relatively small size support this conclusion.643
417 McKenzie emphasizes that if the upward shift in investors'risk perceptions and required
rates of return for long-term capital is not incorporated in the allowed ROE, the results
will fail to meet the comparable earnings standard that is fundamental in determining the
cost of capital.644Further, McKenzie explains that other things equal, a higher debt ratio
and lower common equity ratio, translates into increased financial risk for all investors.645
McKenzie elaborates that a greater amount of debt means more investors have a senior
claim on available cash flow, thereby reducing the certainty that each will receive their
contractual payments, which is true for common shareholders as well.646 Additionally,
McKenzie asserts that a more conservative financial profile, in the form of a higher
common equity ratio, is consistent with increasing uncertainties and the need to maintain
the continuous access to capital under reasonable terms.647
418 Finally, McKenzie contends that in order to offset the debt equivalent associated with off-
balance sheet obligations, the utility must rebalance its capital structure by increasing its
common equity.641
419 The Company's requested overall cost of debt is 4.99 percent.649 The Federal Funds Rate
and Avista's short-term borrowing rate has increased about 525 basis points since the
beginning of 2022.650 Christie emphasizes that higher interest rates increase the cost of
641 Christie,Exh. KJC-1T at 16:6-7.
642 McKenzie, Exh.AMM-IT at 6:19-20.
Gas McKenzie, Exh.AMM-1T at 7:6-28.
644 McKenzie, Exh.AMM-1 T at 3 7:3-5.
645 McKenzie, Exh.AMM-1T at 37:12-13.
646 McKenzie, Exh.AMM-1 T at 37:13-18
647 McKenzie, Exh.AMM-1T at 39:3-5.
648 McKenzie, Exh.AMM-1 T at 40:11-13.
649 Christie,Exh. KJC-lT at 18:18.
650 Christie,Exh. KJC-1T at 19:23, 20:1.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 114
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borrowing under the Company's $500 million revolving credit facility and are expected to
increase the cost of issuing long-term debt over the next couple of years.651
420 Christie argues that if the Company were simply trying to grow its rate base to increase
earnings, it could fully justify increasing its capital budget to well over$600 million over
the next several years, but it is choosing not to, in order to balance investment need with
customer affordability.652
Public Counsel's Response Testimony
Return On Equity
421 Public Counsel witness D. Garrett testifies that the average results of the three models it
used to calculate ROE is 8.5 percent.653 D. Garrett argues that with respect to regulated
utilities, there has been a trend in which awarded returns fail to closely track with actual
market-based cost of capital, which leads to results that are detrimental to ratepayers and
the state's economy.654
422 D. Garrett argues that McKenzie's Capital Asset Pricing Model (CAPM) cost of equity is
overstated due to McKenzie's overestimation of the Equity Risk Premium as well as an
unnecessary size adjustment.655 Additionally, D. Garrett contends that McKenzie conducts
an additional unnecessary size adjustment and adds a flotation costs premium.656 D
Garrett further contends that the Company's Empirical Capital Asset Pricing Model
(ECAPM) further inflates that traditional CAPM's results.657
423 D. Garrett concedes that competitive firms maximize their value by minimizing their
weighted average cost of capital, or WACC, but this is not the case for regulated utilities.
651 Under the regulated rate of return model, a higher WACC results in higher rates, all
651 Christie,Exh. KJC-1T at 20:2-4.
612 Christie,Exh. KJC-IT at 34:8-12.
613 Garrett, Exh. DJG-1T at 4:7-8.
654 Garrett, Exh. DJG-1T at 7:3-6.
655 Garrett, Exh. DJG-1T at 38:1-3.
656 Garrett, Exh. DJG-1T at 38:3-4.
657 Garrett, Exh. DJG-1T at 43:4-5.
658 D. Garrett uses the terms "cost of capital" and"weighted average cost of capital, (WACC),"
interchangeably throughout their testimony. Garrett, Exh. DJG-1T at 49:6-7.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 115
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else held constant.659 Thus, because there is no incentive for a regulated utility to
minimize its WACC, D. Garrett articulates that a Commission must ensure that the
regulated utility is operating at the lowest reasonable WACC.660
424 D. Garrett testifies that according to the debt ratios recently reported in Value Line for the
utility proxy group, the average debt ratio of the proxy group is 55 percent and the average
equity ratio is 45 percent.661 D. Garrett notes that this debt ratio is notably higher than
Avista's proposed debt ratio of only 51.5 percent662 arguing that this means that Avista has
a lower level of financial risk relative to the proxy group, a discrepancy that D. Garrett
believes can be mathematically accounted for through the Hamada Model.663
425 Since Avista's debt ratio is notably lower than that of the proxy group, D. Garrett argues
that when Avista is "relevered"to match the proxy group, it results in a lower ROE than if
Avista had been operating with a capital structure equal to that of the proxy group. D.
Garrett concludes that according to the results of the Hamada model, if the Commission
were to adopt the Company's proposed capital structure, its indicated cost of equity
estimate (under the CAPM) would be 9.2 percent.664
Flotation Costs Adjustment
426 Additionally, D. Garrett disagrees with the Company's position of adding a flotation cost
adjustment of.08 percent to its overall modeling results.665 D. Garrett contends that
flotation costs are not actual "out-of-pocket" costs for the Company,666 the market already
accounts for flotation costs,667 and that it is inappropriate to add any additional basis
points to an awarded ROE proposal that is already 661
AWECs Response Testimony
659 Garrett, Exh. DJG-1 T at 51:1-3.
660 Garrett, Exh. DJG-IT at 51:7-10.
66' Garrett, Exh. DJG-IT at 52:14-16.
662 Garrett, Exh. DJG-IT at 52:16-17.
66' Garrett, Exh. DJG-IT at 52:17-20.
664 Garrett, Exh. DJG-IT at 56:2-4.
665 Garrett, Exh. DJG-1T at 44:3-6.
666 Garrett, Exh. DJG-1T at 44:11.
667 Garrett, Exh. DJG-1T at 44:19.
66' Garrett, Exh. DJG-IT at 45:17-18.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 116
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427 AWEC witness Kaufman recommends that the Commission accept Avista's proposed cost
of debt of 4.99 percent and capital structure with 48.5 percent equity and 51.5 percent
debt,669 and that Avista's return on equity be reduced from the current authorized amount
of 9.4 to 9.25 percent.670
428 Kaufman testifies that investors currently expect the U.S. equity market to have total
annual returns of 4 to 8 percent.671 Kaufman asserts that when considering the Company's
proposed proxy group of comparable investments,AWEC's cost of capital models support
an ROE in the range of 8.3 to 9.3 percent.672
429 Kaufman states that the results of their cost of capital models differ from the Company's
because AWEC excludes two models that are not consistent with financial theory, and
used model inputs that more accurately represent investor expectations.673 Kaufman urges
the Commission give no weight to the Risk Premium or Expected Earnings models, as
they believe those models are not grounded in market outcomes or consistent with
financial theory.674
430 Kaufman states that AWEC would make the following changes to the Company's cost of
capital modelling assumptions:
• AWEC assumes short term earnings growth converges to the long run GDP growth
rate from five to 25 years in a linear manner, as it argues that it is mathematically
implausible for firms to indefinitely grow at a rate greater than the GDP growth
rate.675
• AWEC assumes that utility stock betas will move towards the industry average
over time, rather than a beta of one.676
• AWEC excludes weeks with market returns more than three standard deviations
from mean weekly returns.677
661 Kaufinan, Exh. LDK-1CT at 21:3-4.
670 Kaufinan, Exh. LDK-1CT at 21:4-5.
671 Kaufinan, Exh. LDK-1CT at 21:5-8.
672 Kaufinan, Exh. LDK-1CT at 21:8-10.
67' Kaufinan, Exh. LDK-1CT at 23:3-4.
674 Kaufinan, Exh. LDK-1CT at 23:4-7.
671 Kaufinan, Exh. LDK-1CT at 23:10-13.
676 Kaufinan, Exh. LDK-1CT at 23:14-15.
67 Kaufinan, Exh. LDK-1CT at 23:16-17.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 117
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• AWEC uses a range for the equity risk premium from 5.0 to 6.9 percent.678
• AWEC excludes size premium adjustments from the ECAPM model.679
431 Kaufman opines that the ultimate question for the Commission is whether the proposed
ROE is fair and reasonable, not whether the models are fair and reasonable.680 While the
justification of models and inputs are important, Kaufman argues that the Commission can
also evaluate the ROE independently from the models.681
432 Witness Kaufman notes that AWEC's recommendation results in returns that are
somewhat higher than investor expectations.682 However, Kaufman argues that this
recommendation is closer to investor expectation than the Company's proposal.683 Further,
Kaufman contends that AWEC's ROE recommendation of 9.25 percent is well above the
short- and long-term returns expected for U.S. stocks, and reflects a return needed for an
equity investment with greater than average risk.bsa
Discounted Cash Flow (DCF)Model
433 Kaufman asserts that poor credit of specific utilities should not be resolved through return
on equity adders beyond that indicated by a market analysis.615 Kaufman proposes two
changes to the Company's Discounted Cash Flow (DCF) model:
• Consider short- and long-term growth forecasts; and
• Lengthen the second stage transition period from five to 20 years.686
434 Kaufman argues that the first recommendation reduces estimated cost of equity, while the
second increases estimated cost of equity.687 AWEC contends that net impact is an overall
reduction in the estimated cost of equity.688
671 Kaufinan, Exh. LDK-1CT at 23:18-19.
671 Kaufinan, Exh. LDK-1 CT at 24:1-2.
6a0 Kaufinan, Exh. LDK-1CT at 27:4-6
61' Kaufinan, Exh. LDK-1CT at 27:6-7.
612 Kaufinan, Exh. LDK-1CT at 27:14-15
683 Kaufman, Exh. LDK-1CT at 27:15-16.
614 Kaufman, Exh. LDK-1CT at 28:6-8.
615 Kaufinan, Exh. LDK-1CT at 29:6-8.
616 Kaufinan, Exh. LDK-1CT at 29:17-18.
687 Kaufinan, Exh. LDK-1CT at 29:18-19.
681 Kaufinan, Exh. LDK-1CT at 29:20.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 118
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Capital Asset Pricing Model
435 Witness Kaufman also proposes two changes to the Company's CAPM:
• Kaufman argues that Avista's betas are biased and grossly misrepresent reasonable
forecasts for utility stock betas. Instead,AWEC uses raw betas and betas adjusted
to the industry average.689
• For its equity risk premium,AWEC uses two alternatives that are less susceptible
to bias and more consistent with investor expectations and finance literature.690
436 Kaufman states that Avista's equity risk premium is 7.3 percent, while nearly all third-
party estimates of the equity risk premium indicate it is between 3.0 and 6.0 percent.691
437 Witness Kaufman argues including firms with growth forecasts between -20 and 20
percent is less biased.692 Kaufman refers to this symmetric filter as the "Corrected Avista
Method."AWEC testifies that while the Corrected Avista Method remains theoretically
unsound and inconsistent with investor expectations, it offers an improvement over
Avista's methodology in its direct case.693
438 Kaufman asserts that a forward-looking risk premium can be implied from current market
prices and expected cash flows.694 Kaufman states that the implied equity premium of the
trailing 12 months is the best predictor of the actual implied premium,695 and that the
January 2024 trailing 12-month period's implied equity risk premium is 4.6 percent.696
439 Kaufman also asserts that Avista's size premium model, instead of a standard CAPM
model, is not supported by peer reviewed research.69' Kaufman continues that, in general,
the size premium refers to a highly contested theory that small firms offer a size premium
that compensates investors for size related risk in addition to a market premium.698
689 Kaufinan, Exh. LDK-1CT at 31:17-19.
690 Kaufinan, Exh. LDK-1CT at 32:1-3.
691 Kaufinan, Exh. LDK-1CT at 46:13-14.
692 Kaufinan, Exh. LDK-1CT at 47:3-4.
693 Kaufinan, Exh. LDK-1CT at 47:7-9.
694 Kaufinan, Exh. LDK-1CT at 52:7-8.
69s Kaufinan, Exh. LDK-1CT at 52:9-10.
696 Kaufinan, Exh. LDK-1CT at 52:10-11.
697 Kaufinan, Exh. LDK-1CT at 53:18-20.
691 Kaufinan, Exh. LDK-1CT at 53:22-23.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 119
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Kaufman contends that due to a lack of consensus on the existence of a size premium, it is
not necessary to adjust Avista's cost of capital for a size premium.699
Floating Costs Adjustment
440 Kaufman finds Avista's floating costs unnecessary, and contends that they are a direct
result of Avista's decision to manage its equity through dividends and issuances rather
than through stock buybacks and retained earnings.700 Kaufman further argues that while
the Company provides evidence of historic flotation costs, it does not show that these
costs were historically unrecovered.701 Further, Kaufman contends that Avista fails to
demonstrate that either stock issuances or flotation costs are necessary or expected in the
test year.702
441 Finally,AWEC witness Kaufman argues that even if its cost of capital range of 8.5 percent
to 9.5 percent were increased by Avista's 8 basis point flotation cost adjustment, its
recommended cost of equity remains unchanged at 9.25 percent.703
Staff's Response Testimony
442 Staff witness Parcell testifies that the Company's proposed 48.5 percent common equity
ratio is proper and incorporates this ratio into its own cost of capital analysis.704 Based on
this analysis, Parcell recommends a 9.5 percent ROE for each year of the MYRP, for both
electric and natural gas utility operations.711
443 Parcell contends that Avista's bond ratings are similar to most electric utilities in the
U.S.706 Staff explains that this is evidenced by the relative Moody's and Standard&Poor's
debt ratings, which indicate that the Company's ratings are similar to those of Staff's
utility proxy group in developing their ROE recommendations.707 Additionally, Parcell
notes that Moody's and S&P regard Washington's recent legislation (ESSB 5295), in
699 Kaufinan, Exh. LDK-1CT at 54:12-13.
700 Kaufinan, Exh. LDK-1CT at 56:5,9-11.
701 Kaufinan, Exh. LDK-1CT at 55:22, 56:1.
702 Kaufinan, Exh. LDK-1CT at 56:2-3.
70' Kaufinan, Exh. LDK-1CT at 56:18-20.
704 Parcell, Exh. DCP-1T at 4:15-17.
701 Parcell, Exh. DCP-1T at 6:12-14.
706 Parcell, Exh. DCP-1T at 19:10.
707 Parcell, Exh. DCP-1T at 19:10-13.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 120
ORDER 08
addition to other favorable regulatory mechanisms, as risk-reducing to the Company.708
Witness Parcell recommends that the ROE established in this proceeding be set at a level
that is no higher than the bottom of the market-determined ROE range for the proxy
group, which is 9.5 percent.709
444 Parcell examined Avista's historic (2019-2023) capital structure ratios, which indicate that
Avista has had a slightly declining equity ratio over the past five years.710 Parcell notes
that the Avista Utilities (Division) capital structure has also declined slightly, with equity
ratios (including short-term debt) of about 48 percent or less over the past five years.711
Parcell further notes that over the past several rate proceedings for Avista, all of the
historic equity ratios used to determine cost of capital were less than 48.5 percent.712
445 Parcell argues that the capital structure used in Staff's analysis is similar to Avista's recent
actual ratios including its 2023 capital structure, and is consistent with the capital structure
of other electric and combination electric utilities.713
Discounted Cash Flow (DCF)Model
446 Parcell testifies that a range of 8.6 percent to 10.6 percent (9.6 percent mid-point)broadly
represents the current DCF-derived ROE for the proxy group.714 Parcell states that this
range includes most of the DCF proxy group rates and exceeds the low and mean/median
DCF rates.711 Parcell recommends a more narrow range of 9.0 percent to 10.0 percent(9.5
percent mid-point), which exceeds the mean/median DCF result, excludes the singular
highest DCF result, and includes many of the above-average DCF results.716
447 Parcell asserts that Avista uses four sets of DCF calculations collectively to produce DCF
ROE results with a range of 9.2 percent to 10.7 percent, three of which are within Parcell's
701 Parcell, Exh. DCP-IT at 24:28-29.
709 Parcell, Exh. DCP-IT at 25:17-20.
710 Parcell, Exh. DCP-1T at 28:2,10-11.
711 Parcell, Exh. DCP-1T at 28:11-13.
712 Parcell, Exh. DCP-IT at 28:13-16.
711 Parcell, Exh. DCP-1T at 31:18-19, 32:1.
714 Parcell, Exh. DCP-1T at 38:1-2.
715 Parcell, Exh. DCP-IT at 38:2-4.
716 Parcell, Exh. DCP-IT at 38:6-8.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 121
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own DCF results (9.2 percent, 9.7 percent and 9.9 percent).717 As a result, Parcell opines
that its DCF ROE results and the Company's DCF ROE results are similar.718
Capital Asset Pricing Model
448 Parcell notes that the CAPM results collectively indicate a ROE of 10.7 percent for the
proxy group but proposes the Commission give no weight to the CAPM modeling results
in determining Avista's ROE.719 Parcell highlights that McKenzie's testimony reaches
CAPM conclusions of 11.7 percent to 11.8, which greatly exceeds Parcell's testimony.720
Thus, Parcell finds the Company's CAPM results to be outliers that warrant no weight in
determining Avista's ROE.721
449 Parcell disagrees with McKenzie's risk premium estimates and the "size premium"
employed, as well as the use of ECAPM.722 Similar to Kaufman, Parcell argues that
Avista's 7.3 percent risk premium greatly exceeds the historic levels of risk premiums (4.9
percent to 6.4 percent), and that the Company offers no explanation as to why investors
would expect such a dramatic increase.723
450 Finally, witness Parcell argues that inclusion of a small-firm adjustment is improper and
results in an overstatement of the ROE for the proxy electric utilities.124 While Parcell
acknowledges that it may or may not be true that on an overall market basis, smaller
publicly traded firms exhibit more risk than larger firms, it believes that such is not the
case for regulated utilities.725
Comparable Earnings Analysis
451 Parcell testifies that their Comparable Earnings (CE) analysis indicates that the ROE for
the proxy utilities is no more than 9.0 to 9.5 percent (9.25 percent mid-point).726
717 Parcell, Exh. DCP-IT at 38:18-19.
711 Parcell, Exh. DCP-IT at 39:1-2.
79 Parcell, Exh. DCP-IT at 39:14-15,17-19.
720 Parcell, Exh. DCP-1T at 44:3-4.
721 Parcell, Exh. DCP-1T at 44:4-6.
722 Parcell, Exh. DCP-1T at 44:10-12.
721 Parcell, Exh. DCP-1 T at 45:1-4.
724 Parcell, Exh. DCP-IT at 45:12-13.
721 Parcell, Exh. DCP-IT at 45:18-22.
726 Parcell, Exh. DCP-1T at 51:16-17.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 122
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Parcell states that the Company's Expected Earnings (EE)Approach is a form of the
comparable earnings methodology.727 According to Parcell, the Company's tabulation of
Value Line's "expected"ROE for the proxy group shows an "Adjusted Return on
Common Equity" average of 10.8 percent.728
452 Parcell argues that it is inappropriate to focus only on expected ROE without any
reference to how such returns are perceived by investors.729 Further, Parcell notes that the
actual 2021, 2022, and 2023 median ROEs are less than the Company's 10.8 percent CE
recommendation.730 Parcell also notes that Staff's projected annual average and median
ROES are all less than Avista's 10.8 percent EE results.731
Risk Premium Model
453 Parcell argues that there are two primary problems with Company witness McKenzie's
risk premium analyses, which have the effect of overstating the ROE for the proxy
companies and Avista as:732
• The highest risk premium values over this period occurred in 2011-2022,
corresponding to the post-Great Recession period,733 and
• It is not proper to compare utility authorized ROES in the 1970's and 1980's with
current authorized ROEs.734
454 Parcell concludes that the risk premium result for Avista's ROE range is 9.8 percent to
10.8 percent(10.3 percent mid-point).735
Flotation Costs Adjustment
727 Parcell, Exh. DCP-IT at 52:12-13.
721 Parcell, Exh. DCP-IT at 52:16-17.
729 Parcell, Exh. DCP-1 T at 52:21-22.
730 Parcell, Exh. DCP-1T at 53:10-11.
731 Parcell, Exh. DCP-IT at 53:12-13.
732 Parcell, Exh. DCP-1T at 54:14-15.
733 Parcell, Exh. DCP-1T at 54:16.
734 Parcell, Exh. DCP-1T at 54:19-20.
711 Parcell, Exh. DCP-IT at 59:18-19.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 123
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455 Similar to other parties, Parcell disagrees with the Company's proposal to add a flotation
cost adjustment of.08 percent to the ROE calculation.736 Parcell notes that flotation costs
are known to investors and thus are reflected in the stock prices of companies and
therefore any effect of flotation costs is incorporated in DCF ROE model results.737 Thus,
Parcell argues that there is no need to add flotation costs to the results of ROE models.738
Parcell also notes that the Commission rejectedAvista's request to include flotation costs
in both the 2017 and 2020 GRCs.739 Parcell finds that as in those cases, the Company has
not demonstrated that it incurred flotation costs in this proceeding.740
Walmarts Response Testimony
456 Walmart witness Perry testifies that the Company's proposed ROE of 10.40 percent is
excessive.741 Perry argues that since the Company's most recent GRC was settled through
a"black-box" settlement,Avista's current ROE is unclear.142 Further, Walmart argues that
the requested ROE of 10.4 percent exceeds the average reported electric and natural gas
ROES and the 9.4 percent ROE the Commission has authorized since 2021.743
457 Further, Perry contends that according to S&P Global data, of the 118 reported electric
utility rate case ROES authorized between 2021 and present the average ROE is 9.5
percent with a median of 9.5 percent.744 For natural gas the average is 9.58 percent, with a
median of 9.59 percent. Perry notes that the Company's requested ROE of 10.4 is
significantly above the broader industry trends.745
458 Perry notes that the average ROE authorized for vertically integrated electric utilities in
2021 was 9.54 percent; 9.60 percent in 2022; 9.71 percent in 2023, and 9.72 percent thus
far in 2024.746
736 Parcell, Exh. DCP-IT at 63:15-17.
737 Parcell, Exh. DCP-1 T at 64:1-3.
731 Parcell, Exh. DCP-1T at 64:3-4.
739 Parcell, Exh. DCP-1T at 64:7-11.
740 Parcell, Exh. DCP-1T at 64:11-12.
741 Perry, Exh. LVP-IT at 8:15-16.
742 Perry, Exh. LVP-1T at 9:13-16.
743 Perry, Exh. LVP-1T at 9:20, 10:1, 13:17-18.
744 perry, Exh. LVP-1 T at 10:21, 11:1-4.
741 perry, Exh. LVP-IT at 11:4-6, 15:10-12.
746 Perry, Exh. LVP-1T at 11:12-15.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 124
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459 Perry elaborates that the average ROE authorized for investor-owned gas utilities in 2021
was 9.56 percent; 9.53 percent in 2022; 9.58 percent in 2023. and 9.93 percent thus far in
2024.747 As such, Perry again argues that the Company's proposed 10.40 percent ROE is
counter to broader industry trends.748
460 Perry states that if the Commission approved an electric ROE of 9.62 percent for Avista, it
would reduce the Company's propose electric revenue requirement increase for RY1 by
$11.6 million, or 15.1 percent, inclusive of taxes.749 For natural gas, Perry states that an
authorized ROE of 9.58 percent would reduce the Company's proposed natural gas
revenue requirement increase for RY1 by $3.1 million, or 17.9 percent, inclusive of
taxes.7so
Avistas Rebuttal Testimony
461 On rebuttal, Christie maintains the Company's proposed cost of capital: a rate of return of
7.61 percent, a capital structure of 48.5 percent equity and 51.5 percent debt, a 4.99
percent cost of debt, and a 10.4 percent ROE.751
462 Christie contends that the ROE recommendations of other parties' COC witnesses ("Other
Witnesses") fall well below a fair and reasonable level for the Company's electric and gas
operations.751 Christie argues that the Other Witnesses' analyses are undermined by errors
and methodological flaws and fall below accepted benchmarks.753 Christie asserts that
adjusting national authorized ROES for electric utilities to reflect current capital market
conditions, in and of itself, implies an ROE of approximately 10.43 percent.754
463 Further, Christie argues that adjusting previous ROES approved by the Commission to
account solely for increases in bond yields implies a current return on equity of 10.43
percent.755 Further, adjusting the risk premium of 5.01 percent to the averaged Baa utility
bond of 5.83 percent as of June 2024 results in an implied return on equity of 10.84
747 Perry, Exh. LUP-IT at 15:15-17.
741 Perry, Exh. LUP-IT at 15:17-18.
741 Perry, Exh. LUP-1 T at 12:6-7, 13:1-2.
750 perry, Exh. LUP-1 T at 16:6-7, 17:1-2.
751 Christie,Exh.KJC-4T at 18:13-15.
712 Christie,Exh.KJC-4T at 19:15-17.
753 Christie,Exh.KJC-4T at 19:17-19.
714 Christie,Exh.KJC-4T at 19:19-21.
711 Christie,Exh.KJC-4T at 20:1-2.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 125
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percent.756 Christie notes that the expected returns for the Other Witnesses' own proxy
groups fall in the range of approximately 10.0 percent to 10.7 percent.757 Finally, Christie
testifies that the Company's earned ROE has fallen below its authorized ROE in 11 of the
past 14 years, in many cases by a substantial margin, especially without the means to
address regulatory lag since 2018.758 Christie argues that these factors further support
Avista's 10.40 percent ROE request in this case.759
Response to Staff Testimony
464 McKenzie argues that Staff's recommendation contains numerous flaws that lead to a
significant downward bias, including:760
• Staff's criteria for its proxy group are arbitrary, unnecessarily restrict the size of
the group, and undermine the reliability of the analyses;761
• Staff's DCF analysis relies on historical data, including growth rates based on
dividends and book value; the decision to average individual growth rates together
to compute a single DCF estimate for each company; computational shortcomings
in the retention growth calculation, and subjectively excluding a 10.6 percent DCF
result as an outlier;762
• Staff's CAPM analysis relies on historical data when the ROE estimation process
is clearly forward-looking; adopting an improper methodology to calculate the
historic market risk premium; failure to account for the impact of firm size, and
subjectively excluding a 10.7 percent CAPM result as an outlier;763
• Staff's CE analysis relies on historical data in a process that is forward-looking;
considers market-to-book(NIB), and fails to apply an essential mid-year
adjustment factor; and764
• Staff's selective exclusion of available data in its risk-premium approach results in
subjective bias.761
756 Christie,Exh.KJC-4T at 20:11-14.
757 Christie,Exh.KJC-4T at 20:2-5.
758 Christie,Exh.KJC-4T at 22:13-15.
751 Christie,Exh.KJC-4T at 20:14-15.
760 McKenzie, Exh.AMM-15T at 3:6-7.
761 McKenzie, Exh.AMM-15T at 3:8-10.
762 McKenzie, Exh.AMM-15T at 3:11-15.
763 McKenzie, Exh.AMM-15T at 3:17-22.
764 McKenzie, Exh.AMM-15T at 3:23-27.
765 McKenzie, Exh.AMM-15T at 3:28-29.

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465 In addition to the perceived modeling flaws, McKenzie provides several other arguments
opposing Staff's recommended ROE. First, McKenzie asserts that utility bond yields are
now approximately 260 basis points higher than when the Commission authorized Avista's
current ROE of 9.40 percent, suggesting that even a gradual move towards a fair ROE
requires far more than a 10-basis point increase.766 Second, witness McKenzie contends
the Commission made no specific adjustment to Avista's 9.40 percent ROE on the basis of
the Company's MYRP, despite the enactment of ESSB 5295 five months prior.767
466 Regarding Staff's DCF model,Avista argues that historical growth rates can differ
significantly from the forward-looking growth rate required by the DCF model.768 The
Company explains that to the extent historical trends for utilities are meaningful, they are
already captured in projected growth rates.769 Further, McKenzie contends that Staff
simply calculated the average of the individual growth rates with no consideration for the
reasonableness of the underlying data.770 As such, the Company asserts that Staff's DCF
analysis included individual growth rates that do not reflect investors' expectations.771
467 Responding to Staff's CAPM model, McKenzie opines that Staff analysis is based entirely
on historical, not projected, rates of return, significantly understating investors'required
rate of retum.772 McKenzie also takes issue with Staff calculating its equity risk premium
using the total return for Duff&Phelps' (Kroll's) long-term government bond series773 ; ,,
As a result, the Company concludes that two of three historical market risk premium
(MRP)s and the resulting CAPM cost of equity estimate are all understated.77' Finally,
McKenzie contends that averaging Staff's 7.82 percent MRP with the 7.17 percent long-
horizon historical MRP reported by Kroll results in an average of 7.5 percent.775
Substituting this average MRP into Staff's CAPM study results in an average return on
equity of 11.7 percent.776
766 McKenzie, Exh.AMM-15T at 32:16-20.
767 McKenzie, Exh.AMM-15T at 35:9-11.
768 McKenzie, Exh.AMM-15T at 39:3-4.
769 McKenzie, Exh.AMM-15T at 39:4-5.
770 McKenzie, Exh.AMM-15T at 43:6-7.
771 McKenzie, Exh.AMM-15T at 43:7-9.
772 McKenzie, Exh.AMM-15T at 46:12-13, 47:5.
773 McKenzie, Exh.AMM-15T at 51:11-15.
774 McKenzie, Exh.AMM-15T at 51:15-16.
775 McKenzie, Exh.AMM-15T at 52:3-5.
776 McKenzie, Exh.AMM-15T at 52:5-6.

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468 McKenzie acknowledges that arguments regarding the implications of a M/B ratio greater
than 1.0 in comparative earnings analyses are not uncommon, however, the Company is
not aware of a single instance in recent history where a state regulator has relied on M/B
ratios as the basis to evaluate a fair ROE.777 Further, McKenzie emphasizes that the fallacy
of relying on M/B ratios in evaluating cost of equity estimates has been explicitly
recognized and characterized by FERC as "academic rhetoric."778
469 Witness McKenzie contends that Staff subjectively chooses to truncate the data available
in its risk premium approach by ignoring all observations prior to 2012.779 By choosing a
truncated period for its risk premium study, McKenzie argues that Staff unnecessarily
introduces a subjective bias that undermines the credibility of its analysis.780
470 McKenzie notes that the fact that Staff's expected earnings results exceed authorized
returns says nothing about the validity of its expected earnings ROE estimate.781
471 Finally, McKenzie maintains that flotation costs are legitimate expenses and that unless a
discreet adjustment is made to recognize them, they will not be recovered in the rate
setting process.782
Response to Public Counsel
472 In response to Public Counsel, McKenzie finds Public Counsel's recommendation of an
ROE of 8.50 percent extreme, and that the Commission should reject Public Counsel's
conclusions and recommendations in their entirety.78' The Company provides the
following reasons to support this conclusion:
• Public Counsel's DCF approach ignores projected earnings growth rates; relies on
a"sustainable" growth DCF model that wrongly assumes investors anticipate
every firm in the electric utility industry to mimic a long-term growth forecast for
GDP; and fails to remove illogical estimates;784
777 McKenzie, Exh.AMM-15T at 67:4-6.
778 McKenzie, Exh.AMM-15T at 67:6-8.
79 McKenzie, Exh.AMM-15T at 68:12-13.
780 McKenzie, Exh.AMM-15T at 67:13-15.
781 McKenzie, Exh.AMM-15T at 71:10-12.
782 McKenzie, Exh.AMM-15T at 73:11-12.
783 McKenzie, Exh.AMM-15T at 4:1-2.
784 McKenzie, Exh.AMM-15T at 4:4-9.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 128
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• Public Counsel's CAPM application uses unreliable, illogical, and undocumented
inputs, relies on historical data that is inconsistent with this method's assumptions,
and fails to incorporate the size adjustment;785
• Public Counsel's suggestion that Avista's capital structure would distinguish the
Company's overall investment risk from other electric utilities is incorrect, and the
"Hamada" adjustment to its CAPM results is deeply flawed and should be given no
weight;786 and
• Public Counsel's analysis fails to apply the risk premium approach.787
473 McKenzie highlights that Public Counsel's recommendation is 130 basis points below the
average allowed ROE for other vertically integrated electric utilities in 2023.788 McKenzie
further argues that such an outcome would fall well below the returns available from
comparable-risk investments and undermine the Company's financial integrity.789
474 McKenzie explains that the practical impact of Public Counsel's approach is that
differences in ROE are explained only by differences in dividend yield, which violates
basic tenets of securities valuation and the DCF model.790
475 McKenzie further argues that the fundamental difference between the Company's CAPM
analysis and Public Counsel's is that the Company's looks to the future return
expectations, while Public Counsel's "implied equity risk premium"methodology is based
on historical data.791 As a result, McKenzie asserts that Public Counsel's methodology is
inconsistent with the assumptions of the CAPM.792
476 McKenzie also refutes Public Counsel's contention that Avista's risk premium approach is
not market based.793
477 Witness McKenzie argues that a fair ROE is not evaluated in a vacuum; it is predicated on
analyses for a group of comparable risk utilities, with the relative reliance on equity
781 McKenzie, Exh.AMM-15T at 4:10-12.
786 McKenzie, Exh.AMM-15T at 4:13-15.
787 McKenzie, Exh.AMM-15T at 4:16-17.
788 McKenzie, Exh.AMM-15T at 77:21, 78:1-2.
789 McKenzie, Exh.AMM-15T at 78:2-4.
790 McKenzie, Exh.AMM-15T at 90:1-3.
791 McKenzie, Exh.AMM-15T at 95:4-6.
792 McKenzie, Exh.AMM-15T at 95:9-10.
793 McKenzie, Exh.AMM-15T at 102:14, 18-20.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 129
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financing being only one factor considered in this overall assessment.794 As a result,
McKenzie contends that there is simply no basis for Public Counsel's proposed CAPM
adjustment based only on variations in equity ratios between individual utilities.795
Response to AWEC
478 McKenzie testifies that AWEC's recommendation to reduce Avista's ROE from 9.40
percent to 9.25 percent makes no economic sense since investors'required rate of return
has increased significantly since the Company's last litigated rate proceeding.796
Additionally, McKenzie lists the following reasons in support of its position:
• The return benchmarks cited by AWEC provide no meaningful basis to evaluate a
fair ROE for Avista;797
• There is no support for the assumptions of AWEC's three-stage DCF model;798
• AWEC's constant growth DCF application is based on the incorrect notion that
investors expect growth for all utilities to converge to a long-term forecast of
growth in GDP;799
• AWEC's beta-calculations are subjective and results-oriented, which run counter to
those published by reputable sources;800 and
• The two MRPs AWEC used to apply the CAPM either lack any clear foundation or
were based on illogical modifications.Additionally,AWEC's CAPM results are
downward biased because Kaufman fails to account for the implications of firm
size."'
479 McKenzie asserts that AWEC's proposal to decrease Avista's ROE when capital costs have
demonstrably increased shows that its recommendation is divorced from fundamental
financial principles and should be given no weight.802 McKenzie further argues that
794 McKenzie, Exh.AMM-15T at 107:12-14.
795 McKenzie, Exh.AMM-15T at 107:14-15, 108:1.
796 McKenzie, Exh.AMM-15T at 4:20-23.
797 McKenzie, Exh.AMM-15T at 4:25-26.
798 McKenzie, Exh.AMM-15T at 5:1-2.
799 McKenzie, Exh.AMM-15T at 5:3-6.
800 McKenzie, Exh.AMM-15T at 5:7-10.
801 McKenzie, Exh.AMM-15T at 5:11-15.
802 McKenzie, Exh.AMM-15T at 114:7-10.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 130
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AWEC's 4.0 to 8.0 percent market return range is meaningless and cannot be used to make
the case that its ROE recommendation is conservative.803
480 McKenzie also argues that there is no basis for AWEC's assertion that the use of the
current five-year betas in the CAPM "overinflates utility cost of capital."804
Response to Walmart
481 McKenzie argues that although Walmart does not conduct any analysis or provide an
explicit ROE recommendation, it expresses concern over Avista's ROE request based on a
comparison with historical allowed ROEs and customer impact consideration.805
McKenzie contends that comparisons with historical allowed ROES are overly simplistic
and fail to account for the significant increase in long-term capital costs.806
482 McKenzie argues that the cost of equity is established in competitive capital markets, and
Walmart's suggestion that Avista's ROE might be artificially suppressed to minimize
customer impacts ignores the requirements of regulatory standards, and the long-term
harm that can result if investor confidence is undermined.807 Further, McKenzie contends
that while Walmart's data on allowed ROEs can be useful in the Commission's
deliberations, it is not a substitute for the detailed analyses presented in its direct
testimony.808 Finally, McKenzie refutes Walmart's suggestion that a lower ROE is to
customers'benefit.809 McKenzie argues that while a downward-biased ROE may provide
the illusion of"savings" in the form of a lower revenue requirement in the short-term, the
long-term impact of an inadequate ROE can work to the disadvantage of customers."'
Avista's General Rebuttal of the Other Parties
483 McKenzie argues that the 8.50 percent to 9.50 percent ROE recommendations of the Other
Witnesses fall approximately 93 to 193 basis points below national average authorized
ROES, once adjusted for current interest rates.811 Additionally, McKenize contends that the
803 McKenzie, Exh.AMM-15T at 115:3-4.
804 McKenzie, Exh.AMM-15T at 121:18-20.
805 McKenzie, Exh.AMM-15T at 5:18-20.
806 McKenzie, Exh.AMM-15T at 5:22-24.
807 McKenzie, Exh.AMM-15T at 5:25-28.
808 McKenzie, Exh.AMM-15T at 135:5-6.
809 McKenzie, Exh.AMM-15T at 135:19-20.
810 McKenzie, Exh.AMM-15T at 135:20, 136:1-2.
81 McKenzie, Exh.AMM-15T at 6:8-10.

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ROE disparity is even more evident when considering that utility bond yields have
increased approximately 250 basis points since the Commission approved an ROE of 9.40
percent for Avista.812
484 McKenzie explains that trends in 30-year Treasury bonds and utility bonds are relevant
indicators for evaluating cost of equity.813 Witness McKenzie states that trends in these
bond yields since Avista's last rate proceeding demonstrate a substantial increase in the
returns on long-term capital demanded by investors.814 Additionally, McKenzie notes that
key interest rate benchmarks indicate that investors'required return on debt securities has
increased an average of 170 basis points from September 2021 to June 2022, and another
99 basis points to June 2024.s1s
485 Thus, McKenzie argues that the cost of capital—both debt and equity—has increased
significantly since the Commission authorized the current ROE of 9.40 percent.816 Further,
McKenzie contends that there is no evidence risks associated with increased cost levels for
capital projects have been mitigated by any offsetting risk since the Commission entered
its final order in the 2022 GRC.817
486 Additionally, McKenzie argues that the Other Witnesses do not address the implications of
declining utility credit ratings, increased financial pressures, or the heightened risk posed
by wildfires in their ROE recommendations. Nor does McKenzie believe their
recommendations reflect the significant upward trend in capital costs since Avista's last
litigated rate proceedings."'
487 McKenzie testifies that the ROE recommendations of Public Counsel and AWEC are
unmoored from fundamental principles of finance and violate the basic, common-sense
relationship between interest rates and the cost of equity."' McKenzie finds it
inconceivable that the Company's ROE could have decreased when other capital costs
have significantly increased.120
812 McKenzie, Exh.AMM-15T at 6:10-12.
813 McKenzie, Exh.AMM-15T at 7:15-18.
814 McKenzie, Exh.AMM-15T at 8:12-15.
815 McKenzie, Exh.AMM-15T at 9:5-6.
816 McKenzie, Exh.AMM-15T at 14:14-16.
817 McKenzie, Exh.AMM-15T at 15:7-10.
818 McKenzie, Exh.AMM-15T at 16:13-16.
819 McKenzie, Exh.AMM-15T at 17:5-7.
820 McKenzie, Exh.AMM-15T at 17:4-5.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 132
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488 McKenzie states that despite interest rates having increased substantially—which means
the cost of equity has climbed—Staff is arguing that Avista's ROE should be increased by
just 10 basis points, while Public Counsel and AWEC are arguing for a reduction.821
McKenzie believes that these outcomes are not credible and would violate accepted
principles of finance.822 Therefore, Company witness McKenzie argues that the
Commission should specifically reject the ROE recommendations of Public Counsel and
AWEC on this basis.823
489 McKenzie also argues that adjusting historical average allowed ROES from 2020 to Q 1
2024 to reflect current capital market conditions results in an implied cost of equity of
10.43 percent, therefore substantiating that the non-Company ROE recommendations are
insufficient.824
490 Finally, McKenzie reiterates that the average ROES for the non-utility group reported in
direct testimony range from 10.5 percent to 11.0 percent, and average 10.8 percent.'25
McKenzie asserts that a comparison of objective risk indicators shows the non-utility
group to be less risky than the utility group or Avista, and thus these ROE results provide a
conservative guideline for a fair ROE.826
Parties'Briefs
Avista's Brief
491 In its brief,Avista reiterated that Avista's earned ROE has fallen below its authorized ROE
in 11 of the past 14 years, in many cases by a substantial margin, especially without the
means to otherwise address regulatory lag since 2018, with an attrition adjustment.827 The
821 McKenzie, Exh.AMM-15T at 20:8-10
822 McKenzie, Exh.AMM-15T at 20:11.
823 McKenzie, Exh.AMM-15T at 20:11-13.
824 McKenzie, Exh.AMM-15T at 24:1-4.
825 McKenzie, Exh.AMM-15T at 31:7-9.
826 McKenzie, Exh.AMM-15T at 31:9-11.
827 Avista's Post-Hearing Brief, at¶30. Moody's noted that"the lag in cash flow recovery and
limited revenue increases have pressured Avista's credit metrics particularly during a time when
the sector faced material headwinds from higher natural gas prices and other cost pressures."
(Moody's Investors Service,Avista Corp.,update to credit analysis, Credit Opinion(Aug. 16,
2023)). Similarly, S&P reported the prospect of lowering Avista's ratings over the next 12 to 24
months if financial metrics are pressured by"regulatory lag."(S&P Global Ratings,Avista Corp.,
Ratings Direct,Ratings Score Snapshot(Dec. 8,2023)). (Christie,Exh. KJC-4T at 22:17-19).

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 133
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Company took issue with the other parties'recommendations for Avista's ROE, 828
specifically that the Other Witnesses'ROE recommendations fall below accepted
benchmarks.829
492 Avista also argues that the Other Witnesses'ROE analyses are undermined by errors and
methodological flaws, including, among other things: 1) failure to account for
significantly higher capital costs, declining creditworthiness, and rising risk exposures,
such as wildfires; 2) errors in the specification of their proxy groups; and 3) unsupported
growth rate assumptions in the application of the discounted cash flow ("DCF") model
that do not reflect investors' expectations.830 Avista then details and addresses the
particulars of recommendations by each of the Other Witnesses.831
Staff's Brief
493 Staff argues that the Company's conclusions are unsupported in McKenzie's testimony
and contradictory with his past testimony before this Commission.832 Staff asserts that the
Company's recommendations concerning its ROE are quite simply in direct contrast to the
objective facts presented by the parties in this case. Staff concedes that Avista is deserving
of a moderate rate increase, as stated above, but argues the wildly inflated numbers
McKenzie presented are contrary to both Commission precedent and reasoned policy.833
494 Additionally, with regard to bond yields, Staff argues that Avista's testimony is
contradictory with current bond trends and primarily the result of McKenzie's continued
use of the disfavored CAPM. Staff alleges that the CAPM has been deemphasized by the
Commission.831 Staff claims that witness McKenzie goes beyond just using the CAPM but
creates an ECAPM by substituting actual betas with hypothetical ones for the chosen
proxy group, skewing an already flawed model.831 Staff rejects Avista's proposed 10 basis
point increase of the Company's ROE using ECAPM.836
828 Avista's Post-Hearing Brief, at¶¶31-45.
82'Avista's Post-Hearing Brief, at¶32.
830 Avista's Post-Hearing Brief, at¶32.
831 Avista's Post-Hearing Brief, at¶¶33-45.
832 Staff's Post-Hearing Brief, at¶38.
833 Staff's Post-Hearing Brief, at¶40.
834 Staff's Post-Hearing Brief, at¶41-42 (citing, Wash. Utils. & Transp. Comm'n v Avista Corp,
Dockets UE-200900&UG-200901, Order 08/05, 39¶ 100 (Sept. 27, 2021)).
835 Staff's Post-Hearing Brief, at¶42 (referencing,McKenzie,AMM-1T, at 47:8-9).
836 Staff's Post-Hearing Brief, at¶45.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 134
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495 Next, Staff argues that contrary to Avista's assertions, the Company is actually financially
healthy with an improving credit rating.837 Staff adds that Avista also has no fears of
lessened access to capital.As McKenzie testified,Avista's 10.4 percent return on equity is
not a requirement to obtain funding.838 Staff alleges that Avista's capital structure through
its last case was 48.5 percent common equity, the same as the proposed structure in this
case.839 Yet,Avista's actual common equity ratio stands at 46.2 percent, well below its
current authorized rate.840 Thus, Staff asserts that"by keeping its true equity lower, it can
charge ratepayers at an already inflated hypothetical rate structure of 48.5 percent while
pocketing the difference."841
496 Staff contends that, contrary to Avista's argument, expansion of infrastructure is
immaterial to ROE or cost of capital considerations.842 Further, Staff argues against the
Company's position that"constructive" and"supportive"regulation necessitates a higher
ROE, and that constructive regulation is not relevant to this case.843 Staff also rejects
Avista's attrition claim, and claims that the Company has not conducted and presented
studies demonstrating such attrition, nor has it shown any particularized reasonings for
why that attrition was outside the realm of the Company's control.844
497 Staff asserts that the Commission has a history of applying gradualism to ROE in rate
cases, including in Avista's own prior cases. Staff asserts that this approach benefits
ratepayers and utilities alike, and the Commission should reaffirm its use for ROE
considerations.845
Flotation Costs
498 Staff asserts that the Commission should reject Avista's flotation adjustment as the
Commission has denied this particular type of adjustment in prior litigated cases involving
83' Staff's Post-Hearing Brief, at¶¶45-46.
838 Staff's Post-Hearing Brief, at¶47 (referencing,McKenzie,TR, at 151:7-13).
839 Staff's Post-Hearing Brief, at¶47.
840 Staff's Post-Hearing Brief, at¶47 (referencing,Parcell, DCP-1 T, at 30:16-17).
841 Staff's Post-Hearing Brief, at¶47.
842 Staff's Post-Hearing Brief, at¶48.
843 Staff's Post-Hearing Brief, at¶49.
844 Staff's Post-Hearing Brief, at¶50.
845 Staff's Post-Hearing Brief, at¶53.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 135
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Avista.846 Staff argues that flotation costs are a known factor and are therefore already
incorporated into investor evaluations of stock by the ROE models used to calculate a
company's authorized return.847 Staff posits that adding flotation costs to rates would be
redundant and would in essence ask ratepayers to pay for flotation costs twice, once when
the costs were naturally incorporated in rates, and the second time through the Company's
proposed added adjustment.848 Staff also argues that that the Company has not presented a
rationale or argument as a basis for the Commission to change its position on flotation
costs from prior cases.849
Public Counsel's Brief
499 Public Counsel states that the Commission should set a ROE that is limited to Avista's
actual cost of capital.850 In that vein, Public Counsel argues that a more accurate ROE
given current economic realities would be 8.5 percent, resulting in an overall ROR of 6.86
percent, as opposed to the Company's proposed 10.4 percent ROE, which would result in
an overall ROR of 7.61 percent.851 Public Counsel adds that there is evidence in this
record that Avista's awarded rates have consistently exceeded the rates that are necessary
for capital acquisition and higher than are warranted by Avista's business risk."' Public
Counsel alleges that Avista's claim of under earning and attrition have not interfered with
the Company's access to capital or its financial soundness.853
500 Public Counsel argues that the Commission should accept its recommendation to lower
the Company's ROE from 9.4 percent, and that appropriate range for Avista's ROE is
is 8.0 percent to 9.2 percent.854 Public Counsel believes that lowering Avista's ROE will
not affect its financial performance.sss
846 Staff's Post-Hearing Brief, at¶54; Wash. Utils. & Transp. Comm'n a Avista Corp.,Dockets
UE-170485 &UG-170486, Order 07/02, at 30¶75;Avista,Dockets UE-200900&UG-200901,
Final Order 08/05, at 38¶99.
847 Staff's Post-Hearing Brief, at¶55.
848 Staff's Post-Hearing Brief, at¶55.
849 Staff's Post-Hearing Brief, at¶56.
850 public Counsel's Post-Hearing Brief, at¶2 and¶79.
851 public Counsel's Post-Hearing Brief, at¶79 (referencing, Christie, Exh. KJC-4T at 18:13-15).
852 Public Counsel's Post-Hearing Brief, at¶86.
853 Public Counsel's Post-Hearing Brief, at¶87.
854 public Counsel's Post-Hearing Brief, at¶89 (referencing, Garrett,Exh.DJG-1T at 3 Figure 1).
855 public Counsel's Post-Hearing Brief, at¶95.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 136
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501 Public Counsel contends that the Commission should discount Avista's modeling because
it does not accurately predict or explain investor behavior, and because the Company's
witness admits that his modeling and testimony are not useful to the Commission in
achieving the goals of Bluefield and the Commission's test.856 Public Counsel then goes on
to detail its additional reasons for its position that the Commission should not rely on
McKenzie's financial modeling, which allegedly result in bias and overstated growth
forecasts.857
Flotation Costs
502 Consistent with other party witnesses, Public Counsel argues that the Commission should
reject Avista's request for flotation costs.858 Public Counsel adds that"these costs are not
out-of-pocket costs for the Company, and the Commission has no metric by which to
determine which party would have negotiated to capture that additional value; i.e. would
the stock price have dropped or risen slightly."859 Public Counsel opines that only
competition could fairly make that allocation.860
AWEC's Brief
503 AWEC argues that Avista's ROE should be lowered from its current level of 9.4 percent
and set at 9.25 percent.861 AWEC makes a similar argument to Staff that the Commission
should give little weight to usage of CAPM and ECAPM, based the Commission's recent
skepticism about those models.862 AWEC also takes issue with Avista's models for Risk
Premium and Expected Earnings as AWEC claims that FERC has rejected use of both
models.86'AWEC does not take issue with Avista's DCF model but rather the results of its
analysis, which yielded a cost of equity range between 9.2 percent and 11.9 percent, an
exceedingly broad range.AWEC believes that this range is too broad.864 AWEC opines
that its DCF results are more accurate as they yield a range between 8.5 percent and 9.2
ash public Counsel's Post-Hearing Brief, at¶96 referencing McKenzie,TR. at 151:1-6.
857 Public Counsel's Post-Hearing Brief, at¶¶82-83, 97-101.
858 Public Counsel's Post-Hearing Brief, at¶93 referencing Garrett, Exh. DJG-1T at 45:1-4.
859 public Counsel's Post-Hearing Brief, at¶93 referencing Garrett, Exh. DJG-1T at 45:5-16.
860 public Counsel's Post-Hearing Brief, at¶93.
861 AWEC's Post-Hearing Brief, at¶ 13.
862 AWEC's Post-Hearing Brief, at¶ 15.
863 AWEC's Post-Hearing Brief, at¶ 17.
864 AWEC's Post-Hearing Brief, at¶ 18.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 137
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percent, which is also in line with Public Counsel and Staff's models. Consequently,
AWEC posits that its recommended 9.25 percent is reasonable.865
Flotation Costs
504 As with other witnesses,AWEC recommends that the Commission reject Avista's flotation
cost adjustment, as it did in Avista's 2020 general rate case.866 AWEC claims that"while
Mr. McKenize attempted to respond to the Commission's criticism of this adjustment in
that case by showing Avista's actual flotation costs,Avista fails to show both that it did not
recover these flotation costs through its authorized rates and that Avista will incur flotation
costs in the test year."867
Walmart's Brief
505 Walmart contends that Avista's request for an ROE of 10.40 percent is not just and
reasonable."' In support of its position,Walmart cites to its testimony in which it alleges
that the nationwide average ROE is 9.5 percent,869 and that the average ROE for vertically
integrated utilities authorized from 2021 through the present is 9.62 percent,870 well below
Avista's proposed ROE of 10.40 percent.871 Walmart believes that increased costs to
retailers, in the form of higher energy costs resulting from a high ROE, will result in
passing through higher prices to retail consumers.172 For these reasons, Walmart requests
that the Commission deny Avista's proposed ROE of 10.40 percent and set a just and
reasonable ROE.873
Decision
86s AWEC's Post-Hearing Brief, at¶ 19-20.
866 AWEC's Post-Hearing Brief, at¶ 14; See also Docket Nos. UE-200900,UG-200901,UE-
100894 (Consolidated), Order 08-05¶96("2020 GRC Order").
867 AWEC's Post-Hearing Brief, at¶ 14.
868 Walmart's Post-Hearing Brief, at p. 1.
869 Walmart's Post-Hearing Brief, at p. 2 citing Perry, Ex.LUP-1T at 11:2.
870 Walmart's Post-Hearing Brief, at p. 2 citing Perry, Ex.LUP-1T at 11:12.
871 Walmart's Post-Hearing Brief, at p. 2.
872 Walmart's Post-Hearing Brief, at p. 1.
873 Walmart's Post-Hearing Brief, at p. 2.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 138
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506 In determining cost of capital, the Commission is guided by the longstanding precedent of
the Hope874and Bluefield875 cases. The Commission will analyze service on debt as well as
the return to the equity owner, which should be commensurate with returns on investments
in other enterprises having corresponding risks. That return, moreover, should be
sufficient to assure confidence in the financial integrity of the enterprise, so as to maintain
its credit and to attract capital.876 Moreover, "what the company is entitled to ask is a fair
return upon the value of that which it employs for the public convenience. There must be a
fair return upon the reasonable value of the property at the time it is being used for the
public."877
507 Based on this guidance of the Hope and Bluefield cases, in Wash. Utils. & Transp.
Comm'n a PacifiCorp, we stated that"a utility's cost of capital has three main
components: capital structure, return on equity, and cost of debt. Taking all these factors
into account, it is possible to describe the utility's overall rate of return(ROR), also known
as the weighted average cost of capital (WACC)."878
Cost of Capital (ROE)
508 As was stated previously,Avista proposes a capital structure of 51.5 percent debt and 48.5
percent equity, a proposed cost of debt of 4.99 percent, a proposed 10.40 percent ROE,
and a requested overall ROR in this proceeding of 7.61 percent.879 Avista contends that the
proposed 10.40 percent ROE is reasonable to maintain Avista's financial integrity.880
Avista supports this assertion by stating that four out of five cost of equity methods they
implemented produced an ROE of 10.4 percent.881 Avista also alleges that its earned ROE
has fallen below its authorized ROE in 11 of the past 14 years, in many cases by a
substantial margin, especially without the means to address regulatory lag since 2018.882
874 Fed. Power Comm'n a Hope Nat. Gas Co., 320 U.S. 591, 64 S. Ct. 281, 88 L. Ed. 333 (1944).
875 Bluefield Water Works &Improvement Co. a Pub. Serv. Comm'n, 262 U.S. 679,43 S. Ct. 675,
67 L. Ed. 1176(1923).
876 Federal Power Com. v Hope Natural Gas Co., 320 U.S. 591, 603 (1944).
877 Bluefield Water Works &Improvement Co. a Pub. Sere Comm'n, 262 U.S. at 690.
878 Wash. Utils. & Transp. Comm'n a PacifiCorp,Dockets UE-230172 &UE-210852, Order 08,¶
112 (Mar. 19,2024); See also Bluefield, 262 U.S. at 689-90.
879 Christie,Exh. KJC-1T at 14:8-11.
"0 Christie,Exh. KJC-lT at 16:6-7.
881 McKenzie, Exh.AMM-1T at 6:19-20.
112 Christie,Exh.KJC-4T at 22:13-15.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 139
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509 In turn, Staff does not contest the Company's capital structure, i.e., equity ratio, nor does
Staff contest Avista's cost of debt.883 However, Staff does contest Avista's proposed ROE.
Staff argues that the Company's proposed increase, from 9.4 percent to 10.4 percent,
represents a significant departure from recent ROES the Commission has approved for
Avista.884 Staff further argues that Avista's proposed ROE is not supported by testimony
and is inconsistent with Commission policies.88'An example, among others, Staff
provides as inconsistent with the Commission's policies is the Company's use of CAPM
and ECAPM to calculate ROE.886 Staff recommends a 9.5 percent ROE for each year of
the MYRP, for both electric and natural gas utility operations, a 10 basis point increase to
ROE.sa7
510 Similar to Staff, Public Counsel does not contest the Company's equity ratio, nor does it
contest Avista's cost of debt, but does contest Avista's proposed ROE (10.4 percent) and
its overall ROR(7.61 percent).888 Public Counsel argues that a more accurate ROE, given
current economic realities would be 8.5 percent, resulting in an overall ROR of 6.86
percent.889 Public Counsel, like Staff, also takes issue with Avista's financial modeling,
and argues that the Commission should continue to lower Avista's ROE to be consistent
with the actual cost of capital.890
511 AWEC also disagrees with Avista's modeling claiming that the Commission is skeptical of
the CAPM and ECAPM models on which Avista relies.891 AWEC states that of the other
forms of modeling Avista uses, discounted cash flow, is one acceptable to the
Commission. However,AWEC disputes the inputs Avista uses in its DCF modeling to
arrive at the range for its ROE, between 9.2 percent and 11.9 percent.892 AWEC believes
that this range is too broad, and that a range of 8.5 and 9.3 percent from AWEC's DCF
883 Staff's Post-Hearing Brief, at¶32.
884 Staff's Post-Hearing Brief, at¶33.
885 Staff's Post-Hearing Brief, at¶41-51.
886 Staff's Post-Hearing Brief, at¶41-45.
117 Parcell, Exh. DCP-1T at 6:12-14.
888 Public Counsel's Post-Hearing Brief, at¶79.
889 Public Counsel's Post-Hearing Brief, at¶79 referencing Garrett,MEG-3 (schedule 3.10)and
MEG-4 (scheduled 4.10).
ago public Counsel's Post-Hearing Brief, at¶¶89-101.
891 AWEC's Post-Hearing Brief, at¶ 16.
892 AWEC's Post-Hearing Brief, at¶ 18.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 140
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calculations is more in line with the results from Public Counsel's and Staff's DCF
models.AWEC recommends a ROE of 9.25 percent.893
512 Walmart opposes Avista's proposed ROE and asserts that the increased cost to retailers
like Walmart can put pressure on consumer prices and on the other expenses required by a
business to operate, and this can result in passing through higher prices to consumers.894
Walmart contends that Avista's 10.4 percent ROE is too high compared to the nationwide
ROE average of 9.5, and the authorized average ROE for vertically integrated utilities has
been 9.62 percent since 2021.895 Walmart suggests an ROE of 9.62 percent s96 for Avista's
electric operation and 9.58 percent for Avista's gas operation.897
513 After reviewing the evidence and testimony, we reject Avista's proposed ROE. In its brief,
Staff raises the principle of gradualism that this Commission has articulated in prior
proceedings. Staff makes a valid point that gradualism protects ratepayers and utilities
alike, and that the Commission should reaffirm its use for ROE considerations.898 We
agree. In past proceedings, including those involving Avista, we have relied on this
principle. Specifically, the Commission has said, "We must evaluate all cost of capital
evidence offered and consider other relevant principles and factors such as the general
state of the economy, investment cycles in the industry, and the principle of gradualism to
determine, consistent with the public interest, a reasonable range of returns and what
specific ROE within that range is appropriate for determining Avista's revenue
requirements."899
514 Even with economic factors Avista cites, approving an ROE at 10.4 percent, a 100 basis
point increase from the Company's current 9.4 percent ROE, is against this principle and
we cannot in good conscience and in our statutory duty approve such a steep increase
absent extreme circumstances that we do not see here. Doing so certainly would not be in
the public interest.
893 AWEC's Post-Hearing Brief, at¶20.
894 Walmart's Post-Hearing Brief, at p. 1.
895 Walmart's Post-Hearing Brief, at p. 2.
896 Perry, Exh. LUP-1 T at 12:6-7, 13:1-2.
897 Perry, Exh. LUP-1 T at 16:6-7, 17:1-2.
898 Staff's Post-Hearing Brief, at¶53.
899 Wash. Utils. & Transp. Conan n v Avista Corp,Dockets UE-200900,UG-200901 &UE-
200894, Order 08/05,¶97 (September 27, 2021);See Wash. Utils. & Transp. Comm'n v Puget
Sound Energy, Dockets UE-121697&UG-121705 (Consolidated),Order 15,Dockets UE-130137
&UG-130138 (Consolidated), Order 14,Final Order on Remand, 16,132 (Jun. 29, 2015)
[hereinafter PSE Remand Final Order].

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 141
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515 However, we also reject the ROES recommended by Staff, Public Counsel,AWEC, and
Walmart. The parties through their witnesses have utilized analytical tools with which we
are well-acquainted, including DCF, CAPM, ECAPM, and CE. The models yielded results
for ROE ranging from as low as 8 percent calculated by Public Counsel to a high of 11.8
percent calculated by Avista. We observe that the range of results is due to a similar
approach to modeling from Avista's rate case in Docket UE-200900 wherein we noted
"the wide-ranging results are directly attributable to the experts' selection of proxy groups
and reliance on different sources for growth rates, discount rates, and market risk
premiums."goo The difference here at least is that the witnesses' analyses produced a 380-
basis point range of possible returns rather than the 450-basis point range from the prior
Avista rate case.
516 Despite the range of possible returns, we note that Staff and Walmart offer to raise Avista's
ROE slightly higher with Staff at 9.5 percent for gas and electric for RY 1 and RY2, and
Walmart at 9.62 percent for electric for RY1 and RY2 and 9.58 percent for gas in RY1 and
RY2. Public Counsel and AWEC would actually reduce Avista's ROE to 8.5 percent and
9.25 percent, respectively. These proffered ROES are either too low or do not adjust high
enough to address the current conditions facing Avista.
517 While we cannot go as high as the 10.4 percent level for ROE the Company requests, for
previously stated reasons, we recognize that upward adjustment is needed to address the
challenges the Company faces and to ensure it remains a viable entity able to provide
reliable and adequate service to its customers. The challenges of remaining credit worthy
and acquiring capital for continued operation are very real. In fact, these challenges go to
the heart of the Commission's responsibility, which is to assure confidence in the financial
integrity of the utility company, to maintain its credit rating and to attract capital, so that it
can continue to provide service for the public convenience.901
518 Given this precedent and our adherence to it, we approve raising Avista's ROE to 9.8
percent for electric and gas operations for both RY1 and RY2. We believe doing so serves
two purposes. First, we remain consistent with the principles of gradualism and protect the
ratepayers from rate shock, which we believe would have been the case if we had
approved Avista's ROE at 10.4 percent. Second, approving a higher ROE allows the
Company to maintain its credit rating, attract needed capital, and continue to be a viable
900 Avista Corp,Dockets UE-200900,UG-200901 &UE-200894,Order 08/05,¶98.
901 Federal Power Com. a Hope Natural Gas Co., 320 U.S. 591, 603 (1944);Bluefield Water
Works &Improvement Co. v Pub. Sere Comm'n, 262 U.S. at 690.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 142
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utility, providing service to its ratepayers, pursuant to the precedent established in the
Hope and Bluefield cases.
519 In short, the ratemaking process, where agencies similar to the Commission seek to
establish just and reasonable rates, involves a balancing of the investor and consumer
interests.902 We believe that approving Avista's ROE at 9.8 percent strikes that balance
between investor and consumer interests, and therefore is in the public interest.
520 Given that no party contested Avista's proposed capital structure of 51.5 percent debt and
48.5 percent equity, we approve the Company's proposed capital structure. Similarly, no
party contested the Company's proposed cost of debt of 4.99 percent. Based on our
decision to increase the Company's ROE to 9.8 percent,Avista's overall rate of return, or
ROR, will be 7.32 percent.
Flotation Costs
521 Flotation costs are incurred when a company issues new securities.903 These costs are
incurred by the investors with the sale of these new securities,904 and include services such
as legal, accounting, and printing costs, as well as the fees and discounts paid to
compensate brokers for selling the stock to the public.90s Avista asserts that it should be
offered an opportunity to recover flotation costs, which it believes are a legitimate expense
incurred to provide equity capital.916 Avista proposes an 8-basis point increase to its ROE
based on flotation costs.907
522 Staff, Public Counsel and AWEC all argue for rejection of flotation costs because they are
a known factor already incorporated into investor evaluations of stock by the ROE models
used to calculate a company's authorized return, and because the Commission has rejected
inclusion of flotation costs in ROE in prior proceedings.908 Staff posits that adding
flotation costs to rates would be redundant and would in essence ask ratepayers to pay for
902 Federal Power Com. a Hope Natural Gas Co., 320 U.S. at 603.
903 Avista Corp., Dockets UE-170485 &UG-170486,Order 07/02, at fn. 80.
904 McKenzie, AMM-1T, at 49:4-11.
905 McKenzie, AMM-1T, at 49:4-11.
906 Avista's Post-Hearing Brief, at¶33.
907 McKenzie,AMM-1T at 54:4-11.
908 Staff's Post-Hearing Brief, at¶¶55, 56; Public Counsel's Post-Hearing Brief, at¶93;AWEC's
Post-Hearing Brief, at¶ 14.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 143
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flotation costs twice, once when the costs were naturally incorporated in rates, and the
second time through Avista's proposed added adjustment.909
523 Public Counsel adds that"these costs are not out-of-pocket costs for the Company, and the
Commission has no metric by which to determine which party would have negotiated to
capture that additional value; i.e. would the stock price have dropped or risen slightly."910
AWEC also recommends that the Commission reject the Company's flotation cost
adjustment as it does not provide adequate evidence to support its request.911
524 We agree with Staff, Public Counsel, and AWEC, and reject Avista's proposed flotation
cost adjustment. In Avista's 2017 rate proceeding the Commission rejected Avista's
request for flotation costs, reasoning that "while these costs may be legitimate adjustments
made during the underwriting process, the Company had failed to demonstrate the level of
flotation costs it had actually incurred during the test year."912 The Commission reiterated
this standard in Avista's 2020 case and rejected Avista's proposed flotation cost
adjustment. In that matter, the Commission stated, "we remain unpersuaded in this case
that we should include any flotation adjustment without a compelling showing."913
525 We remain unpersuaded in this case as well.Avista's witness McKenzie acknowledged the
precedent from the 2017 and 2020 rate cases and admitted that our concerns stated in
those proceedings were not addressed in this one.914 Based on the lack of evidentiary
support, we have no choice but to reject the Company's proposed flotation adjustment.
Cost of'Service, Rate Spread and Rate Design
Avista's Direct Testimony
526 Avista proposes rate increases for residential customers under Schedules 1 & 101 and
argues that the Company's fixed costs do not vary with customer usage and are therefore
customer allocated costs.915 Company witness Miller further argues it is important for
909 Staff's Post-Hearing Brief, at¶55.
910 Public Counsel's Post-Hearing Brief, at¶93 referencing Garrett, Exh. DJG-1T at 45:5-16.
91 AWEC's Post-Hearing Brief, at¶ 14.
912 Avista Corp., Dockets UE-170485 &UG-170486,Order 07/02, at¶76.
913 Avista Corp,Dockets UE-200900,UG-200901 &UE-200894,Order 08/05,¶96.
914 McKenzie,AMM-1T at 53:18-54:21.
915 Miller, Exh. No. JDM-IT at 32:5-11.We note that every reference to Schedule 1 in this section
also applies to Schedules 7 and 8 (TOU Pilot).

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 144
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charges to accurately reflect the actual costs incurred to serve customers.916TO further
detail,Avista proposes increasing the Basic Monthly Charge (BMC) for electric residential
customers from $9.00 to $15.00 in Rate Year 1 (RY1) and $20.00 in Rate Year 2 (RY2),
and for natural gas residential customers from$9.50 to $15.00 in RY 1 and $20.00 in
RY2.91 7
527 Avista bases its rate spread recommendation on its proposal for an electric revenue
increase of$77.0 million(13.0 percent) in RY1 over current base tariff rates in effect and
an increase of$78.1 million (11.7 percent) in RY2, and for natural gas customers proposes
a revenue increase of$17.3 million(13.6 percent) in RY 1 and$4.5 million(3.2 percent) in
RY2.91 s
528 Avista proposes to spread this rate increase through an equal increase of 13.1 percent for
the base tariff rates for each electric customer class (except the 12.8 percent increase for
Schedule 25) and on the gas side proposes an equal increase of 11.7 percent for all
customer classes.919 Avista justifies this proposal based on the size of the increase and
argues a uniform increase will make modest improvements towards more evenly
distributed return ratios.920
Staff's Response Testimony
529 Staff argues that the Company did not justify including a broader range of costs in its
proposed BMC calculation.921 Citing prior Commission guidance and policies regarding
gradualism, Staff recommends a $1.00 increase for residential gas and electric customers
to bring the Company's basic charge closer to cost parity without too sharp of an increase
to the basic charge.922
Public Counsel's Response Testimony
916 Miller, Exh. No. JDM-IT at 32:21-23.
91 Miller, Exh. No. JDM-1T at 32:5-11.
918 Miller, Exh. No. JDM-1T at 32:5-11.
919 Miller, Exh. No. JDM-4(schedule 25 has a proposed increase of 12.8 percent).
921 Miller, Exh. No. JDM-1T at 2:8-12.
Parity Ratio: Schedule revenue to cost ratio divided by system's revenue to cost ratio.
Return Ratio: Schedule rate of return divided by overall rate of return.
921 Hillstead, Exh. No. KMH-1T at 26:8-15.
922 Hillstead, Exh. No. KMH-1T at 27:14-18.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 145
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Basic Charge
530 Public Counsel recommends that the Commission reject the Company's proposed increase
in customer charges for both residential electric and natural gas general service. Public
Counsel witness Dismukes criticizes the Company for including non-customer related
activities into its cost allocation for calculating the basic charge.923
531 Public Counsel's calculation for what is necessary to recover customer related costs in the
basic charge amounts to $9.93 for electric schedule 1 in RY1 and$11.44 for gas schedule
101 in RY 1.92a Beyond the arguments for using those figures, Dismukes asserts that higher
basic charges reduce incentives for customers to conserve. Furthermore, Public Counsel's
analysis estimates that low-use electric residential customers would see an increase of
15.57 percent if the Company's proposal were to go into effect compared to the proposed
average rate increase for all residential customers of 13.02 percent.925 For low-use gas
customers, the bill increase would be 9.19 percent with the Company's proposal, as
opposed to a 6.74 percent average rate increase for all residential customers.926 Public
Counsel highlights the close correlation between having low usage and being low income
to support its position.
AWEC' Response Testimony
532 AWEC witness Kaufman begins the discussion of rate spread by referencing Staff's
"recent practice of characterizing deviations from rate parity of less than 0.05 as within the
margin of error, more than 0.1 as unreasonable, more than 0.2 as excessive, and deviations
more than 0.3 as grossly excessive."927 AWEC argues for rate increases described in Table
4 and 5.
923 Dismukes, Exh.No. DED-1T at 9:13-17.
924 Dismukes, Exh.No. DED-1T at 9-10.
925 Dismukes, Exh.No. DED-3.
926 Dismukes, Exh.No. DED-4.
927 Kaufman, Exh. No. LDK-1CT at 10:17-11:1.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 146
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Table 4: Recommended Electric Rate Change as Percent of Average928
Schedule Parity % of Avg. % of Avg.
(AWEC COS) Change RY1 Change RY2
Residential Service 1 0.85 51 150
General Service 11-12 1.18 125 75
Large Gen. Service 21-22 1.21 150 50
XL Gen. Service 25 1.30 200 25
Pumping Service 31-32 1.06 100 100
Street/Area Lights 41-48 1.08 100 100
Gen. EV 13 0.27 0 200
Large Gen. EV 23 0.14 0 200
Table 5: Recommended Gas Rate Change as Percent of Average929
Schedule Parity % of Avg.
(AWEC COS) Change RY1
Gen. Service 101 0.97 100
Large Gen. Service 111 1.21 50
Interruptible 131 1.34 25
Transport 146 0.74 150
533 Kaufman also notes that the Company's rate spread usually includes Colstrip costs and
rate impacts. Kaufman expresses concern that when the Colstrip tracker retires there will
be rate impacts that would result in the residential rate schedule moving further below rate
parity.930
Rate Design- Schedule 25 Special Contracts
534 In addition to its proposals for rate spread,AWEC proposes several changes to the rate
design for Schedule 25 that do not affect other rate schedules.93i These include:
• Increasing demand charges by 50 percent in RY1 and 25 percent in RY2.
928 Kaufinan, Exh. No. LDK-lCT at 12.
929 Kaufrnan, Exh. No. LDK-lCT at 12.
930 Kaufman, Exh. No. LDK-lCT at 13:10-14:2.
931 Extra Large General Service(electric).

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 147
ORDER 08
• Increasing the discount for usage greater than 115 kV primary voltage discount
from $1.93 to $4.39 ($6.10 ifAWEC's recommended COSS allocation is not
adopted); and
• Modifying the discount to apply to customers served through substations not
owned by the Company.932
The Energy Projects Response Testimony
535 TEP recommends the Commission reject Avista's proposal to increase customer charges
for residential and commercial electric customers as well as general service gas customers.
TEP witness Colton offers an in—depth study related to Avista's rate proposals using a
"stratification approach" which is further detailed in his testimony related to equity. In
short, Colton suggests that Avista's proposal to increase the BMC will disproportionately
impact lower income households who typically have lower average usage levels and
therefore would pay proportionally more with a higher basic charge.933
NWEC' Response Testimony
536 NWEC witness McCloy recommends the Commission reject Avista's proposal to increase
customer charges for residential and commercial electric customers as well as general
service gas customers.934 McCloy argues the purpose of the fixed charge is not to pay the
utility's total fixed costs. Instead, McCloy advocates for fixed charges to focus on
recovery for customer service, metering, and billing.
537 McCloy further testifies that the Company's proposed use of the customer charge
complicates decoupling mechanisms, arguing that any costs can be considered a fixed cost
over a long enough period of time. Recovering more revenue from a large basic charge
does help decouple revenue from sales, but McCloy argues that this is not a preferred
decoupling strategy. McCloy characterizes a high fixed charge as raising the "floor" for
utility revenues, without benefiting customers.935
538 McCloy also references in testimony an upcoming decision in California related to
income-based fixed charges. NWEC encourages future consideration of creative rate
932 Kauftnan, Exh. No. LDK-1CT at 16-17.
933 Colton,Exh. No. RDC-1T at 65:10-15.
934 McCloy, Exh.No. LM-1T at 3:2.
935 McCloy, Exh.No. LM-1T at 9:10-15.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 148
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design proposals that can bolster low-income affordability, but asserts more evidence is
needed for supporting such a novel idea.936
539 NWEC witness Gehrke recommends using the generation allocator SO to allocate costs
for Colstrip consistent with Commission rule and deviating from the Settlement regarding
Colstrip allocation.937 Gehrke argues the SO allocation would better match cost of service
principals.938
Walmarts Response Testimony
Rate Spread
540 Walmart's witness Perry testifies in support of aligning rates more closely with the cost of
service for each rate class.939
541 Perry identified that Avista's proposed electric revenue allocation brings each class closer
to cost of service but that parity ratios remain too far away from parity. While Perry
supports Avista's initial proposed revenue requirement, they assert that with a lower
revenue requirement Walmart would support maintaining the initial increase allocated to
Schedule 1, equal increases to Schedules 13, 23, and 31/32, and all remaining revenue
collected through an equal increase split between schedules 11/12, 21/22, and 25.941
Walmart supports the Company's rate spread proposal for gas service.941
Avista's Rebuttal Testimony
542 On rebuttal,Avista agrees to modify its basic charge proposal to reflect Staff's
recommendation of a$1.00 increase to the basic charge for residential customers on both
the gas and electric side.Avista asserts that it continues to believe in better aligning fixed
costs and basic charges and offers this compromise in the spirit of reducing the number of
contested issues.942
936 McCloy, Exh.No. LM-1T at 10:1-5.
937 Gehrke, Exh.No. WG-IT at 9:20-23.
938 Gehrke, Exh.No. WG-IT at 10:3-8.
939 Perry, Exh.No. LUP-1T at 18:10-12.
Sao perry, Exh.No. LUP-1 T at 23:1-6.
941 Perry, Exh.No. LUP-IT at 23:15-18.
942 Miller, Exh. No. JDK-8T at 13:1-6.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 149
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543 Avista does not oppose changes to the rate design of the Electric Extra Large General
Service in Schedule 25 but suggests a more modest change. Rather than a 50 percent
increase followed by a 25 percent increase in demand charges,Avista suggests a 25
percent increase for RY1 and RY2.943
544 Avista insists that the Commission should not consider party positions relitigating a
decision from a Full Multiparty Settlement Stipulation.944 Company witness Miller points
out that NWEC offered supplemental testimony supporting the Colstrip Tracker and
Schedule 99 as part of the Settlement Agreement in that docket.
NWECs Cross Answering Testimony
545 NWEC does not support AWEC's proposal to alter the Company's treatment of
Colstrip.945
Public Counsel's Cross Answering Testimony
546 Public Counsel witness Dismukes argues that the Company overstates the necessity of
increasing the BMC and urges the Commission to reject Staff's recommendation to raise
residential basic charges by $1.00.
547 According to Public Counsel,Avista recovers "82.4 percent of customer-related costs for
electric Residential Service and 51 percent of customer-related costs for natural gas
general service customers."946 Dismukes further argues that decoupling mechanisms
already allow the utility to reconcile volumetric rates with changes in volumetric use.94'
Finally, Dismukes reiterates that increases in the BMC impact low-income customers
disproportionately.941
548 Dismukes opposes AWEC's proposed rate spread.949 Public Counsel highlights that
AWEC did not factor in its proposal the full rate increase the Commission approved in
Avista's most recent GRC. Dismukes elaborates that the "AWEC proposal would add
941 Miller, Exh. No. JDK-8T at 15:16-21.
944 Miller, Exh. No. JDK-8T at 16:16-21.
945 Gehrke, Exh.No. WG-8T at 11:11-16.
946 Dismukes, Exh.No. DED-10T at 8:18-20.
94'Dismukes, Exh.No. DED-1OT at 8:20-21.
94s Dismukes, Exh.No. DED-1OT at 9:7-16.
949 Dismukes, Exh.No. DED-10T at 3.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 150
ORDER 08
compounding disproportionate rate increases to low-load factor customers before it is fully
known what the relative cost of providing electric service to different customer classes
will be going forward."950 Dismukes recommends the Commission accept the Company's
proposal to equally allocate any potential rate change across all customer classes.
549 Public Counsel also opposes AWEC's proposal to include Colstrip costs and revenues into
rate spread considerations.951
AWECs Cross Answering Testimony
550 Kaufman notes that NWEC's reallocation of Schedule 99 would lead to Schedule 25
receiving an increase of 15.5 percent rather than 11.7 percent. Kaufman notes that this
would be significant because Schedule 25 already is above parity, and a higher-than-
average rate increase would grow the gap in parity.952 AWEC suggests "spreading the
combined revenue from base rates and Schedule 99 according to the approved allocation,
then subtracting the generation-based allocation of Schedule 99 from the combined
revenue to determine the appropriate base rate revenue" as a method to alleviate that
concern.953
Parties'Briefs
Avista
551 In the Company's post-hearing brief,Avista suggests the Commission does not need to
approve either Avista or AWEC's Cost of Service Study in this proceeding,but rather
should recognize that both are directionally similar and accurate for setting rates.954
552 On electric rate spread, the Company is supportive of AWEC's proposed rate spread for
RYI and RY2.Avista acknowledges that Schedules 11/12, 21/22, and 25 are overpaying
while Schedule 1 is underpaying.955 However,Avista argues the Commission should reject
AWEC's positions related to Schedules 13, 23, and 99.Avista also argues for an equal
percentage increase for Schedules 13 and 23 consistent with its original filing.Avista
95'Dismukes, Exh.No. DED-1OT at 3:13-16.
951 Dismukes, Exh.No. DED-10T at 7:12.
952 Kauftnan, Exh. No. LDK-6T at 3:10-17.
953 Kaufman, Exh. No. LDK-6T at 3:21-22.
954 Avista's Post-Hearing Brief¶¶ 159-60.
955 Avista's Post-Hearing Brief¶ 161.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 151
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further maintains that Schedule 99 should not be factored into rate spread because the
tariff is separate and distinct, and the allocation was agreed to in a prior settlement.956
553 Similarly, for natural gas rate spread,Avista is supportive of AWEC's position because the
Cost-of-Service Studies that both the Company and AWEC performed show Schedules
111/112 and 131/132 are overpaying and Schedule 146 is underpaying.957
554 Regarding rate design,Avista is supportive of Staff's proposal for$1.00 increases to
residential basic minimum charges for both electric and gas customers. Further, the
Company supports AWEC's recommendation related to Schedule 25 demand charges, but
recommends the Commission approve a 25 percent increase for RY1 and RY2, instead of
the 50 percent increase in RY1 AWEC proposes to support full-cost recovery while
reducing variability of rate changes to Schedule 25 customers. The Company is also
supportive of AWEC's proposed increase to the greater than 115 kV discount from$1.93
to $4.39 for Schedule 25 customers.958
555 Finally,Avista argues the Commission should disregard the arguments NWEC put forward
regarding Colstrip Schedule 99, on the basis that the allocation is part of a settlement, to
which NWEC was a signatory.959
Staff
556 Staff reiterates its argument that the Commission should reject Avista's original rate design
proposal and adopt the proposed $1.00 increase to basic charges for residential electric and
gas customers. Staff argues that after discovery, they could not validate the Company's
claims regarding the basic charge and that Staff's proposal matches the principle of setting
the basic charge to recover"direct customer costs."960
Public Counsel
557 Public Counsel requests the Commission adopt an equal rate spread for electric and gas
customers. While Public Counsel concedes it cannot refute Avista's class cost of service
956 Avista's Post-Hearing Brief¶ 163.
957 Avista's Post-Hearing Brief¶ 164.
958 Avista's Post-Hearing Brief¶¶ 165-67.
959 Avista's Post-Hearing Brief¶ 168.
960 Staff's Post-Hearing Brief¶¶ 116-18.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 152
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study showing a 0.86 rate parity, they argue that the Commission should"exercise caution
and approve an equal allocation."961
558 Public Counsel presents four reasons for adopting an equal rate spread. First, an
asymmetric rate spread would have outsized impacts on parity and may overshoot its goal.
Second, Public Counsel asserts the class cost of service study has not completely captured
the impacts of the last rate adjustment because of"pancaking"rate cases. Third, the
removal of Colstrip and move towards renewables energy is moving residential ratepayers
towards parity as they carry less of Colstrip and more of the costs from renewables.
Fourth, residential ratepayers are already troubled by recent increases and potential
overcorrections would intensify inequities from rate increases.962
559 Regarding rate design, Public Counsel argues the Commission should reject Avista's
proposal to increase the basic charge. Public Counsel argues the basic charge should not
be increased because Avista overstates costs attributable to customer-related activities,
stating 82.4 and 51 percent of costs for electric and gas customers respectively is
recovered through existing basic charges. Further, Public Counsel reasons that shifting
costs from variable to fixed reduces conservation incentives, and that an increase is not
necessary with a decoupling mechanism. Finally, Public Counsel argues that Staff's $1.00
increase should be rejected for the same reasons.963
AWEC
560 AWEC argues in its post-hearing brief that the Commission should adopt the rate spread
Avista proposes in its Rebuttal Testimony.AWEC opposes Public Counsel's approach for
an equal spread of revenue requirement on the basis that Public Counsel did not provide
any supporting evidence or perform its own cost of service study and maintains that its
suggested approach could in fact exacerbate the existing class parity levels.964
561 Additionally,AWEC argues that the Commission should adopt its three recommended
changes to Schedule 25, as modified by Avista, which AWEC asserts are unopposed. The
changes include (1) increasing demand charges for energy blocks 1 and 2 by 25 percent in
RY1 and 25 percent in RY2, (2) increasing the primary voltage discount from$1.93/kW to
961 Public Counsel's Post-Hearing Brief¶ 128.
962 Public Counsel's Post-Hearing Brief¶¶ 129-34.
963 Public Counsel's Post-Hearing Brief¶¶ 135-36.
964 AWEC's Post-Hearing Brief¶¶72-80.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 153
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$4.39/kW, and(3) changing language in Schedule 25 to make the primary voltage
discount applicable to customers served through third parry substations.961
NWEC
562 NWEC reiterates its argument to alter Schedule 99 rate spread to the generation allocator
SO as detailed in witness Gehrke's testimony. NWEC argues that it has reevaluated its
position, even though it supported the Schedule 99 allocation as part of a settlement.966
NWEC explains that since the Commission adopted the settlement without conditions,
made the settlement part of the Order, it may go back and amend the allocation pursuant to
its authority under RCW 80.04.210 and WAC 480-07-875.967 NWEC argues in favor of its
Schedule 99 adjustment by asserting that the reallocation would be consistent with the
Commission's cost of service methodology.968
563 Finally,NWEC opposes the basic minimum charge increases proposed by both Avista and
Staff on the basis that the increase is not mandated by rule, law, or governing principle,
exceeds those of other Washington regulated utilities and disproportionately impacts
marginalized customers.969
Decision
564 The Commission finds Public Counsel's recommended approach to rate spread to be the
most reasonable and equitable in this case and therefore rejects the rate spreads put
forward by AWEC and Avista. The Commission also agrees with Staff and Avista that a
$1.00 increase to the minimum charge for electric and gas customers is supported by the
record. The Commission further finds that the three adjustments AWEC proposed for
Schedule 25, as modified by Avista, should be adopted. However,AWEC's proposals
regarding Schedule 13 and 23 should be rejected, as should the proposals from AWEC and
NWEC for modifications to Schedule 99 allocations and calculation in rate spread.
565 Regarding rate spread, the Commission recognizes that some rate classes are not within
the range of parity that Staff has recently used to evaluate deviations from rate parity.971
965 AWEC's Post-Hearing Brief¶¶82-83 (Oct. 28, 2024).
966 WUTC a Avista Corp.,Dockets UE-240006&UG-240007,NWEC's Post-Hearing Brief¶¶29-
30, 34-35 (NWEC's Post-Hearing Brief).
967 NWEC's Post-Hearing Brief¶32 (Oct. 28, 2024).
968 NWEC's Post-Hearing Brief¶¶28, 37.
969 NWEC's Post-Hearing Brief¶¶39-41.
970 See, Kaufman,Exh.No. LDK-1CT at 10:17-11:1.

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While the Commission finds the framework instructive and helpful, it is not mandated that
each class falls within a certain range when looking at rate parity ratios, and as highlighted
in Public Counsel's arguments, there are a number of factors likely to impact parity ratios
over the rate effective period. While we acknowledge that the cost-of-service study does
not capture all the increases from Avista's last rate case, as noted in Public Counsel's post-
hearing brief, early results show parity improving.971
566 We also recognize and agree with Public Counsel that the 2025 removal of Colstrip from
rates is likely to impact parity, and adopting a differential allocation in this case may in
fact have impacts not fully reflected in the record before us. Because of this, the
Commission finds Public Counsel's recommendation for an equal allocation is fair,just,
and reasonable, and that Avista's next cost of service study shall account for removal of
Colstrip from rates.
567 On rate design, the Commission agrees with Staff, as supported by Avista, that electric and
gas basic charges should be increased by $1.00 each.As Avista asserts, and Staff to some
degree confirms,Avista's current basic charge does not meet the fixed costs components
of the basic charge. Staff calculated the components of the electric basic charge to be
$10.93 and the natural gas components to be $18.60, and the $1.00 increase for gas and
electric basic service charge will move the charges closer to customer fixed costs.972
568 While Public Counsel,NWEC, and TEP do not support an increase to the basic charge due
to its disincentive to conserve and other impacts such an increase may have on
marginalized customers, the record supports an increase. We agree with Staff that the basic
charge is intended to recover"direct customer costs."973 While NWEC is correct that no
law requires an increase, it is within the Commission's discretion to order an increase
here. We are further in agreement with Staff, that a$1.00 increase for electric and gas
customers, is consistent with the principle of gradualism and is a fair,just, and reasonable
increase at this time.
569 AWEC's three adjustments to Schedule 25, as modified by Avista, are unopposed and
should be adopted. Those include (1) increasing demand charges for energy blocks 1 and 2
by 25 percent in RY1 and 25 percent in RY2, (2) increasing the primary voltage discount
971 AWEC's Post-Hearing Brief 131 (citing,Dismukes,Exh. DED-10T at 3:19-4:3, 5:1-6;Miller,
Tr. Vol. III at 327:16-23).
972 Hillstead, Exh. KMH-1T at 27:4-28:10.
973 PacifiCorp,Dockets UE-140762,UE-140617,UE-131384 &UE-140094, at 91 ¶216.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 155
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from $1.93/kW to $4.39/kW, and(3) changing language in Schedule 25 to make the
primary voltage discount applicable to customers served through third party substations.
570 Finally, we decline to adopt AWEC's proposal to include Colstrip in rate spread, NWEC's
proposal to reallocate Schedule 99, and AWEC's proposals related to Schedules 13 and 23.
For the proposals related to Colstrip, we agree with Avista that both AWEC and NWEC
were signatories to the original settlement, and that the settlement should not be amended
at this time. While we agree with NWEC that the Commission has the authority to order
changes to the settlement, we decline to do so now and there is no compelling reason
within this record to disturb what is settled. Finally, we agree with Avista and find
Schedules 13 and 23 are newly adopted and should have time to mature.Accordingly, an
equal percentage of base revenue increase is appropriate, consistent with our approach to
rate spread generally, and Avista's original filing.
Return on Purchase Power Agreements
Avistas Direct Testimony
571 Avista witness Kinney testifies that pursuant to RCW 80.28.410(2)(b) the Company has
included interest on qualifying PPAs (Chelan, Clearwater III and Columbia Basin Hydro)
at the Company's proposed rate of return in this general rate case of 7.61 percent.974
Kinney testifies that its pro forma adjustment includes interest totaling $2.16 million
included for RY1 (2025).975 This reflects interest to be deferred in 2024 and recovered in
2025 ($0.66 million), and incremental interest in 2025 of$1.5 million.976 Schultz testifies
that the net impact of this adjustment decreases Washington electric net operating income
(NOI)by $1,706,000.97
572 In RY2 (2026) Kinney states that it included $2.34 million in total PPA interest, resulting
in incremental increase of$176,000 above RY1 levels.978 The net impact of this
adjustment decreases Washington electric NOI by$139,000.979
974 Kinney,Exh. SJK-1 T at 49:13-15.
975 Kinney,Exh. SJK-IT at 49:15-17.
976 Kinney,Exh. SJK-IT at 49:17-18.
97 Schultz, Exh. KJS-IT at 86:20-21.
978 Kinney,Exh. SJK-1T at 49:18-20.
979 Schultz, Exh. KJS-1T at 95:16-17.

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NWM Response Testimony
573 NWEC witness Gehrke recommends that the Commission reject Avista's proposal to
provide an incentive for purchased power agreements. Gehrke states that aside from citing
RCW 80.28.410(2)(b),Avista does not provide additional rationale for the inclusion of the
incentive, one that NWEC argues will cost customers several million dollars over the rate
plan.9s0
574 Gehrke does not believe that Washington statute requires the Commission to provide a
return on PPAs.981 RCW 80.28.410(2) states the utility "may...defer for later consideration
by the Commission," costs included in subsections (a) and (b) —the latter including a rate
of return for PPAs.982 Gehrke testifies that"[1]ater consideration by the Commission"
indicates that the Commission retains its broad discretion to approve or reject a proposal
to receive a return on PPAs.983
575 Additionally, Gehrke highlights that the Oregon Public Utilities Commission (OPUC)
analyzed the premise that an inherent bias exists in utility resource procurement, one that
favors utility ownership of generation assets over PPAs due in part to an inability to earn a
return on PPAs.914 Witness Gehrke states that while the OPUC agreed that such a bias
exists, it had no evidence as to its size or impact on rates and thus warned about the
potential for incentives on PPAs to greatly outweigh the impact of the bias.985
576 Gehrke argues that Avista makes no showing that a bias exists, nor does the Company
make any attempt to quantify that bias. NWEC further argues that it is possible, even
likely, that rewarding Avista with a full rate of return for CETA-compliant PPAs would
overcompensate the utility at the expense of customers.986
577 NWEC witness Gehrke contends that rather than using utility financing (debt or equity)to
fund PPAs,Avista contracts with a third-party power plant owner and pays for the resource
over the contract's duration.987 Gehrke states that regardless of the method used to acquire
9a0 Gehrke, Exh.WG-1T at 2:14-17.
9" Gehrke, Exh.WG-1 T at 3:13-14.
912 Gehrke, Exh.WG-1 T at 3:14-16.
983 Gehrke, Exh.WG-1T at 3:16-19.
914 Gehrke, Exh.WG-1 T at 4:1-5.
9s5 Gehrke, Exh.WG-1T at 4:8-24, 5:1-2.
916 Gehrke, Exh.WG-1T at 5:5-7.
987 Gehrke, Exh.WG-1T at 5:15-17.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 157
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capital for a purchased power agreement project, the contracted price is structured to cover
the capital costs associated with the agreement, including a return on investment.988
Gehrke specifies that these costs are paid for by customers through the power cost rates.989
Gehrke thus argues that under Avista's proposal customers would be charged for two
financing costs, which is not appropriate for cost-based pricing.990
578 Gehrke contends that if the Commission concludes that it is inclined to provide the
incentive, RCW 80.28.410(2)(b) allows for"a rate of return of no less than the authorized
cost of debt and no greater than the authorized rate of return for the electrical
company."991 Gehrke further contends that in order to protect customers and keep CETA
compliance costs low, if the Commission decides to authorize a return, it should allow a
return for PPAs only equal to the cost of debt.992
579 Gehrke argues that since Avista must demonstrate that it acted prudently in order to
recover costs associated with the lowest reasonable-cost resource, it is counterintuitive
that adding additional costs to a contracted resource via a newly established return would
result in a greater acquisition of contracted resources.993 Gehrke emphasizes that Avista
must choose the lowest-cost resource that fits the resource need, which is true with or
without a return added for PPAs.994
580 In conclusion, Gehrke recommends that the Commission reject Avista's proposal to
include a rate of return for PPAs.995 In the alternative, should the Commission feel
compelled to provide an incentive, Gehrke believes that the Commission should set the
rate of return for PPAs at the cost of debt for the Company.996
988 Gehrke, Exh.WG-1 T at 6:14.
9a9 Gehrke, Exh.WG-IT at 5:17-18.
990 Gehrke, Exh.WG-IT at 5:18-20.
991 Gehrke, Exh.WG-1 T at 6:13-17.
992 Gehrke, Exh.WG-1T at 6:17-19.
99' Gehrke, Exh.WG-1T at 7:6-10.
994 Gehrke, Exh.WG-1T at 7:10-12.
99' Gehrke, Exh.WG-IT at 7:15-16.
996 Gehrke, Exh.WG-1T at 7:16-18.

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Staffs Response Testimony
581 Staff witness Hillstead does not agree that the Company should use a ROR of 7.61 percent
for calculating the interest in its PPA adjustment.997 Hillstead argues that the 7.61 percent
is a computation based on the Company's proposed capital structure which includes an
ROE of 10.4 percent.998 Hillstead further argues that using a rate of 7.61 percent results in
an inflated interest expense and thus a higher revenue requirement.999
582 Hillstead testifies that it has concerns with the Company's methodology for this
adjustment. The first issue is that pro forma adjustments are to be known and measurable,
not assumptions)000 The second issue in the Company's use of 7.61 percent, is that this
rate of return has not been authorized by the Commission and is solely based on the
Company's proposed capital structure.1001
583 Hillstead recommends that the interest rate for this adjustment be at Avista's cost of long-
term debt,per Staff witness Parcell's capital structure recommendations, which is 4.93
percent.1002 This is the appropriate rate to use because PPAs are contracts, not capital
investments.1003 In Hillstead's view, the lower end of the range should be used absent
adequate justification by the Company for the use of the upper end of the range.1004
Hillstead contends that the Company has made no such justification for the upper end of
the range.1005
NWEC's Cross-Answering Testimony
584 Gehrke argues that the Commission is not compelled to grant an incentive on CETA PPA
costs and retains broad ratemaking authority.1006 Additionally, in PSE's GRC, Gehrke
99'Hillstead, Exh. KMH-1T at 17:9-10.
998 Hillstead, Exh. KMH-1T at 17:10-12.
999 Hillstead, Exh. KMH-1T at 17:12-13.
1000 Hillstead, Exh. KMH-IT at 17:17-18.
1001 Hillstead, Exh. KMH-IT at 17:18-20.
1002 Hillstead, Exh. KMH-1T at 18:11-14.
100' Hillstead, Exh. KMH-IT at 18:14-15.
1004 Hillstead, Exh. KMH-IT at 18:15-16.
100'Hillstead, Exh. KMH-IT at 18:16-17.
1006 Gehrke, Exh.WG-8T at 10:22 and 11:1-2.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 159
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states that The Energy Project is making a similar argument regarding the language of
RCW 80.28.410 and that NWEC concurs with this position.1007
Avistas Rebuttal Testimony
585 Avista witness Andrews does not agree with NWEC's assertion that a return on PPAs does
not"follow traditional cost-based ratemaking."1008 Andrews argues that rather than being a
cost-based item, the return is essentially a performance-based incentive, created by the
Legislature, which serves to compensate utilities for securing clean energy PPAs over
potentially more expensive self-build options.
586 Andrews testifies that Senate Bill 5116 states, in reference to the transition to clean
energy, that the "legislature declares that utilities in the state have an important role to play
in this transition, and must be fully empowered, through regulatory tools and incentives, to
achieve the goals of this policy."loo9 Andrews argues that the purposeful inclusion of"a
rate of return of no less than the authorized cost of debt and no greater than the authorized
rate of return of the electrical company...," is such an incentive.1010
587 Avista witness Andrews further argues that incentives of any type are meant to drive
certain behaviors and that for CETA, an incentive rate of return will help drive adoption of
clean energy PPAs and/or remove any bias towards selecting self-build options!011
588 Company witness Andrews argues that the findings of the Oregon Public Utility
Commission are not relevant in this instance.'O"Andrews states that witness Gehrke cites
an investigation—from 2010—where the OPUC found it to be inconclusive as to whether
customers were harmed by paying an incentive rate of return as compared to the savings
from the mitigation of a self-build bias.'O"Andrews argues that such a"stale"proceeding
in Oregon should not be used to supplant the legislature's intent upon the passage of
CETA, that allows for an incentive rate of return.lol4
'00' Gehrke, Exh.WG-8T at 11:2-6.
"O'Andrews, Exh. EMA-6T at 50:5-9.
`09 Andrews, Exh. EMA-6T at 50:11-14.
'0'0 Andrews, Exh. EMA-6T at 50:14-16.
'0"Andrews, Exh. EMA-6T at 51:1-6.
1112 Andrews, Exh. EMA-6T at 51:9-10.
1013 Andrews, Exh. EMA-6T at 51:10-12.
1014 Andrews, Exh. EMA-6T at 51:18-20.

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589 Andrews states that it has filed a 4.99 percent cost of debt, which has been supported(or
not opposed)by the parties in this case.1015 Witness Andrews testifies that Staff witness
Hillstead states that the cost of long-term debt is 4.93 percent.1016 While Andrews
concedes that this is correct, it contends that what is contemplated in the law is the
"authorized cost of debt", not authorized cost of long-term debt.1017 As such,Andrews
argues that if the Commission were to authorize a return on PPAs at the authorized cost of
debt, 4.99 percent would be the appropriate value.1018
Parties Briefs
Avista
590 In its post-hearing brief,Avista reiterates its previously stated position, that the
Commission should authorize the Company's Pro Forma Power Purchase Agreement
Interests Adjustments as proposed(3.23 RY1 and 5.12 RY2).1019 Avista opposed NWEC's
proposal to remove interest; and Staff's proposal to limit interest to the Company's cost of
debt.
Staff
591 In opposition, Staff's brief reiterates that the return on CETA-qualifying PPAs should be
limited to the Company's authorized cost of debt.1020 Staff notes that RCW
80.28.410(2)(b) controls, and provides a range between an authorized cost of debt and its
authorized rate of return. Staff notes, that this range is difficult to square with NWEC
proposal to not allow any return of these costs. Staff's brief concluded by noting how the
Commission has broad discretion in determining appropriate deferred costs of capital; and
the Company bears the burden of showing proposed rates are fair,just, reasonable and
sufficient. Staff avers that Avista has not provided a sufficient showing as to why the high-
end of the range would be appropriate here. 1021
1015 Andrews, Exh. EMA-6T at 52:11-12.
1016 Andrews, Exh. EMA-6T at 52:12-13.
1117 Andrews, Exh. EMA-6T at 52:13-14.
""Andrews, Exh. EMA-6T at 52:14-16.
1019 Avista's Post-Hearing Brief, at¶ 113.
1020 Staff's Post-Hearing Brief, at¶¶ 106-109.
1021 Staff's Post-Hearing Brief, at¶¶ 106-109.

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NWEC
592 In its brief,NWEC reiterates its previously stated position that approving a rate of return
for PPAs executed for CETA compliance is not legally required of the Commission.
NWEC rejects both Staff and Avista's proposals here, because the "burden to demonstrate
that an incentive is necessary" has not been met.1022 NWEC points out that other
performance-based ratemaking constructs are being reviewed in an ongoing proceeding,
citing to Docket U-210590. NWEC urges the Commission to exercise its discretion to
reject this rate of return,because it will increase costs for customers. NWEC emphasizes
that an incentive is inappropriate—because Avista is already required to choose the
lowest-cost resource that fits the resource needs.
TEP
593 In its brief, TEP proffers that RCW 80.28.410 uses permissive language, such that the
Commission has the discretion to determine whether"any" cost recovery is appropriate.
TEP goes on to identify three reasons why authorizing a rate of return inappropriate
here.1023 First, TEP contends that capital costs are already included in the PPA contract
price, such that customers would be forced to pay twice for capital costs of such projects;
TEP describes this as a"phantom cost of capital."1024 Second, TEP argues that approving
a rate of return would raise the cost of contracting for clean energy—which is against the
state's clean energy policy. Finally, TEP highlights that Avista bears the burden and has
not demonstrated any convincing arguments for this incentive. 1025
Decision
594 The Commission finds it appropriate to allow a return on Avista's PPA. The plain language
of RCW 80.28.410 gives the Commission the discretion to allow such costs to be deferred
and is intended to incentivize PPAs, as they often are the lowest cost resource. The PPAs
at issue are for resources which need to be procured and these PPAs are the lowest
reasonable cost resources available. The statute contemplates returning a range between
the cost of debt and the authorized rate of return. See RCW 80.28.410(2)(b). This return is
meant to incentivize procurement of resources at the lowest reasonable cost to aid the
utilities in meeting Washington's long-term decarbonization goals. In reviewing the
record, we conclude that Avista did not present a case warranting the authorized rate of
return, and as such, we agree with Staff that the lower end of the spectrum, the cost of
1022 NWEC's Post-Hearing Brief, at¶¶ 12-27.
1023 TEP's Post-Hearing Brief, at¶¶27-33.
1024 TEP's Post-Hearing Brief, at¶59.
102'TEP's Post-Hearing Brief, at¶¶32-33.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 162
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debt, is appropriate here, and that the appropriate cost of debt is 4.93 as proposed by Staff.
We believe that 4.93 percent is the appropriate cost of debt given the statutory intent for
utilities to enter long-term PPAs to provide service to their Washington customers, with
the expectation that those resources reduce GHG emissions to meet Washington's long-
term emissions targets.
Targeted Electrification Pilot
Avistas Direct Testimony
595 Avista witness Thackston describes the Company's strategy for natural gas
decarbonization as diversifying and transitioning from conventional fossil fuel natural gas
to RNG, hydrogen, other renewable fuels, and reducing consumption via conservation and
energy efficiency. Witness Thackston further adds that the Company will also purchase
carbon offsets as necessary to meet CCA compliance obligations.1026
Sierra Clubs Response Testimony
596 Witness Dennison's testimony urges Avista to conduct a robust Targeted Electrification
Pilot program to advance electrification.102' Dennison specifically identifies (1)non-pipe
alternatives (NPAs) analysis, (2) identifying ways to incorporate electrification into its
CCA compliance strategy, and(3) opportunities to coordinate electrification efforts with
other electrification programs and policies as experiences that would help Avista.
597 Dennison continues to more fully describes each of these benefits:
• NPAs can avoid costs related to replacing,upgrading, or expanding gas system
infrastructure; avoid the risk of future stranded assets; reduce gas consumption and
emissions.1121
• CCA compliance requires reducing GHG emissions, Dennison cites electrification
as one of the most"promising, cost-effective strategies for reducing
[emissions]."1029
• Finally, Dennison claims targeted electrification will help coordinate electrification
efforts to make the most of investments. Sierra Club specifically mentions
1126 Thackston,Exh. JRT-1T at 9:5-9.
112'Dennison,Exh. JAD-1T at 31:3-5.
lots Dennison,Exh. JAD-1T at 20:13-18.
1129 Dennison,Exh. JAD-1T at 31:20-23.

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incentives, state & federal rebates and tax credits as incentives that would be easier
to access.1030
598 Dennison also cites PSE's targeted electrification pilot as a success.'031 Dennison
mentions provisions of the PSE settlement agreement that resulted in the creation of the
pilot, including directives to PSE to demonstrate material benefits to low-income
participants, enroll eligible participants in bill assistance programs, and include
appropriate low-income customer protections.1032
599 Dennison identified accomplishments of the PSE electrification pilot in testimony
including:
• 7,712 home electrification assessments with 30 percent reaching Named
Communities.
• 852 heat pump rebates distributed.
• 14 low-income direct install weatherization and electrification projects and
identified candidates for small business and multi-family retrofit projects.
• Development of a joint pilot with Seattle City Light aiming to install heat pumps in
20 homes through the Low-Income Weatherization Program.
600 Dennison made four recommendations for a potential pilot program including:103 3
Customer Engagement targets
Dennison recommends a target of engaging 5,000 customers through home
electrification assessments and providing at least 1,000 rebates for
electrification equipment between June 2025 and December 2026.
Provisions to engage low-income customers and Named Communities
Dennison suggested that language from ESHB 1589 about the inclusion of
low-income electrification programs in large combination utilities'
Integrated System Plans(ISPs) could inform similar provisions for Avista.
Dennison further adds that target numbers for low-income and Named
Communities participation could be beneficial.
....Dennison,Exh. JAD-IT at 32:5-13.
1031 Dennison,Exh. JAD-1T at 33:5-6.
1132 Dennison,Exh. JAD-1T at 33:7-16.
1033 Dennison,Exh. JAD-1T at 34:4-13.

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Provisions for public reporting
Dennison recommends a report summarizing the results of the pilot by
January of 2027; including information about the number of customers
engaged through each measure, the number and types of equipment
incentives provided, the Company's cost for providing each measure, and
lessons learned.
Provisions to incorporate the Pilot into Avista's decarbonization and
CCA compliance strategies
Dennison recommends using the lessons from an electrification pilot to
inform a Gas System Decarbonization Plan for the Company. The witness
further adds that the costs of the pilot should be treated as CCA compliance
costs and shared between gas customers and shareholders, this would be
different than how costs for PSE's pilot were treated.
Avista's Rebuttal Testimony
601 The Company does not support the proposal for the Commission to require a targeted
electrification pilot. Witness Bonfield claims, "If or when electrification is cost-effective,
the Company will pursue it as part of its [Preferred Resource Strategy] PRS".1034 Witness
Bonfield offers that in the Company's 2025 Natural Gas IRP, it plans to refine
electrification assumptions to include "an end use model to estimate a customer's decision
with equipment at its end of life and new building code requirements."1035
NWEC' Cross Answering Testimony
602 NWEC testifies in support of a targeted electrification pilot, citing the "valuable
experience in integrating electrification into the CCA compliance strategy."1o36
603 In response to the Seirra Club's suggestion that "it may be appropriate to set a target for
the number of electrification retrofits performed in low-income households and Named
Communities through the Pilot. This and other aspects of the Pilot related to low-income
and Named Community participation could be informed by input from the Company and
other parties,"witness Gehrke recommends:1037
1034 Bonfield, Exh. SJB-5T at 56:10-11.
1035 Bonfield, Exh. SJB-5T at 56:12-14.
1036 Gehrke, Exh.WG-8T at 2:22-23.
1017 Gehrke, Exh.WG-8T at 3:8—5:13.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 165
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• A program target of 40 percent of its customers from low-income or Named
Communities.
• A minimum of 25 no-cost, high-efficiency electric-only heat pump installations to
low-income and Named Community customers.
• Avista should acquire operational experience in conducting electric-only heat
pump installations for its customers.
• If the recommendations above are not adopted,NWEC encourages the Company
to consult with its Energy Assistance Advisory Group and Conservation Resources
Advisory Group on low-income electrification programming.
AWECs Cross Answering Testimony
604 AWEC does not mention targeted electrification directly in cross-answering testimony,
however,AWEC notes that"[n]o additional direction from the Commission is required to
obligate Avista to appropriately plan to meet long-term CCA compliance obligations cost-
effectively. While the proposal does not add to Avista's planning burden, prescribing
certain decarbonization planning requirements risks biasing the decarbonization plan
towards ineffective solutions."'03s
Parties'Briefs
Avista
605 In briefing,Avista reiterates that it does not support Sierra Club's proposal that the
Company be required to perform a targeted electrification pilot.1031
Sierra Club
606 Sierra Club requests that the Commission require Avista to conduct a targeted
electrification pilot with various specific targets, similar to the Puget Sound Energy
electrification pilot following its 2022 general rate case.`0 Sierra Club states that a
targeted electrification program would yield several benefits related to decarbonization,
CCA compliance, leveraging additional sources of funding, and synergy with Avista's
NPA analyses.1041
1031 Kaufrnaxi, Exh. LDK-6T at 12:8-14.
1039 Avista's Post-Hearing Brief, at¶ 158.
1040 Sierra Club's Post-Hearing Brief, at¶¶39-40.
1041 Sierra Club's Post-Hearing Brief, at¶40.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 166
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607 Sierra Club further recommends that if the Commission approves a performance incentive
mechanism (PIM) for Avista, that such a mechanism be tied to Avista meeting customer
engagement targets related to the targeted electrification pilot.1041 Sierra Club suggests that
its proposed PIM would aid the Commission's evaluation of Avista's efforts to advance
state climate policy as reflected in RCW 80.28.425.1041 Sierra Club also proposes that the
targeted electrification pilot be considered as a CCA compliance cost and recovered from
Avista's gas customers.1044 Sierra Club notes that NWEC is supportive of the proposed
targeted electrification pilot, as the pilot will aid Avista in meeting CCA emissions goals
and advancing equity, and agrees with NWEC's proposals for additional compliance
actions regarding the pilot.1041
608 Sierra Club disagrees with Avista's proposal to review electrification in the context of its
IRP for three reasons. Sierra Club raises concerns with (1)Avista's electrification analysis
in its IRP, (2) the delay in waiting for future IRP processes, and(3) the distinct purposes of
a pilot project as compared to the IRP process, suggesting that the IRP system-level
analysis is ill-suited to identifying smaller scale projects.1046
NWEC
609 NWEC is generally supportive of Sierra Club's proposal to require Avista to implement a
targeted electrification pilot and, similar to Sierra Club, asserts that such a pilot would
assist Avista in meeting its CCA obligations and promote equity in the context of
decarbonization.1047 NWEC recommends that the Commission adopt Sierra Club's
proposal, with modified thresholds to require that the program target 40 percent of
customers from low-income or Named Communities and a minimum of 25 no-cost high
efficiency electric-only heat pump installations to low-income and Named Community
customers.1048 In the alternative,NWEC recommends that the Commission require Avista
to consult with its Energy Assistance Advisory Group and Conservation Advisory Group
regarding a timeline that would align with other targeted electrification programming.1049
1042 Sierra Club's Post-Hearing Brief, at¶41.
1043 Sierra Club's Post-Hearing Brief, at¶41.
1044 Sierra Club's Post-Hearing Brief, at¶42.
loos Sierra Club's Post-Hearing Brief, at¶43 (Oct. 28, 2024) (citing Gehrke,Exh.WG-8T at 4:7-
16, 5:4-13).
1046 Sierra Club's Post-Hearing Brief, at¶44.
1047 NWEC's Post-Hearing Brief, at¶¶43-45.
loos NWEC's Post-Hearing Brief, at¶45.
1049 NWEC's Post-Hearing Brief, at¶45.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 167
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Decision
610 The Commission declines to require Avista to implement a targeted electrification
program in this proceeding.Although the aims of Sierra Club and NWEC are laudable, the
Commission determines that the benefits of future electrification may be adequately
addressed as part of the Company's IRP process, as suggested by Avista witness
Bonfield.'0s0 Furthermore, similar to the decision concerning the request that the Company
adopt a decarbonization plan, directing an electrification pilot would appear to be
explicitly prohibited by I-2066. The Commission believes that it would be prudent to
withhold further consideration of an electrification pilot until a future GRC, where the
Commission will have the benefit of full testimony and briefing regarding how the pilot
would promote state emissions policy goals in light of I-2066. To the extent that a
component of the requested electrification pilot would have required an analysis of non-
pipeline alternatives, we do not find that analyses of non-pipeline alternatives are
necessarily prohibited by I-2066 in the abstract. Indeed, earlier in this Order, we directed
the Company to conduct two NPA analyses on natural gas distribution projects related to
customer growth for any potential projects that exceed $500,000.
Wildfire Expense Balancing Account
Avista's Direct Testimony
611 In Avista's 2020 GRC, the Commission approved a two-way Wildfire Expense Balancing
Account to track the variability in Avista's wildfire expenses against an established
baseline, with deferral of the difference in actual wildfire expenses, up or down, over the
10-Year Wildfire Resiliency Plan.1051 The authorized wildfire expense baseline was first
set at $3.1 million for Washington electric operations, effective October 1, 2021, and
updated to $5.1 million in Dockets UE-220053, et. seq., with any deferrals above or below
this level to be deferred for later return to or recovery from customers.1052
612 In this proceeding, the Company is proposing to increase its annual baseline to $8.3
million for each year of its proposed two-year rate plan.1053 This is based on projected
annual wildfire expenses of$14.9 million is 2025 and $13.8 million in 2026, on a system
basis. Washington's share of these expenses, excluding labor, result in the proposed $8.3
1050 Bonfield, Exh. SJB-5T at 55:22—56:16.
1051 Andrews, Exh. EMA-1 T at 17:19— 18:2.
1052 Andrews, Exh. EMA-IT at 18:2-5 and 18:16-18.
1053 Andrews, Exh. EMA-1T at 19:4-6.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 168
ORDER 08
million annual baseline amount.1054 Avista states that the proposed increase in the baseline
is primarily caused by its enhanced risk-based vegetation management program, which
includes 100 percent risk-tree identification annually, and which has resulted in a"much
bigger and more expensive proposition than originally anticipated."loss
613 In addition, the Company requests carrying charges on its existing deferred Wildfire
balance, any new deferred balances going forward, and while any balances are being
amortized.1016 The Company claims that in its original request for the deferral mechanism
it inadvertently proposed"no interest on the unamortized Wildfire deferral balances,"
however its original intent was to accrue interest as the balances were being amortized and
recovered from, or returned to customers!!"Avista notes that the Commission approved
the balancing account deferral and amortization without carrying charges of any kind.los8
The Company argues that carrying charges are appropriate due to the large deferral
balances it has experienced in recent years, the higher carrying costs it has experienced to
cover all its operating costs, as well as its delayed recovery of wildfire costs.1059 The
Company proposes that its carrying charges be based on its actual cost of debt, updated
semi-annually on January 1, and July 1 each year, effective December 21, 2024 (Rate Year
1) 1060
Staff's Response Testimony
614 Staff does not contest Avista's proposed increase to its Wildfire Balancing Account
baseline, from $5.1 million to $8.3 million annually.1061 Staff also does not contest
Avista's proposal to accrue interest on its deferred balance, because "the circumstances
were outside of the utility's control and the costs were unexpected and significant."1062
Staff notes, however, that since the balancing account's creation in 2020, it is becoming
increasingly difficult for Staff to distinguish between spending that is specific to wildfire
1054 Andrews, Exh. EMA-1T at 19:6-10.
loss Andrews, Exh. EMA-1T at 20:13—21:11.
1056 Andrews, Exh. EMA-1 T at 24:11-17.
1057 Andrews, Exh. EMA-IT at 24:2-10.
1051 Andrews, Exh. EMA-1 T at 24:8-10.
1059 Andrews, Exh. EMA-1 T at 24:11-13.
1060 Andrews, Exh. EMA-1T at 24:16-17.
1061 Erdahl, Exh. BAE-1T at 26:7-10.
1062 Erdahl, Exh. BAE-IT at 26:14-16.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 169
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risk mitigation and"spending which results in other shared benefits, such as enhanced
reliability and reduced storm damage."1063
615 Staff offers two proposals forAvista's next GRC: (1) to fold into base rates all wildfire
mitigation costs that result in other shared benefits; and (2) "to clearly identify and report
learnings from any enhanced grid hardening(i.e.,undergrounding) wherever those
projects are located on Avista's electric transmission and distribution grid."1o64 Staff
identifies costs that it believes would be considered exclusively related to mitigation of
wildfire risk and properly contained in a future balancing account, including: weather
monitoring and establishment of prescribed system operating parameters; undergrounding
of equipment in high-fire risk areas; identification and removal of risk trees (accelerated
vegetation management); and the development of public power cutoff protocols and
mechanisms.lobs Staff argues that standard vegetation management and grid hardening
benefit not only wildfire resilience, but also system reliability and storm damage
mitigation, and would be more properly included in base rates in the future.1066 Staff
further argues for eventual phasing out of the wildfire balancing account completely,
stating that, because these practices have been codified and are becoming a typical part of
doing business for all electric utilities in the state, a tracker is not necessary for such costs
and they should instead become a part of base rates.1067
Avista Rebuttal Testimony
616 Avista does not agree with Staff's proposal to discontinue the wildfire expense balancing
account.1068 The Company agrees that these costs are becoming a normal part of its
operations but does not agree with Staff's contention that a tracker is no longer necessary
and should instead become embedded in base rates in its next GRC.1069 Avista argues that
the use of a balancing account protects both the customers and the Company, as it allows
the Company to defer and recover any excess costs over the established baseline, and to
refund to customers the difference if the costs are less than the baseline.1070 Also,Avista
argues that the tracker allows the Company to react to any future needs identified in its
106' Erdahl, Exh. BAE-1T at 26:19—27:5.
1064 Erdahl, Exh. BAE-1T at 27:14-19.
106'Erdahl, Exh. BAE-IT at 28:3-6 and generally Howell,Exh. DRH-3.
1066 Erdahl, Exh. BAE-IT at 28:14-16.
1067 Erdahl, Exh. BAE-1T at 28:18—29:3.
1061 Andrews, Exh. EMA-6T at 32:18-22.
1069 Andrews, Exh. EMA-6T at 30:13—31:1.
1070 Andrews, Exh. EMA-6T at 31:2-10.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 170
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Wildfire Resiliency Plan, and to pass along any benefits, which"are not easily identified
or quantified in real time, let alone estimated into the future in order to in include in the
next GRC."1o71 The Company requests that the Commission allow the Wildfire Expense
Balancing Account tracker to continue, at least through 2029, over its 10-year Wildfire
Resiliency Plan, as previously approved by the Commission in Dockets UE- 200900, et.
al.1072
Parties'Briefs
Avistas Brief
617 Avista requests the Commission approve the Company's electric Wildfire Expense
Adjustment 3.24,adjusting the Company's wildfire expense and Wildfire Expense
Balancing Account baseline to $8.3 million over the Two-Year Rate Plan, including a
carrying charge at the Company's cost of debt on the deferred balances (current and on-
going), and during amortization of these deferred balances, as-filed by the Company.1073
The Company alleges that these adjustments are supported by Staff, and are uncontested
by the remaining parties.1074 In addition, the Company requests the Commission allow the
Wildfire Expense Balancing Account"tracker"to continue beyond this GRC, at least
through 2029, as this tracker acts as protection for customers and the Company, if costs
expected over the life of the Wildfire Plan vary from that included in base rates.1075
Staff's Brief
618 Staff takes no issue with adjusting the Wildfire Expense Balancing Account baseline, nor
approval of a carrying charge for the account's balances, but also recommends that the
Commission order Avista to do two things: (1) move costs not strictly and exclusively
related to mitigating wildfire risk out of the balancing account and into base rates; and (2)
report on its experience with grid hardening." Staff notes that Avista seems to agree to
report on grid hardening,but rejects moving cost not strictly and exclusively related to
mitigating wildfire risk out the wildfire balancing account. Staff takes issue with Avista's
position that a tracker would provide dollar-for-dollar recovery or refund for any deviation
between actual costs and what is built into rates. But the Commission does not allow for a
1171 Andrews, Exh. EMA-6T at 32:5-14.
1072 Andrews, Exh. EMA-6T at 32:18-21.
1073 Avista's Brief,¶145.
1074 Avista's Brief,¶145;Erdahl,Exh. BAE-1T, at 26:12-16.
1075 Avista's Brief,¶145;Andrews, Exh. EMA-6T at 28-32.
1076 Staff's Brief,¶112 referencing Erdahl, Exh. BAE-1T at 27:12-19.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 171
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tracker for every cost, and it should not, given the incentive distorting effects noted by
AWEC witness Mullins.1077
619 Staff goes further by recommending that Avista remove non-wildfire-specific costs from
the tracker,1078 and leaving in the tracker costs incurred specifically needed to address
wildfire dangers, such as expedited vegetation management or undergrounding facilities in
high-risk areas.1079 Staff suggests that many of the costs Avista is recovering through the
tracker are providing shared benefits, such as those incurred generally for reliability,
instead providing benefits to address wildfire expenses and costs.1080
Decision
620 In Avista's 2020 rate case, we determined that Avista's circumstances concerning wildfires
are extraordinary and justified exercising the Commission's discretion to use regulatory
tools such as balancing accounts, trackers, or deferrals.10s1 As such, we found that
Avista had shown that use of a Wildfire Balancing Account was justified, and we expected
that implementation of the account would remove much uncertainty regarding wildfire
expenses, both for the Company and for customers!0" "Our intent in authorizing the
account is to track and review actual wildfire expense, encourage the utility to take actions
to address the increasing threat of wildfires to the utility and its customers with the
knowledge that prudent expenditures will be recovered and at least a portion will be
included in rates currently authorized for recovery, and ensure fairness to Avista's
customers by monitoring the incremental wildfire expenses collected from them.991083
621 The Commission authorized Avista to initiate the Wildfire Expense Balancing Account in
October of 2021 and established a baseline of$3.1 million for the balancing account.1084
The Commission directed that modifications to the mechanics of the account, such as the
application of a new base level of wildfire expense, additional requirements, or
performance-based metrics, should be considered in GRCs, in order to monitor wildfire
107 Staff's Brief,¶¶113-114 referencing Mullins, Exh.BGM-1T at 64:20-65:1.
1071 Staff's Brief,¶¶115 referencing Erdahl, Exh.BAE-1T at 27:14-16.
1071 Staff's Brief,¶¶115 referencing Erdahl, Exh.BAE-IT at 28:1-10.
10a0 Staff's Brief,¶¶ 115.
1081 Avista Corp,Dockets UE-200900&UG-200901, Order 08/05, 39¶256.
lost Avista Corp,Dockets UE-200900&UG-200901, Order 08/05, 39¶257.
1083 Avista Corp,Dockets UE-200900&UG-200901, Order 08/05, 39¶257.
1084 Avista Corp,Dockets UE-200900&UG-200901, Order 08/05, 39¶257.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 172
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expenses.1085 In Avista's 2022 rate case, the Commission approved a new baseline for the
balancing account of$5.1 million. 1016
622 None of parties, including Staff, contest the Wildfire Expense Balancing Account baseline
being raised to $8.3 million over the Two-Year Rate Plan, nor does any party contest the
carrying charge related to the Company's cost of debt on the deferred balances. The only
issue is Staff's recommendation to remove non wildfire specific costs from the tracker,
such as standard vegetation management and grid hardening, because they benefit not only
wildfire resilience, but also system reliability and storm damage mitigation, and would be
more properly included in base rates in the future.108' Staff does support Avista's inclusion
of expedited vegetation and undergrounding facilities in high-risk areas.1088
623 The Company argues that the use of a balancing account protects both the customers and
the Company, as it allows the Company to defer and recover any excess costs over the
established baseline, and to refund to customers the difference if the costs are less than the
baseline.'0"Also,Avista argues that the tracker allows the Company to react to any future
needs identified in its Wildfire Resiliency Plan, and to pass along any benefits, which"are
not easily identified or quantified in real time, let alone estimated into the future in order
to in include in the next GRC."1090
624 With regard to the non-wildfire costs that result in shared benefits for reliability that
should be removed from the Wildfire Balancing Adjustment, we disagree with Staff and
reject their recommendation.As the Company points out, the balancing account in its
present form allows Avista to react to any future needs identified in its Wildfire Resiliency
Plan.As we have seen with the unpredictable nature of wildfires, what may be non-fire
risk area today may turn into a fire-risk area tomorrow.Avista's standard undergrounding
and standard vegetation management protects against this very real, possible outcome,
given the unpredictability of wildfires. The Commission is hesitant to limit the Company's
flexibility in that regard. Therefore, we reject Staff's recommendation to remove standard
undergrounding in non-fire risk areas and standard vegetation management from Avista's
Wildfire Balancing Adjustment.
1085 Avista Corp,Dockets UE-200900&UG-200901, Order 08/05, 39¶258-259.
10" Wash. Utils. & Transp. Comm'n a Avista Corp, Dockets UE-220053 &UG-210584, Order
10/04,¶ 147 (December 12, 2022).
1017 Erdahl, Exh. BAE-IT at 28:14-16.
" Staff's Brief,¶115.
10s9 Andrews, Exh. EMA-6T at 31:2-10.
1090 Andrews, Exh. EMA-6T at 32:5-14.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 173
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625 As none of the parties contest the Wildfire Expense Balancing Account baseline being
raised to $8.3 million over the Two-Year Rate Plan, we accept Avista's proposed new level
for the balancing account's baseline. Furthermore, as none of the parties contest the
proposal to recover carrying charges at cost of debt, we accept Avista's proposal in that
regard.
Insurance Expense Balancing Account and Pro Forma Insurance Expense
Avista Direct Testimony
626 Avista proposes to continue the use of its insurance expense balancing account, which
defers actual insurance expense above or below its approved baseline, for later return to or
recovery from customers.1091 The Company proposes to increase its currently authorized
baseline from $8.3 million to $12.8 million(WA Electric) and from$1.7 to $2.3 million
(WA Natural Gas) for its proposed two year rate plan.1092 Avista witness Andrews notes
that the Commission's approval of the balancing account was non-precedential per the
approved Settlement, and that the Commission conditioned its approval, requiring Avista
to "document its action to seek out, negotiate, and attain the best insurance at the lowest
costs.""Avista witness Schultz argues that Avista met this condition in its annual
insurance expense balancing account filing beginning September 1, 2023.1094
627 Andrews argues that the Company continues to experience extraordinary and volatile
conditions currently and expects this to continue through its proposed two-year rate
plan."Andrews explains that the Company's proposed baseline increase is based on its
Pro Forma Adjustment 3.12,which contains expected increases in insurance premiums for
general liability, directors and officers (D&O) liability,property insurance, and other
insurance expense."Andrews states that the Company will update any 2023/2024
estimated amounts used in its proposal later in the proceeding once further actual invoices
become available.1197 Andrews notes that the Company incurred approximately $14.6
million in insurance expense during the test year, approximately $0.9 million below its
1091 Andrews, Exh. EMA-1T at 24:23—25:2 and at 25:16-17.
1092 Andrews, Exh. EMA-IT at 25:2-5.
1093 Andrews, Exh. EMA-IT at 25:17—27: 20. See also Dockets UE-220053,et. al., Order 10/04
¶¶ 144-146.
1094 Andrews, Exh. EMA-IT at 27:22-28.See also Andrews Exh. EMA-5C.
109s Andrews, Exh. EMA-1 T at 28:1-7.
1096 Andrews, Exh. EMA-IT at 28:14-19.
1097 Andrews, Exh. EMA-1T at 29:8-11.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 174
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2023/2024 authorized baseline, but reflecting an increase of 119 percent above 2020
levels.1098
628 Also, as with proposal with the Wildfire Expense Balancing Account,Avista proposes to
accrue interest at the Company's actual cost of debt on any existing deferred balances, any
new deferred balances going forward, and while being amortized.1099
Staff Response Testimony
629 Staff witness Erdahl agrees that Avista should be allowed to continue its insurance
balancing account, because "there has not been evidence of conditions becoming more
stable."Erdahl notes that the balancing account protects the ratepayers and the Company
from over or under-collection of insurance expense!100 Staff also supports Avista's
proposed increase to its baseline, and its request to accrue interest on its deferred
balance.'1°1
AWEC' Response Testimony
630 AWEC witness Mullins contests the continuation of the balancing account, arguing that as
a matter of policy and in the interest of ratepayer protections, the Commission should limit
the number of true-up mechanisms granted to Avista.1"' Mullins argues that the dollar-for-
dollar recovery of such a mechanism removes "the Company's incentive to seek out,
negotiate, and attain the best insurance at the lowest costs."1103 Mullins notes that the
insurance expense balancing account was created as part of the Commission's approval of
a multi-party settlement in its last rate case, and therefore represents a compromise of the
settling parties, subject to the Commission's additional reporting requirements that
conditioned its approval.)10'Mullins states that AWEC and other parties have since gained
additional understanding of the administrative burdens that multi-year rate plans impose
on the parties, and the additional work required for both Avista and reviewing parties
related to these additional reporting requirements."0s Mullins argues that this additional
109'Andrews, Exh. EMA-1 T at 30:3-14.
"99 Andrews, Exh. EMA-1 T at 33:1-18.
1100 Erdahl, Exh. BAE-IT at 32 5-8.
101 Erdahl, Exh. BAE-IT at 32:10—33:3.
1102 Mullins,Exh. BGM-IT at 64:15-20.
" Mullins,Exh. BGM-IT at 64:20—65:1.
1 104 Mullins,Exh. BGM-1 T at 65:3-6.
1105 Mullins,Exh. BGM-IT at 65:6-10.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 175
ORDER 08
reporting "introduces ambiguity in terms of what actions are available or appropriate upon
review of Avista's documentation."1106 Mullins believes that this additional burden, along
with the lack of incentive for Avista to manage its insurance expenses between rate cases,
supports discontinuance of the balancing account.1107
631 Mullins does not dispute inclusion of Avista's forecasted insurance expense in base rates,
and notes "AWEC's opposition is to the use of the single-issue ratemaking to recover these
costs.""0s
Public Counsel's Response Testimony
632 Public Counsel witness M. Garrett disputes the directors and officers portion of Avista's
insurance expense proposal, arguing that a 50150 cost allocation between customers and
shareholders is appropriate!109 M. Garrett's adjustment would reduce operating expenses
by $237,000 (WA Electric) and $75,000 (WA Natural Gas).1110 M. Garrett argues that
D&O liability insurance generally protects the assets of a company's directors and officers
from financial impacts of litigation resulting from their actions taken on the corporation's
behalf, and also shields shareholders, Board members, and senior leadership from legal
action resulting from their decisions!111 M. Garrett argues that the costs of a director or
officer's negligent acts are not a necessary cost of providing utility service, and because
they have a fiduciary duty to put the interests of shareholders first, some of these costs
should be borne by shareholders, including D&O liability insurance!112
633 M. Garrett argues that a 50150 allocation between customers and shareholders, as opposed
to the 90/10 allocation proposed by Avista is more appropriate, as both groups benefit
from the Company holding D&O liability insurance.1113 M. Garrett notes that several state
regulatory commissions have required equal sharing of these costs, including Arkansas,
California, Nevada,New Mexico, Florida, and New York, and that Connecticut previously
allowed only 25 percent of these costs in rates.1114
1106 Mullins,Exh. BGM-IT at 65:10-12.
107 Mullins,Exh. BGM-IT at 65:12-14.
"Mullins,Exh. BGM-IT at 65:15-19.
1109 M. Garrett, Exh. MEG-1T at 34:6-7.
110 M. Garrett, Exh. MEG-1T at 34:7-12.
1111 M. Garrett, Exh. MEG-1T at 28:15-18.
1112 M. Garrett, Exh. MEG-1T at 29:3-7.
11" M. Garrett, Exh. MEG-1T at 30:1-12.
1114 M. Garrett, Exh. MEG-1T at 30:16—34:3.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 176
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AWEC s Cross Answering Testimony
634 In Cross-Answer testimony directed at Staff, Mullins argues that under the balancing
account approach, insurance costs are updated annually on November 1 st each year,
resulting in more rate volatility and unpredictability for customers." s Mullins also argues
that this methodology could create a windfall for Avista, noting that the balancing account
is not subject to an earnings test, and should Avista earn at or above its rate of return and
also experience a material increase in its insurance costs, it will still be allowed to recover
these costs, even when such recovery is not necessary to ensure healthy earnings for the
utility.1116 Mullins argues that under a scenario where the balancing account is removed,
the Company still has the ability to file for a deferral to track and recover any excessive
insurance costs.""Mullins argues that this approach could be subject to an earnings test,
preventing potential windfall, and that any recovery would be granted in conjunction with
its next rate case, eliminating AWEC's rate volatility concerns.1118
Avista Rebuttal Testimony
635 Regarding Mullins's proposed discontinuation of the insurance expense balancing
account,Andrews disagrees with the assertion that the true-up mechanism is single-issue
ratemaking, results in additional administrative burden, and removes Avista's incentive to
manage its insurance costs.""Noting the findings of the Commission in the final order of
the Company's 2022 GRC, and reiterated by Staff in its response testimony,Andrews
argues that"the volatility experienced by Avista, and the utility industry, is extraordinary
and outside the Company's control."'120 Andrews argues that tracking mechanisms such as
this were created for this very reason, as protection for the Company and customers from
extraordinary circumstances and volatility in certain expenses.1121
636 Regarding M. Garrett's proposal to split the cost of D&O insurance equally between
shareholders and customers,Avista witness Schultz argues that M. Garrett's proposal
11" Mullins,Exh. BGM-8T at 20:5-8.
11"Mullins,Exh. BGM-8T at 20:11-14.
11"Mullins,Exh. BGM-8T at 20:15-19.
11"Mullins,Exh. BGM-8T at 20:19-24.
11"Andrews, Exh. EMA-6T at 37:3-7.
1120 Andrews, Exh. EMA-6T at 37:7-10.
1121 Andrews, Exh. EMA-6T at 37:10-12.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 177
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should be rejected!122 Schultz argues that M. Garrett's analysis focuses on the findings of
seven states, but ignores the other 43 states, and argues that it is this Commission's
findings that are most relevant to Avista.1123 Schultz states that the Company has
consistently applied the reduction of 10 percent for D&O insurance since ordered by the
Commission in Avista's 2009 rate case.1124 Schultz argues that Avista's Board of Directors
is focused primarily on utility operations, and that based on the actual time the Board
dedicates to the utility, "a 90%/l0% sharing of these fees is conservative."112s
Parties'Briefs
Avistas Brief
637 Avista states that the Commission should approve the Company's electric and natural gas
Insurance Expense Adjustments 3.12, updating the Company's insurance expense and its
proposed Insurance Expense Balancing Account baselines, over the Two-Year Rate Plan,
to $12.8 million for electric, and $2.3 million for natural gas, as filed by the Company.1126
The Company requests approval of the Pro Forma Insurance Expense as well as the
approval of the D&O Insurance expense sharing at its current level of 90percent/10
percent, as opposed to the 50150 proposed by Public Counsel.112'Avista seeks the
inclusion of a carrying charge at the Company's cost of debt on the deferred balances
(current and on-going), and during amortization of these deferred balances, was supported
by Staff, and uncontested by the other parties!121
Staff's Brief
638 In its brief, Staff supports approval of. 1)the continuation of Avista's insurance balancing
account;112' 2) an increase to its baseline;...° and 3) a carrying charge on the current
1122 Schultz, Exh. KJS-5T at 54:2-6.
1121 Schultz, Exh. KJS-5T at 54:10-12.
1124 Schultz, Exh. KJS-5T at 54:12—55:3.
1125 Schultz, Exh. KJS-5T at 55:4-6.
1126 Avista's Brief,¶146.
1121 Avista's Brief,¶146 referencing M. Garrett, Exh. MEG-1T, at 34:4-12.
1121 Avista's Brief,¶146 referencing M. Garrett, Exh. MEG-1T, at 32:18—33:3.
1121 Andrews, Exh. EMA-IT at 24:20-25:5.
1130 Andrews, Exh. EMA-1T at 24:20-25:5.Avista specifically seeks to increase the baseline from
$8.271 million to $12.795 million for electric operations and from$1.746 million to $2.247 for
natural gas operations.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 178
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deferred balance and any future deferrals.'131 Staff notes that AWEC opposes the
Insurance Expense Balancing Account as a single-issue ratemaking mechanism. Staff does
not agree with AWEC's position and points out that the insurance market has been volatile
for companies. Staff opines that the Commission's reporting requirements will allow the
parties to verify that Avista is taking all efforts toto minimize its insurance costs. 1132 Staff
asserts that the Commission should allow Avista to continue the account, adjust the
baseline, approve the carrying charge, and continue in effect the reporting requirements
for the account.'133
Public Counsel's Brief
639 Public Counsel reiterates that they favor a 50 percent or less rather than a 90 percent
allocation of insurance expenses.1134
AWEC's Brief
640 AWEC rejects Avista's proposal to continue the Insurance Expense Balancing Account
because it believes that balancing accounts constitute single-issue ratemaking and allows
Avista dollar-for-dollar recovery of insurance expense.1135 AWEC cites to Commission
precedent for the premise that"single-issue ratemaking is generally disfavored as it allows
for specific ratemaking treatment for a single or small subset of costs, regardless of
whether other costs have gone up or down during the same period, and"risks over-earning
by the company and over-paying by the customers."1136 AWEC opines that Avista forecast
the insurance expense within the confines of the MYRP, instead of truing up the expense
through the balancing account.'131
Decision
641 In Avista's 2022 rate case, and as part of settlement, the parties agreed to the establishment
of a non-precedential Insurance Balancing Account. The Commission approved the
131 Staff's Brief,¶110 referencing Andrews, Exh. EMA-1T at 33:12-18.
1132 Staff's Brief,¶111 referencing Erdahl, Exh. BAE-1T at 30:10-32:1.
1133 Staff's Brief,¶111;Andrews,Exh. EMA-6T at 37:13-38:6 (agreeing to continue reporting on
measures Avista has taken to minimize insurance costs).
1134 Public Counsel's Brief,¶106.
1135 AWEC's Brief,¶104.
1136 AWEC's Brief,¶104 citing In re Avista Corporation,Docket UG-060518, Order 04 at 11 (Feb.
1, 2007).
137 AWEC's Brief,¶104.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 179
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settlement and the Insurance Balancing Account)138 In that case, Public Counsel opposed
the establishment of the Insurance Balancing Account on the grounds that generally,
authorizing a pass-through guaranteeing a company recovery of its costs in a certain area
removes the business incentive for the company to control those costs."39 However, in the
present case, it is AWEC that seeks discontinuance of the Insurance Balancing
Account,'140 raising the same arguments that Public Counsel raised in Avista's 2022 rate
case.1141
642 In Avista's 2022 rate case we found that Avista had demonstrated unprecedented increases
and volatility in its insurance costs, and that the insurance expense increases in recent
years are "extraordinary" and"volatile" and caused an under-recovery of approximately
$5.3 million in 2022.1142 Moreover, we held that Avista demonstrated that it had taken and
is taking appropriate steps to try to control these costs, but had shown unprecedented
recent increases in insurance that were largely out of its control. These increases had been
driven primarily by the Company's general liability premiums, which cover wildfire risk
and property insurance premiums, and which tend to react to insurance industry losses due
to natural disasters.1143 Further, we agreed that these costs had increased due to factors
outside the Company's control and despite the Company's best efforts under its Wildfire
Resiliency Plan.'144
643 Based on the evidence and testimony, we reject AWEC's recommendation to discontinue
and accept Avista's proposal to continue the Insurance Balancing Account. Similar to the
circumstances in 2022, we again see a volatile insurance market due to the increase of
recent natural disasters, including the persistent presence of wildfires. We note that Avista
witness Andrews stated in her testimony that "the volatility experienced by Avista, and the
utility industry, is extraordinary and outside the Company's control."114s In addition, we
note Staff witness Erdahl's testimony that, "there has not been evidence of conditions
138 Avista, Dockets UE-220053, et. al., Order 10/04 T140.
1139 Avista, Dockets UE-220053, et. al., Order 10/04 T140; See also Mullins,Exh.BGM-1T at
64:20-65:1.
1140 Mullins,Exh. BGM-IT at 64:15-20.
141 Mullins,Exh. BGM-IT at 65:15-19.
1142 Avista, Dockets UE-220053, et. al., Order 10/04 T141;Andrews, Exh. EMA-1T at 66:16-19
and Exh. EMA-7T 28:5-11.
1143 Avista, Dockets UE-220053, et. al., Order 10/04 T141; See also Andrews, EMA-1T at 64:2-
74:19;Brandkamp,Exh. REB-1CT at 3:22-8:12.
1144 Avista, Dockets UE-220053, et. al., Order 10/04 T141; See also Andrews, EMA-1T at 64:2-
74:19;Brandkamp,Exh. REB-1CT at 3:22-8:12.
1145 Andrews, Exh. EMA-6T at 37:7-10.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 180
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becoming more stable," and that the balancing account protects the ratepayers and the
Company from over or under-collection of insurance expense)146 Therefore, because of
the continued volatility of market conditions beyond Avista's control the Insurance
Balancing Account shall continue.
644 We turn to the baseline for the Company's Insurance Balancing Account.Avista proposes
adjusting the Insurance Expense Balancing Account baselines, over the Two-Year Rate
Plan, to $12.8 million for electric, and $2.3 million for natural gas, as filed by the
Company)14'No other parties contest Avista's proposed adjustments.Additionally, given
the current market and environment, increasing the Insurance Expense Balancing Account
baselines is appropriate. Therefore, we approve increasing Insurance Expense Balancing
Account baselines to $12.8 million for electric, and $2.3 million for natural gas.
645 Next,Avista has proposed to recover carrying charges at its cost of debt. No Party contests
Avista's proposal. We grant Avista's proposal to recover its carrying charges at its cost of
debt.
Association Dues
Public Counsel's Response Testimony
646 While not addressed in Avista's direct testimony, Public Counsel witness M. Garrett
proposes full disallowance of Avista's industry association dues paid to the American Gas
Association (AGA) and the Edison Electric Institute (EEI), which would reduce the as-
filed revenue requirement by approximately $140,000 for AGA dues and$252,000 for EEI
dues.1148 M. Garrett argues that Avista has not adequately demonstrated that its "request
for recovery of these dues relates to customer interests rather than lobbying and broader
industry advocacy efforts."1149
647 M. Garrett maintains that in recent years, regulatory commissions and legislators
nationwide are raising concerns of utilities inappropriately passing along costs of political
activities and"industry self-promotion to captive customers,"11 so since a significant
1146 Erdahl, Exh. BAE-IT at 32 5-8. In Order 10/04 T144,the Commission established that
overcollection or undercollection would be subject to rebate or surcharge.
141 Avista's Brief,¶146.
1141 M. Garrett, Exh. MEG-1T at 24:12-17. See also Exh. MEG-3 Sch. 3.8 and Exh. MEG-4 Sch.
4.8.
1149 M. Garrett, Exh. MEG-1T at 24:10-13.
1151 M. Garrett, Exh. MEG-1T at 15:16-18.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 181
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portion of the industry association dues relate to payments for lobbying efforts and
political activities!151 M. Garrett argues that given there is significant overlap between the
services these associations provide for the public interest and those which advocate for
their members'private interests, these expenses should be removed until "a clear
distinction between these services" can be made.1112 M. Garrett also refers to IRS
regulations that require these associations to report amounts spent on lobbying activity, but
argues that the narrow definition for "lobbying"is not sufficient to determine how much
of EEI's and AGA's efforts are "more appropriately described as advocating for its
members'private interests to federal, state, and local officials and policymakers."1153
648 Additionally, in light of growing concerns, M. Garett highlights that FERC recently
opened a Notice of Inquiry(NOI) to examine this issue, and he cites to a recent appellate
court decision holding that"indirect influence expenses (e.g., industry associations that
provide public policy advocacy services on behalf of dues-paying members) should be
recorded [below the line]."11sa M. Garett also cites to state public utility commissions in
Kentucky, Minnesota, California, and Avista's recent rate case in Oregon, where industry
association dues were disallowed, in full or in part."" M. Garret also cites to legislation
enacted in Colorado, Connecticut,New York, and Maine, as instructive to prohibit utilities
from recovering expenses for trade or industry association dues from retail customers!156
Sierra Club's Cross Answering Testimony
649 In its Cross-Answer testimony, Sierra Club witness Dennison supports Public Counsel's
proposed 100 percent removal of industry association dues, noting agreement with the
arguments put forth by Garrett above.'15' Dennison also highlights that Sierra Club led a
coalition of 17 organizations that called for Avista to end its membership with the AGA on
the basis of AGA's opposition to policymakers misleading the public by failing to disclose
their financial backers. Specifically, in a letter to Avista, the AGA in relevant part stated it
"opposed local, state, and federal building decarbonization policies, deployed tactics and
experts that were previously used by big tobacco companies to cast doubt about the health
1151 M. Garrett, Exh. MEG-1 T at 16:1-2.
1152 M. Garrett, Exh. MEG-1T at 16:6-13.
153 M. Garrett, Exh. MEG-1T at 17:19— 18:4.
1154 M. Garrett, Exh. MEG-1T at 19:10—20:4.
1155 M. Garrett, Exh. MEG-1T at 21:11 22:2.
156 M. Garrett, Exh. MEG-1T at 23:13-17.
157 Dennison,Exh. JAD-12T at 9:5-6.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 182
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harms of burning gas indoors, and mislead policymakers and the public by failing to
disclose its financial support for these efforts."1158
Avistas Rebuttal Testimony
650 Avista witness Schultz asserts that all costs associated with political activities and
lobbying efforts paid to the EEI and AGA are booked"below-the-line" and charged
directly to shareholders, and that all other costs related to membership are directly related
to utility operations, and therefore properly recoverable from ratepayers.1159 Schultz
argues that EEI and AGA provide "public policy leadership, critical industry data, market
opportunities, strategic business intelligence, and one-of-a-kind conferences and forums,
among other things."1160 Schultz also asserts that"Washington ratepayers benefit from
Avista's involvement in these organizations because they provide an opportunity for
Company's employees: (1) to stay abreast of critical electric and natural gas industry
issues issue specific to utilities: (2) to access to volumes of information on industry data;
and (3)to foster networking opportunities within those industries."1161
651 Schultz provides some specific examples of how Avista and its customers benefit from
Avista's membership in EEI and AGA, including its participation in EEI's Reliability
Technical Committee (RTC), EEI's Reliability Executive Advisory Committee (REAC),
EEI's Spare Transformer Equipment Program(STEP),AGA's Peer Review,AGA's
Technical Committees and Technical Discussion Groups, and AGA's Field Operations
Committee)162 Schultz cites to a specific example of a customer benefit received through
its membership. Namely AGA deployed its National Mutual Aid Program during the
Williams Pipeline dig-in that occurred in November 2023, which allowed Avista to
quickly restore services to its 36,000 natural gas customers after the pipeline was
damaged.1163 Through this program, Schultz states,AGA helped coordinate over 300
mutual aid workers from eight natural gas utilities across six states, which enabled Avista
to restore service to customers in less than a week.'161
Dennison,Exh. JAD-12T at 8:1-7.
Schultz, Exh. KJS-5T at 59:6-12.
1160 Schultz, Exh. KJS-5T at 59:15-17.
1161 Schultz, Exh. KJS-5T at 59:17-21.
162 Schultz, Exh. KJS-5T at 60:1 —61:24.
161 Schultz, Exh. KJS-5T at 61:27-33.
1164 Schultz, Exh. KJS-5T at 61:34—62:3.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 183
ORDER 08
652 Finally, Schultz disputes M. Garrett's statement that in Avista's recent general rate
proceeding in Oregon, the commission disallowed industry association dues. The Oregon
case was an all-party settlement, whereby as part of the "give-and-take,"Avista agreed to
remove these costs for settlement purposes.116'As such, Schultz explains that the
disallowance and approval of a settlement agreement "are two very different things and
should give the Commission pause"1166 in reviewing the arguments put forward by M.
Garrett and the Sierra Club. For these reasons, Schultz concludes that Avista's industry
association membership dues are prudently incurred and that Public Counsel's proposed
removal of such costs from revenue requirement should be rejected.1167
Decision -Association Dues
653 While the Commission acknowledges that an overlap can exist between the services
associations provide for the public interest and those which advocate for their members'
private interests in lobbying, absent any evidence in the record that demonstrate the dues
Avista pays go directly toward private interest and lobbying, we find this argument
speculative. More importantly,Avista identified a direct nexus to the benefits its customers
received through its membership in these groups, including deployment of AGA's
National Mutal Aid Program during the Williams Pipeline incident, which enabled the
Company to coordinate over 300 mutual aid workers from eight natural gas utilities across
six states to restore service to customers in less than a week.Additionally, because it is
unclear to what degree it is Avista's responsibility to perform an audit for each
association's costs and services, and because FERC's NOI into this issue is pending, we
reject Public Counsel and Sierra Club's proposal to disallow Avista's industry association
dues paid to AGA and EEI.
Investor Relations Expense
Public Counsel's Response Testimony
654 Public Counsel witness M. Garrett proposes an adjustment to Avista's investor relations
expense, arguing that a 50150 split of these costs between shareholders and ratepayers is
appropriate."" M. Garrett's adjustment would result in a revenue requirement reduction
of$201,000 (WA Electric) and$60,000 (WA Natural Gas).1169
165 Schultz, Exh. KJS-5T at 62:5-13.
1166 Schultz, Exh. KJS-5T at 62:13-16.
167 Schultz, Exh. KJS-5T at 62:18-19.
161 M. Garrett, Exh. MEG-1T at 36:7-9.
1169 M. Garrett, Exh. MEG-1T at 36:9-12.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 184
ORDER 08
655 M. Garrett argues that"shareholders and customers both benefit when the Company incurs
expenses to disseminate information about Avista's current and future earnings and
investments to the larger investment community in a timely manner,"noting that
customers benefit when the Company can access capital at a lower price, and shareholders
benefit through higher share prices.1170 Based on this, M. Garrett believes a 50150 split is
appropriate.1171
Avistas Rebuttal Testimony
656 Avista witness Schultz offers on rebuttal that the effect of a 90/10 adjustment would be a
reduction in revenue requirement of approximately$40,000 (WA Electric) and $12,000
(WA Natural Gas).'172
657 Schultz argues that the proposal to split these costs 50150 is "completely
unreasonable."1173 As an investor-owned utility, Schultz argues,Avista raises
approximately half of its funds used to serve its customers through equity markets, and as
a result is required to meet certain rules and requirements that set forth how Avista
operates, including "the development and issuance of quarterly and annual financial
reports, which is facilitated by investor relations."1174 Schultz explains that Avista's
investors, who are its owners, provide the funds necessary to operate its business for the
benefit of its customers and that its investor relations team facilitates its compliance with
Securities and Exchange Commission (SEC)requirements, financial reporting, and
communication with the investment community!175
658 Schultz also argues that Public Counsel's proposed 50150 split is arbitrary and
unsupported by evidence!171 Schultz notes that, unlike when Avista had significant non-
utility operations in the past which may justified a lower percentage sharing,Avista is now
comprised almost entirely of utility operations, with only a small set of passive
investments under Avista Capital.""
1170 M. Garrett, Exh. MEG-1T at 36:3-7.
1171 M. Garrett, Exh. MEG-1T at 36:7-9.
1172 Schultz, Exh. KJS-5T at 35:9-12.
1173 Schultz, Exh. KJS-5T at 49:6-9.
1174 Schultz, Exh. KJS-5T at 49:9-14.
1175 Schultz, Exh. KJS-5T at 49:16—50:4.
1176 Schultz, Exh. KJS-5T at 50:12-14.
1177 Schultz, Exh. KJS-5T at 50:15-19.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 185
ORDER 08
659 However, Schultz does believe that after review of the arguments made by M. Garrett,
some degree of adjustment is appropriate, and Avista offers a 90/10 split, which is
consistent with Avista's rationale for having 90 percent of the costs associated with its
Board of Directors allocated to utility customers.1178 Schultz states that"given a small
portion of the overall Company is related to non-utility activities, it is reasonable to assert
that a portion should be recognized as non-utility."1179
Decision —Investor Relations
660 The Commission finds that Avista's revised offer provided on rebuttal of a 90/10 split is a
reasonable middle-ground as opposed to the 50150 split proposed by Public Counsel. The
Company's proposal is also consistent with the 90/10 allocation of Avista's Directors' and
Officers' liability insurance policy.
Working Capital
AWEC' Response Testimony
661 AWEC Witness Mullins argues that Avista inappropriately includes interest-bearing
accounts within its Working Capital. Mullins testifies that although the Company claims to
deduct the interest associated with the two specific accounts in question,Avista errs in its
calculation of the net interest and is unable to track the interest specific to electric and
natural gas operations. He argues, too, that the historical period will not accurately reflect
the expected interest earned during the rate plan as interest is not earned based on an
average balance and is subject to changing condition in the commodities market.'"0
Further, Mullins testifies the Company's working capital model contained hardcoded
balances and therefore AWEC was unable to duplicate Avista's calculation. However,
Mullins estimates the impacts of AWEC's recommendation would reduce the revenue
requirement by approximately $2.5 million for electric and $311,000 for natural gas.
Avistas Rebuttal Testimony
662 Company witness Andrews refutes AWEC's proposed adjustment to Working Capital
testifying that Avista used the methodology for excluding interest-bearing portions of
accounts used for commodity trades in its 2019 GRC in consolidated dockets UE-190334,
1171 Schultz, Exh. KJS-5T at 50:5-8.
1171 Schultz, Exh. KJS-5T at 50:9-10.
...0 Mullins,Exh. BGM-1T at 26:3—28:2, 29:6-22.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 186
ORDER 08
UG-190335, UE-190222.Andrews argues this methodology was proposed by Commission
Staff and approved by the Commission)181
663 Additionally,Andrews rejects AWEC's contention that the Company is unable to
accurately identify the interest-bearing portion of the two accounts nor unable to identify
the impacts to electric and natural gas operations independently. Witness Andrews
references Company witness Schultz's calculations of the Working Capital adjustment
(1.03 ISWC Adjustment) that specifically identify that 92 percent of the accounts are non-
interest-bearing and identifies specific dollar amounts for the electric and natural gas share
of the interest-bearing portion of the accounts.1182
664 Further,Andrews disagrees with AWEC's position that historical account balances are not
an indicator of future balances. While Andrews agrees that the events that occurred in
winter 2022 were extraordinary, the collateral balances have not returned to pre-2022
levels. With continued changing market conditions, which have resulted in more market
transactions over the past five years, collateral balance baselines are anticipated to remain
elevated. Therefore,Andrews contends that margin rates have also not returned to pre-
2022 levels. Finally,Andrews argues the Company appropriately uses historical balances
in its Working Capital adjustment as it not feasible to project the hundreds of balance
sheet accounts that flow into this adjustment.Andrews states that allowing a party to
"cherry pick" accounts to reduce working capital is inappropriate; while some accounts
may decline from historical balances, others may just as likely increase.1183
665 Finally, witness Andrews provides testimony that generally supports the inclusion of
working capital as a mechanism to mitigate regulatory lag.Andrews claims otherwise the
Company would be required to incur a greater lost return beyond what it has already
absorbed.1 114
Parties'Briefs
Avista
666 Avista argues that the Commission should approve its Investor Supplied Working Capital
(ISWC) Restating Adjustment 1.03 and reject AWEC's proposal to remove the Wells and
Mizuho account balances from the adjustment.Avista states that it complied with the
"g'Andrews, Exh. EMA-6T at 45:3-15.
1112 Andrews, Exh. EMA-6T at 46:15 47:5.
11"Andrews, Exh. EMA-6T at 47:9-48:8.
1184 Andrews, Exh. EMA-6T at 49:3-19.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 187
ORDER 08
methodology that the Commission approved in Dockets UE-190334, UG-190335, and
UE-190222 by removing the minimal interest-bearing portion of these accounts such that
they represent expected ISWC balances during the effective period of the multi-year rate
plan.'185 The Company further notes that it has experienced a lost return of over $6.3
million in 2023 due to increased ISWC balances as a result of increased power supply
margin account balances, resulting in substantial regulatory lag.'186
AWEC
667 AWEC recommends that the Commission adopt an adjustment to reflect the removal of
Avista's Wells and Mizuho interest-bearing accounts.AWEC states that while the method
Avista used in this proceeding is consistent with the method used in Dockets UE-190334,
UG-190335, and UE-190222, the Commission did not expressly adopt that methodology
in its order.187 AWEC argues that Avista's methodology is inappropriate for two reasons.
First,AWEC contends that because there are factors that influence the accounts' earned
interest beyond the account balances, it is inappropriate to conclude that a portion of the
balances do not earn interest!188 Second,AWEC contends that the two accounts'
performance during the historical period are not representative of anticipated performance
during the rate effective period of the rate plan.'189
668 AWEC further disagrees with Avista's assertion that AWEC's proposed adjustment is
selectively interpreting accounts and maintains that its recommendation is grounded in
RCW 80.28.425(3)(b)'s requirement to determine the fair value of property during the rate
effective period of the rate plan.1190 AWEC assert that Avista's adjustment fails to properly
forecast the balances of the Wells and Mizuho accounts in the rate effective period
because Avista did not adjust its historical data to account for the influence of unusual
185 WUTC v Avista Corp.,Dockets UE-240006&UG-240007,Avista's Post-Hearing Brief¶ 112
(Oct. 28,2024).
1116 WUTC v Avista Corp.,Dockets UE-240006&UG-240007,Avista's Post-Hearing Brief¶ 112
(Oct. 28,2024).
1187 WUTC a Avista Corp.,Dockets UE-240006 &UG-240007,AWEC's Post-Hearing Brief¶95
(Oct. 28,2024).
1"' WUTC a Avista Corp.,Dockets UE-240006&UG-240007,AWEC's Post-Hearing Brief¶96
(Oct. 28,2024).
11a9 WUTC a Avista Corp.,Dockets UE-240006&UG-240007,AWEC's Post-Hearing Brief¶96
(Oct. 28,2024).
1190 WUTC a Avista Corp.,Dockets UE-240006&UG-240007,AWEC's Post-Hearing Brief¶97
(Oct. 28,2024).

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 188
ORDER 08
market prices during the winter of 2022-2023.""AWEC contends that Avista's power
supply forecasts demonstrate that the conditions that caused high prices during the winter
of 2022-2023 are unlikely to reoccur during the rate effective period of the rate plan."92
Instead,AWEC maintains that margin prices will be effectively zero based on the data
from 2020 to 2021, and consequently Avista's recommended approach does not comply
with RCW 80.28.425(3)(b).1193 Finally,AWEC argues that regulatory lag does not provide
a justification for adopting Avista's proposed treatment of its Wells and Mizuho accounts
because regulatory lag is within the control of the Company.1194
Decision
669 The Commission rejects AWEC's proposed revision to Avista's working capital Restating
Adjustment 1.03.As an initial matter, the Commission disagrees with AWEC's assertion
that the methodology used by Avista for its working capital adjustment is not precedential.
As AWEC acknowledges in its briefing, the methodology used by Avista in this case is the
same methodology used in Dockets UE-190334, UG-190335, and UE-190222.'195 While
the methodology was not explicitly discussed in the order, it was in fact used during the
case and incorporated into the final outcome, and the Company has used that methodology
in all of its subsequent rate cases.'196 Consequently, it was deemed fair,just, reasonable,
and sufficient by the Commission and AWEC's arguments to the contrary are
unpersuasive.
670 In its brief,AWEC argues that the Commission should reject Avista's methodology in part
because the extraordinary prices that occurred during the winter of 2022-2023 are not
representative of how the working capital accounts will perform during the rate effective
period!19' However, it is clear from Avista's testimony that it considered several factors
other than just the winter 2022-2023 prices, including elevated power and gas prices
191 WUTC a Avista Corp.,Dockets UE-240006&UG-240007,AWEC's Post-Hearing Brief¶97
(Oct. 28,2024).
1192 WUTC a Avista Corp.,Dockets UE-240006&UG-240007,AWEC's Post-Hearing Brief¶97
(Oct. 28,2024).
119' WUTC a Avista Corp.,Dockets UE-240006&UG-240007,AWEC's Post-Hearing Brief¶97
(Oct. 28,2024).
1194 WUTC a Avista Corp.,Dockets UE-240006&UG-240007,AWEC's Post-Hearing Brief¶98
(Oct. 28,2024).
119' Id., at¶95.
1196 Andrews, Exh. EMA-6T at 45:6-15.
197 WUTC a Avista Corp.,Dockets UE-240006&UG-240007,AWEC's Post-Hearing Brief¶96
(Oct. 28,2024).

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 189
ORDER 08
relative to past years, greater price volatility, and the impacts of significant market
events.'198 The Commission further shares Avista's concerns that attempting to forecast an
adjustment to its ISWC is not reasonably feasible, given that it consists of hundreds of
balance sheets.'199
671 Although AWEC argues that its adjustment method is more reasonable because it forecasts
the likely performance of the accounts during the rate effective period, there does not
appear to be supporting analysis for AWEC's forecast beyond a citation to witness
Mullins'testimony.1200 In turn, witness Mullins states in testimony "[a]s can be seen, in
the winter of 2022-2023, the margin balances were extraordinary, whereas in the past they
hovered close to zero."1201 Contrary to AWEC's assertions, this observation, standing on
its own, does not support the conclusion that the margin balances will in fact be close to
zero during the rate effective period. Furthermore, even assuming that AWEC's forecast
was accurate, it is not appropriate to adjust some,but not all, of the accounts in Avista's
ISWC, because the limited adjustments will not reasonably reflect the performance of the
entire ISWC during the rate-effective period.
672 Finally, the Commission disagrees with AWEC's assertion that its proposed methodology
is the only methodology that complies with RCW 80.28.425(3)(b). The Commission notes
that pursuant to RCW 80.28.425(3)(d), "[i]n ascertaining and determining the fair value of
property of a gas or electrical company pursuant to (b) of this subsection . . . the
commission may use any standard, formula, method, or theory of valuation reasonably
calculated to arrive at fair,just, reasonable, and sufficient rates."This statute affords the
Commission broad discretion regarding an appropriate methodology, provided that the
method is "reasonably calculated"to arrive at rates that are fair,just, reasonable, and
sufficient. Consequently, the Commission has discretion to authorize a methodology that
considers historical performance, even in the absence of a forecast. The Commission has
done so in the past on this issue and determines that it is reasonable to do so again based
on the record developed in this proceeding. The Commission accepts Avista's proposed
Restating Adjustment 1.03.
11"Andrews, Exh. EMA-6T at 47:9—48:2.
1199 Andrews, Exh. EMA-6T at 48:13 -20.
1200 WUTC a Avista Corp.,Dockets UE-240006&UG-240007,AWEC's Post-Hearing Brief 197,
fii. 242, 247 (Oct. 28,2024)(citing Mullins,Exh. BGM-IT at 28:12-13).
1201 Mullins,Exh. BGM-IT at 28:12-13.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 190
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FITIDFITIITC A djustm en t
673 We note that Avista filed a petition in Dockets UE-200896 and UG-200896, requesting the
Commission authorize a change to its accounting for federal income tax expense for
certain plants and defer the associated change in tax expense (Tax Customer Credit) on
October 30, 2020, the same date it filed its 2020 GRC in Dockets UE-200900 and UG-
200901.
674 In its order granting the petition, the Commission authorized Avista to change its
accounting method for plant related to IDD#5 mixed service costs (inventory costs) and
for meters from normalization to flow-through treatment.Additionally, Order 01
authorized the deferral for the associated change in tax expense. The Commission found
the proposed accounting treatment had no immediate impact on rates, and that the
treatment of unprotected ADFIT and EDIT(including the Tax Customer Credit) would be
addressed within the context of the 2020 GRC.
675 The 2020 GRC resulted in a partial multiparty settlement, however, the Tax Customer
Credit remained contested. In its final order, the Commission ordered that Avista begin
returning the benefit to customers as of the rate effective date over a two-year period
through separate tariff schedules. However, as the balance of the Tax Customer Credit
would not reach zero at the end of that two-year period, the Commission temporarily
ordered a new 10-year amortization schedule for that remaining balance subject to
reexamination in the subsequent GRC.
676 On December 12, 2022, the Commission issued its final order in that subsequent GRC
which resulted in a full multiparty settlement.1202 The settling parties agreed the Residual
Tax Customer Credit be returned to customers using the same tariff schedules created in
the 2020 GRC over a two-year period beginning with the rate effective date of the 2022
GRC.At that time, the residual amounts were $27.6 million for electric and$12.5 million
for natural gas.1211
1202 public Counsel opposed certain aspects of the settlement,but the Residual Tax Customer
Credit was not one of those issues.
1203 WUTC a Avista,Dockets UE-220053, UG-220054,and UE-210854 (consolidated), Order
10/04??58-61 (Dec. 12, 2022). The settlement provided no additional information regarding
continued tax deferrals or further residual credits, nor did it discuss how or when to discontinue
those deferrals and associated tariff schedules and subsequently including any remaining balances
into rate base.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 191
ORDER 08
AWEC Response Testimony
677 In this proceeding,AWEC proposes the Commission now require Avista to fully transition
to flow-through accounting rather than continuing the deferral process.1204 Mullins argues
these benefits are no more uncertain than any other tax provision. Therefore, Mullins
contends this is the appropriate proceeding to discontinue the deferrals, and on a going-
forward basis, include the benefits as a reduction to rate base. Mullins proposes a one-time
offset to RY2 for electric to mitigate the rate increase associated with the Colstrip
retirement. For natural gas, Mullins recommends the amount be amortized over the two-
year rate plan. However,AWEC recognizes residual balances will remain in that account
and recommends maintaining the tariff schedules to refund that ending balance to
customers.1205
678 Additionally, Mullins takes issue with the Company including a carrying charge at its full
cost of capital on the residual balances. Mullins argues that the Commission never
authorized such treatment.AWEC recommends eliminating the carrying charge, which in
combination with the full transition in tax treatment, results in a reduction in revenue
requirement of approximately $5.7 million for electric and $5.4 million for natural gas.1206
Avista's Rebuttal Testimony
679 Witness Andrews disagrees with AWEC's recommendations, testifies that witness Mullins
erred in his recalculation of the tax benefit amount owed to customers, and argues that the
Commission through approval of the two preceding rate cases accepted the Company's
appropriate inclusion of the carrying charge.
680 First,Andrews reasons the Commission's approval of the deferral treatment ensures
customers receive dollar-for-dollar actual tax benefits and keeps the Company whole.1207
Next,Andrews testifies that if the Commission were to decide to end the deferrals in
December 2024, that the end-of-period balances would result in a debit balance (due from
customers) of$0.5 million for electric and a credit balance of$2.4 million for natural gas,
and require an adjustment to the test period liability balances to reflect the revised ADFIT
1204 Mullins,Exh. BGM-IT at 36:6-19.
1205 Mullins,Exh. BGM-IT at 37:7-38:3, 39:14-18.
1206 Mullins,Exh. BGM-IT at 38:10-11, 39:2-3, 39:5-10.
1207 Andrews, Exh. EMA-6T at 57:14-19, 71:16-72:1.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 192
ORDER 08
level resulting in an increase in rate base of$30.1 million and $11.6 million for electric
and natural gas, respectively and by extension the revenue requirement.1201
681 Addressing the carrying charge,Andrews contends the customers have received the
benefit of lower rate base over the course of the deferral and subsequent amortizations. If
the Company did not include the full cost of capital,Avista would be "penalized" for the
return on that understated rate base in the amount of$9.7 million.1209 Further,Andrews
argues the treatment, including the return, were presented in its workpapers in both the
2020 and 2022 GRC proceedings.Andrews submits that no party contested those
calculations during either rate case and subsequently, the Commission approved that
treatment through its final orders in those proceedings.1210
682 Finally, while Avista proposes to continue the current deferred accounting treatment,
Andrews offers that if the Commission prefers to end the Customer Tax Credit deferred
accounting that it allows the Company to do so in the next GRC.Andrews argues this will
allow the Company to fully account for this change.1211
Parties'Brief's
AWEC
683 In its brief,AWEC notes that"the remaining balances due to customers, at least based on
Avista's calculation, will decline effectively to zero by December 31, 2024."1212 AWEC
agrees with Avista's calculation of associated accumulated deferred income taxes.
However,AWEC opposes the perpetual deferral of the annual impacts of the flow-through
accounting.1211 Instead,AWEC recommends to the Commission that the associated flow-
through benefits be considered in base rate revenue requirement, which AWEC contends
would be consistent with the accounting application approved by the Commission in
Dockets UE-200895/UG-20089. 1214 AWEC challenges Avista's characterization of its
1201 Andrews, Exh. EMA-6T at 58:13.Andrews notes correcting AWECs balances results in an
increase to Mullins revenue requirement by$2.8 million and$1.1 million for electric and natural
gas, respectively.Andrews,Exh. EMA-6T at 58:13-15.
1201 Andrews, Exh. EMA-6T at 67:6-10, 68:6-8, 70:6-12.
1210 Andrews, Exh. EMA-6T at 72:9-73:10.
1211 Andrews, Exh. EMA-6T at 60:7-12.
1212 WUTC a Avista Corp.,Dockets 240006 &240007,AWEC's Post-Hearing Brief¶59 (Oct. 28,
2024).
1213 AWEC's Post-Hearing Brief, at¶60.
1214 AWEC's Post-Hearing Brief, at¶61.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 193
ORDER 08
accounting application. 1215 Further,AWEC notes how this process did not result in
benefits to ratepayers in 2024.1216
Avista
684 In its brief,Avista reiterates its opposition to AWEC's proposal that Avista transition fully
to flow-through accounting of its 2025 estimated tax deductions associated with IDD#5
and meter expenditures.1217 Avista emphasizes that the process is to the benefit of
customers, citing to the $3.4 million saved over 2022 and 2023.121s At bottom,Avista
contends that the current"accounting for these tax credits has kept customers whole —
returning no more, no less owed them."1219
Decision
685 We acknowledge AWEC's point that extending these deferrals in perpetuity would be
inappropriate. However, we are not persuaded that a change is necessary at this time.
Therefore, we reject AWEC's proposal to immediately end the deferral and eliminate the
carrying charge. Instead, we accept Avista's alternative proposal to end the deferral in
Avista's 2026 general rate case.
Electric and Natural Gas Adjustments (3.03)Pro Forma EDIT Reverse South
Georgia Method(RSGM)Expense
686 Briefly, we turn to the issue Avista presented related to the Electric and Natural Gas
Adjustments (3.03) Pro Forma EDIT RSGM Expense. The Company's proposed
adjustment revises the Company's test year Excess Deferred Income Tax(EDIT) expense
levels for a change in its method of accounting for the reversal of long-term tax benefits
from the Average Rate Assumption Model (ARAM) to the RSGM.Andrews provides
supporting documentation in Exh. EMA-4 to justify the accounting change. The exhibit
contains an internal memo that recognizes an inadvertent error related to cost of removal
that was not properly accounted for as required by the IRS. This adjustment increases the
RY 1 electric and natural gas revenue requirement by $122,000 and $181,000,
1211 AWEC's Post-Hearing Brief, at¶62.
1211 AWEC's Post-Hearing Brief, at¶64.
1217 Avista's Post-Hearing Brief, at¶ 115.
1218 Avista's Post-Hearing Brief, at¶ 116.
1219 Avista's Post-Hearing Brief, at¶ 117.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 194
ORDER 08
respectively; with an incremental increase of approximately $1 million for electric in RY2
associated with removing Colstrip EDIT from base rates on January 1, 2026.1220
Decision
687 We note that no party has contested this adjustment. However, as the reversal of protected
EDIT was addressed in the Company's 2017 GRC and the Commission specifically
ordered the use of ARAM, the Commission addresses the change in accounting
methodology for the record in this proceeding. Furthermore, the Tax Cut and Jobs Act
(TCJA) of 2017 required that protected EDIT be returned due to the change in corporate
tax rate.1221 While ARAM is the most common methodology, when certain information is
not known(e.g., the age of assets) then the RSGM may be utilized to avoid violating the
normalization rules and passing back EDIT more rapidly or to a greater extent than under
the ARAM.
688 The Commission has reviewed Avista's testimony and supporting documentation filed in
this proceeding and is satisfied that the Company is required by law to change the method
of accounting. Additionally, changing the methodology in this proceeding avoids a
violation of the Safe Harbor provision that allows a Company to change its methodology
at its next available opportunity. Accordingly, the Commission accepts the Company's
change in accounting methodology.
Misc. Restating Non-Utility/Non-Recurring Expenses
AWECs Response Testimony
689 Witness Mullins recommends the Commission remove two cost items as non-recurring:
(1) wildfire litigation, and(2) patent and patent application costs. Mullins rationale is
simply that wildfire litigation is not an ongoing expense, and that the Company has a
history of developing venture corporations, and therefore, customers should not bear the
burden of those Costs.1222
1220 Andrews, Exh. EMA-1T at 14:15-15:7.
1221 Tax Cuts and Jobs Act(TCJA,P.L. 115-97).
1222 Mullins,Exh. BGM-1T at 34:3-12.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 195
ORDER 08
Avista Rebuttal Testimony
690 Company witness Schultz responds to AWEC's recommendations regarding the non-
utility/non-recurring restating adjustment.1223 First, Schultz testifies that the Company
does not include any patent-related costs that are non-utility or related to a subsidiary. To
the contrary, Schultz argues that Avista pursues innovation and protects those pursuits
through patents providing several project examples such as the Company's Digital
Exchange Platform, real time optimization of Avista hydro facilities, an invention to
facilitate load disaggregation, and enhanced outage management and electric
operations.1224
691 Second, witness Schultz argues that the Company must maintain some level of legal
expense for a variety of categories, with wildfire litigation being a continuing expense and
normal course of business given the nature of those cases. Schultz provides four examples
of wildfire litigation that occurred in the historical period and are expected to continue
through the rate plan period.1221 Further, Schultz contends it is in the best interest of the
Company and its customers that Avista"defend its interests and pursue those rights...."1226
Parties'Briefs
Avista
692 In its briefing,Avista rejects AWEC's characterization of legal and wildfire litigation costs
as "non-recurring."122'Avista explains that in the normal course of business, the company
becomes involved in "various claims, controversies, disputes and other contingent matters,
including wildfire litigation."In fact,Avista contends that it "has been conservative and
understated legal expenses in this case."1228 In support of this,Avista explains that the
requested legal expenses are lower than the level actually experienced in 2023.
1223 The Company did make a correction to this adjustment to exclude a single invoice as non-
utility. This correction lowered the revenue requirement by$2,000 for electric and$1,000 for
natural gas. Schultz,Exh. KJS-5T at 25:10-17.
1224 Schultz, Exh. KJS-5T at 36:14-21.
1221 Schultz, Exh. KJS-5T at 37:25-38:7.
1226 Schultz, Exh. KJS-5T at 38:10.
1227 Avista's Post-Hearing Brief, at¶98.
1228 Avista's Post-Hearing Brief, at fn. 130.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 196
ORDER 08
AWEC
693 In its briefing,AWEC continues to recommend that the Commission adjust Avista's
revenue requirement to remove non-recurring legal expenses incurred in the test
period.1229 AWEC argues that the Company's list of incidents amount to "Specific, discrete
cases that will most certainly conclude."1230 AWEC rejects the normalization of such costs
and requests that they be excluded from rates. AWEC goes on to state that the patents do
not provide a benefit to ratepayers, and thus litigation expense to protect them do not
"meet the used and useful standard. ,1231 In support of this,AWEC proffers that a
competing utility's infringement of Avista's patent does not harm ratepayers.
Decision —Litigation Costs
694 We reject AWEC's proposed adjustment to remove wildfire and patent litigation expenses
as non-recurring. Litigation costs generally are part of the cost of doing business.
However, we note that costs may become unreasonable, at which point such costs would
be excluded from rates.
Miscellaneous Pro Forma Adjustments—Non-Executive Labor,Employee
Benefits, and Incentive Pay Pro Forma Labor,Non-Executive Adjustments
Avista's Direct Testimony
695 Avista Pro Forma Adjustment 3.05 proposes increases in base pay for non-executive
Union and non-Union employees.113' This base pay reflects a portion of Avista employees'
total compensation package, which also includes pay-at-risk incentives (see Pro Forma
Incentives Adjustment 3.08), which aim to "provide competitive compensation in the
marketplace."1233 Avista witness Schultz states that base pay levels are determined through
consultation with third-party firms that compare Avista's compensation levels with other
organizations in the utility industry, and other industries regionally and nationally.1234
1221 AWEC's Post-Hearing Brief, at¶ 100.
1230 AWEC's Post-Hearing Brief, at¶ 101.
1231 AWEC's Post-Hearing Brief, at¶102.
1232 Schultz, Exh. KJS-lT at 56:3 and 57:5-7.
1233 Schultz, Exh. KJS-1T at 56:3-6.
1214 Schultz, Exh. KJS-1T at 56:9-11.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 197
ORDER 08
Based on these surveys, salary recommendations are presented to the independent
Compensation Committee of the Board of Directors, for consideration and approval.1235
696 Specifically,Avista's non-executive non-Union base pay adjustment annualizes the impact
of the actual pay increases effective March of 2023, and include expected increases for
March 2024,1216 and a final increase for non-Union employees that its Board will approve
in the first quarter of 2024."1237 Avista also included an estimated prorated March 2025
increase for total labor expense levels in RY1.1211
697 For Union employees,Avista proposes an increase to annualize the effect of the 3.5
percent increase that occurred in 2023, and notes that the Company is currently
negotiating 2024 merit increases, which it expects will be finalized during the pendency of
the case.1239 In lieu of final amounts which will be available upon ratification of its Union
contract,Avista proposes that its estimated merit increases for 2024 and 2025, be
consistent for its non-Union employees.1240
698 The effect of this adjustment is an expense increase, resulting in a decrease in Net
Operating Income(NOI) of approximately $5.2 million (WA Electric) and $1.4 million
(WA Natural Gas).1241
699 Avista's related adjustment for RY2, Pro Forma Adjustment 5.02, reflects incremental
increases in Union and non-Union wages and salaries for 2026,1242 the Company's
adjustment annualizes its estimated 2025 wage increases and includes the prorated salary
increases expected in March 2026 for both Union and non-Union employees.1243 The
effect of this adjustment would in turn result in a decrease in NOI of approximately $2.1
million(WA Electric) and$0.6 million(WA Natural Gas).1244
1235 Schultz, Exh. KJS-IT at 56:20—57: 3.
1236 Schultz, Exh. KJS-IT at 57:8-9.
1237 Schultz, Exh. KJS-IT at 57:8-13.
1231 Schultz, Exh. KJS-IT at 57:13-15.
1239 Schultz, Exh. KJS-IT at 57:16-21.
1240 Schultz, Exh. KJS-IT at 57: 19-20.
1241 Schultz, Exh. KJS-1T at 58:1-3.
1242 Schultz, Exh. KJS-1T at 92:3-6.
1243 Schultz, Exh. KJS-IT at 92:6-9.
1244 Schultz, Exh. KJS-IT at 92:9-10.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 198
ORDER 08
Staffs Response Testimony
700 Staff contests Avista Pro Forma Adjustment 3.05, on the basis that Avista's adjustment
uses estimated wage increases for its Union and non-Union employees for 2024 and 2025,
which are not known and measurable.1245 Staff witness Hillstead contends that the
amounts used in Avista's pro forma adjustment for non-Union employees differ slightly
from the wage increases approved by Avista's Board of Directors for March 1, 2024 and
March 1, 2025, which were approved after Avista's initial filing.1246 Accordingly, Staff
proposes a pro forma adjustment reflecting the actual approved non-Union wage increases
for 2024 and 2025.1247
701 Regarding base pay increases for Union employees, Hillstead notes that the Union
increases for 2024 and 2025 cannot be quantified, as the contract has not yet been
ratified.1241 Pending finalization of the contract, Staff proposes removal of Avista's
proposed Union pay increases for 2024 and 2025,but states that they would support
inclusion of these amounts should those costs become known and measurable on
rebuttal.1241
702 In total, Staff's proposed adjustment would result in a revenue requirement reduction of
approximately $1.85 million(Combined WA Electric and WA Natural Gas) in RY 1.1250
Avistas Rebuttal Testimony
703 On rebuttal, Schultz explains that Avista came to agreement with the Union and ratified
the contract on July 31, 2024, granting a 5 percent merit increase effective March 2024,
which will be retroactively paid, and a 5 percent increase effective March of 2025.1251
Avista initially estimated and based its pro forma adjustment on a 4 percent merit increase
for both 2024 and 2025,1252 and then updated the adjustment, which resulted in an expense
1245 Hillstead, Exh. KMH-1T at 11:10-18.
124'Hillstead, Exh. KMH-1T at 12:2-6. See also Hillstead, Exh. KMH-6C.
1247 Hillstead, Exh. KMH-IT at 12:7-8.
124'Hillstead, Exh. KMH-1T at 12:9-11.
1249 Hillstead, Exh. KMH-IT at 12:14-17.
1250 Hillstead, Exh. KMH-1 T at 10:1 (Table 3 —Impact of Contested Adjustments on NOI and
Revenue Requirement).
1251 Shultz,Exh. KJS-5T at 40:15 —41:6.
1252 Shultz,Exh. KJS-5T at 41:9-10.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 199
ORDER 08
increase from the Union employee portion of its initial proposal of$417,000 (WA
Electric) and$126,000 (WA Natural Gas).1253
704 Regarding the non-Union portion of its pro forma adjustment, Schultz notes that Staff has
accepted and incorporated the Board approved pay increase in its adjustment, which
results in a reduction in expense of approximately$338,000 (WA Electric) and$89,000
(WA Natural Gas) when compared to the non-Union portion of Avista's initial proposal.
705 Schultz notes Staff's silence on its RY2 Pro Forma Adjustment (5.02), as Staff does not
support a multi-year rate plan(MYRP).1214 The Company has included in this adjustment,
a 3 percent merit increase for 2026 for both Union and non-Union employees, which
represents the minimum increase approved by the Board for its non-represented
employees.1255 The Company argues that it is appropriate to apply this increase to its
Union employees as well, as "the bargaining unit typically will not accept a merit increase
less than that of non-Union employees," and notes that over the past five years, Union
merit increases have exceeded the Board approved minimums.1216 When compared to
Avista's as-filed adjustment,Avista's revised proposal would increase its RY1 expense
slightly, by $80,000 (WA Electric) and by$37,000 (WA Natural Gas), and would reduce
expense in RY2 by $541,000 (WA Electric) and by $147,000 (WA Natural Gas).1211
Decision -Pro Forma Labor and Non-Executive Adjustments
706 We accept Avista's Pro Forma Adjustments 3.05 and 5.02, as revised on rebuttal.Avista's
revised adjustments appropriately reflect the Union wage increase that became effective
July 31, 2024, which granted a 5 percent merit increase effective March 2024, and a 5
percent increase effective March of 2025.Avista's revised adjustments also incorporate a
reduction from its initial proposal to its non-Union wage increase, which was approved by
the Board after the Company's initial filing. For RY2 the Company's adjustment includes
a 3 percent merit increase for both Union and non-Union employees, based on the Board
approved minimum. Staff indicated its support for the use of the Board approved
minimum in RY2 during the evidentiary hearing.1258
1253 Shultz,Exh. KJS-5T at 41:13-17.
1214 Shultz,Exh. KJS-5T at 40:1-2.
1255 Shultz,Exh. KJS-5T at 42:13-14.
1256 Shultz,Exh. KJS-5T at 42:12—43:8.
1257 Shultz,Exh. KJS-5T at 40:3-9.
12"TR at 408:10—409:2.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 200
ORDER 08
Pro Forma Employee Benefits
Avistas Direct Testimony
707 Avista proposes Pro Forma Adjustment 3.07 which adjusts its test year retirement plan
expenses and medical insurance expenses for active and retired employees to the amounts
expected in RY1.1219 Avista calculates its adjustment based on estimates determined
annually by Willis Towers Watson, an independent actuarial company which deals with
Avista's retirement plan, and by Mercer, which deals with its medical plans.1260
708 Regarding the retirement portion of its adjustment, the Company included only its test
year level of actual pension expense but plans to update its adjustment to reflect a prorated
amount for RY1 based on an updated actuarial report expected in first quarter of 2024.1261
Avista witness Schultz notes that the Company has made changes to its overall retirement
plan, and proposes an increase consistent with its proposed labor increases prorated for the
rate effective period, resulting in an increase in 401(k) expense of$749,000 (Total
System).1262
709 Schultz notes that Avista has closed its defined benefit pension plan to all non-Union
employees as of January 1, 2024, and for Union employees effective January 1, 2024, and
a defined contribution 401(k) plan replaced the defined benefit pension plan for
employees hired after these cutoff dates.1263
710 Schultz also discusses Avista's pension settlement and related amortization, which is a
component of its adjustment, and was authorized for a 12-year amortization beginning
January 1, 2023, as approved in Avista's last rate case.1264 Schultz notes that the test year
contained six months of this amortization, and Avista proposes to annualize this amount
within its pro forma adjustment.1261
1219 Shultz,Exh. KJS-5T at 59:3-6.
1260 Shultz,Exh. KJS-5T at 59:6-8.
1261 Shultz,Exh. KJS-5T at 60:15-19.
1262 Shultz,Exh. KJS-5T at 61:2-5.
1263 Shultz,Exh. KJS-5T at 61: 9-18.
1264 Shultz,Exh. KJS-5T at 62: 13-20.
1261 Shultz,Exh. KJS-5T at 62: 20—63: 1.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 201
ORDER 08
711 Regarding the medical benefits contained in its adjustment,Avista similarly plans to
update its adjustment based on updates from its consultant that it expects to receive in the
first quarter of 2024 and will adjust its medical expense once received.1266
712 Pro Forma Adjustment 5.03 represents the RY2 portion of Avista's employee benefits
expense adjustment.1267
AWECs Response Testimony
713 AWEC disputes Avista's pro forma employee benefits adjustment, and proposes its own
adjustment based on an updated actuarial report received in response to a data request.1268
AWEC witness Mullins argues that the pension and other post-employment benefit costs
were materially lower in the updated actuarial report than the values Avista used for its pro
forma adjustment.126'AWEC argues that Avista did not properly include the full reduction
to its benefits expense calculation, as provided through the updated actuarial report, and
instead relied on test period expense levels.1270
714 AWEC's proposed adjustment would result in a combined reduction in expense of
approximately $1.6 million in RY1 and$0.4 million in RY2.1271
Public Counsel's Cross-Answer Testimony
715 In cross-answer testimony directed at AWEC witness Mullins, Public Counsel witness M.
Garrett adopts Mullins'proposed adjustment.1272 M. Garrett agrees with Mullins rationale,
arguing that"the Company did not include the full reduction in its pension expense on an
on-going basis" as reflected in the results of the updated actuarial report.'...
1266 Shultz,Exh. KJS-5T at 64: 4-10.
1267 Shultz,Exh. KJS-5T at 92: 11-14.
1261 Mullins,Exh. BGM-1T at 21: 2-3.
1269 Mullins,Exh. BGM-1T at 21: 6-7.
1270 Mullins,Exh. BGM-1T at 21: 9-19.
1271 See Mullins,Exh. BGM-1T at 22: 5 (Table 4). Sum of WA Electric and WA Natural Gas
impacts.
1272 M. Garrett, Exh. MEG-9T at 2: 8-10.
1271 M. Garrett, Exh. MEG-9T at 3: 2-11.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 202
ORDER 08
Avista—Rebuttal Testimony
716 Schultz argues that AWEC's adjustment omitted an update to health insurance, post-
retirement medical expense, 401(k) expense, as well as the pension amortization expense
originally included in the Company's adjustment.1114 Avista also notes a discrepancy in
Mullin's testimony, in which Mullins states that both pension and post-retirement medical
expenses were updated per the updated actuary reports, when in fact, Mullins only updated
pension expense.12"Avista argues that Mullins appears to have chosen only to include the
one update that reduced expense, ignoring other components that increased expense.1276
717 Schultz argues that Avista has accurately reflected the full effect of the pension settlement
and amortization, as well as the updated actuarial report's findings in its adjustment, which
has been updated on rebuttal.1211 Schultz also notes that Mullins has accepted Avista's
RY2 adjustment(Pro Forma Adjustment 5.03).1278 Schultz urges the Commission to reject
AWEC's proposal and adopt Avista's revised adjustment, the expense impact of which is
shown below:1271
Table No. 17—PF Emnlovee Benefits Expense—As Filed versus Rebuttal
Pro Forma Employee Benefits Expense -As-Filed vs. Rebuttal (Adjs.PF 3.07& PF 5.03)
As-Filed Rebuttal Variance
RY1 RY2 RY1 RY2 RY1 RY2
2025 2026 2025 2026 2025 2026
WA Electric $ 131.936 $ 463.696 $ 299.016 $ 164.105 $ 167.080 $ (299.591)
WA Natural Gas $ 41.764 $ 146.782 $ 94,653 $ 51.947 $ 52.889 $ 94.835
Total S 173,700 S 610,478 $ 393,669 $ 216,052 S 219,969 $ 394,42
Decision
718 We accept Avista's Pro Forma Pension Adjustment 3.07, which the Company revised on
rebuttal and AWEC agreed to in briefing. The Commission agrees with Avista that
AWEC's originally proposed adjustment improperly excluded updates to health insurance,
post-retirement medical expenses, and 401(k) expenses and pension amortization expense
1274 Schultz, Exh. KJS-5T at 47: 2-5.
1275 Schultz, Exh. KJS-5T at 47: 9-12.
1271 Schultz, Exh. KJS-5T at 48: 13-16.
127 Schultz, Exh. KJS-5T at 48: 10-11 and 18-19.
1271 Schultz, Exh. KJS-5T at 48: 21 —49:2.
1279 Schultz, Exh. KJS-5T at 29: 10-18 (Table No. 17).

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 203
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originally included in the Company's adjustment.1280 Additionally, we accept the updated
employee pension and medical insurance expenses based on the updated actuarial reports
Avista provided on rebuttal.
Pro Forma Incentives
Avistas Direct Testimony
719 In its Pro Forma Incentive Adjustment 3.08, the Company proposes to deviate from its
traditional six-year average methodology, and instead proposes an adjustment based on
forecasted incentive payouts, which would result in an expense increase of$1.2 million
(WA Electric) and$0.4 million(WA Natural Gas).1281 Avista witness Schultz argues that
the six-year average of actual incentive expense "is simply not representative of the level
of incentive expense the Company is forecasted to incur in RY1 (and carrying into
RY2)."1282
720 Schultz explains that the Company's incentive program, which consists of the non-
executive short-term incentive plan(STIP) and the executive STIP, "provide incentives
and focus employees on stated goals, while recognizing and rewarding employees for their
contributions toward achieving those goals."1283 The Company has included 100 percent
of its non-executive STIP costs and approximately 40 percent of its executive STIP costs
(excluding metrics related to earnings per share and non-regulated activity targets).1284
Staffs Response Testimony
721 Staff contests Avista's proposed pro forma adjustment to incentive expenses, arguing that
the proposed methodology deviates from the previously established six-year average
methodology and the Commission's established standard for pro forma adjustments.1281
Staff witness Hillstead argues that Avista's proposal assumes that the forecasted incentive
pay is certain, when it cannot be due to the nature of incentive pay, and can therefore only
be known and measurable in retrospect.128' Hillstead references Avista's 2017 GRC in
1280 Schultz, Exh. KJS-5T at 47:2-5.
1281 Schultz, Exh. KJS-IT at 65: 1-13.
1212 Schultz, Exh. KJS-IT at 65: 6-8.
1211 Schultz, Exh. KJS-1T at 65:22—66: 4.
1214 Schultz, Exh. KJS-IT at 67: 4-6.
12"Hillstead, Exh. KMH-1T at 13: 11-18.
1216 Hillstead, Exh. KMH-1T at 14: 2-6.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 204
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which the Company proposed a similar adjustment using budgeted projections.1217
Hillstead notes that Staff contested this adjustment and proposed using a six-year average
of actual incentive payouts as the methodology for its adjustment, which the Company
ultimately accepted.1288
722 In this case, Staff analyzed the Company's actual incentive distributions between 2017 and
2022, the six years that comprise the six-year average, and found large variations between
targeted and actual payouts.1289 Hillstead states that the Company may be correct in its
speculation that incentive payments will be significantly higher than its current six-year
average, but argues that the Company will have the opportunity to include these actual
payouts as part of the six-year methodology in a future GRC.1290
723 Staff recommends full disallowance of Avista's proposed pro forma adjustment and to
maintain the level of incentive expenses at the six-year average, as reflected in Avista's
Restating Adjustment 2.13.1291 Staff's proposed disallowance would result in an
approximate $1.2 million reduction in total revenue requirement.1292
Avista's Rebuttal Testimony
724 Schultz argues that Avista's pro forma incentive adjustment meets the standard of a pro
forma adjustment and believes it is appropriate to increase incentive expense beyond the
normal six-year average methodology, arguing that its adjustment is more representative
of what the Company expects to incur in RY1 and RY2.1213 Schultz argues that incentive
expense is based on a percentage of each individual's salary, and that as these salaries
increase each year, incentive expense naturally increases with it.1294 Schultz notes Staff's
acceptance of Avista's pro forma non-executive non-Union labor increases through 2025,
and that Staff considers them to be known and measurable, and which are a larger increase
than the "conservative levels"the Company is proposing with this adjustment.1291
1287 Hillstead, Exh. KMH-1T at 14: 7-9.
12"Hillstead, Exh. KMH-1T at 14: 9-13.
12a9 Hillstead, Exh. KMH-1T at 14: 14-17.
1290 Hillstead, Exh. KMH-1 T at 15: 1-4.
1291 Hillstead, Exh. KMH-IT at 14: 19-21.
1292 Hillstead, Exh. KMH-IT at 10:1 (Table 3 —Impact of Contested Adjustments on NOI and
Revenue Requirement).
1293 Schultz, Exh. KJS-5T at 52: 2-8.
1294 Schultz, Exh. KJS-5T at 52: 11-13.
1291 Schultz, Exh. KJS-5T at 52: 13-16.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 205
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725 Schultz argues that the six-year average methodology understated the amounts "from the
get-go, since labor will increase through RY1 and RY2."1296 Schultz notes that Avista's
six-year average payout percentage from 2017-2022 is 95 percent for non-officer and 98%
for officers, and that if the Company were to apply these payout percentages to its planned
labor increases in 2025 and 2026, the result would be much higher than the "reasonable
and conservative" adjustment it proposes here, which is based solely on its expected 2024
incentive payouts.1297 Schultz argues that it"simply cannot leave a combined $1.6 million
of incentive expense unaccounted for and create yet more regulatory lag."1298 Schultz
states that Avisa's incentive compensation is a critical component of its total compensation
philosophy necessary to recruit and retain qualified employees, and as such, "customers
should have this benefit reflected in their retail rates."1299
Decision
726 We agree with Staff on his issue. While Avista's proposed adjustment is based on contracts
tied to specific incentives in 2024, Staff correctly points out that the contracts in the record
have not been performed.Accordingly, there is no guarantee that those incentive amounts
will be paid.!...
727 The 2024 expected incentive payments remain pending employee performance on
contracts, and thus the amounts remain unknown and unmeasurable.As we have said
throughout this order,pro forma adjustments generally must meet the known and
measurable standard, and not be based on speculation, estimates, or forecasts. The
incentive adjustment proposed by Avista is based on estimates and forecasts, and therefore
does not meet the known and measurable standard.Avista must continue to use the six-
year rolling average methodology with no escalation factor for the incentive adjustment,
consistent with the historic known and measurable methodology.
1296 Schultz, Exh. KJS-5T at 52: 18—53: 1.
1297 Schultz, Exh. KJS-5T at 53: 1-8.
1291 Schultz, Exh. KJS-5T at 53: 12-13.
1299 Schultz, Exh. KJS-5T at 53: 13-16.
1300 See, Staff's Post-Hearing Brief, at¶¶ 104-05.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 206
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Miscellaneous Issues
Electric Property Rent
728 AWEC witness Mullins recommends that the Commission adopt a higher level of rent
from Electric Property for Avista for RY1, based on revenue growth trends observed in
Avista's FERC Account 454 and increased pole costs.1301 Mullins recommends the
Commission increase rent from Electric Property by $2.1 million in RY1. Mullins
recommends an increase of$0.2 million in RY2, a rate of growth that is equal to the
expected growth in distribution plant. 1102 Public Counsel witness M. Garrett adopts and
supports Mullin's adjustment to rents from electric property. 1303
729 Andrews agrees with Mullins'proposal to include a higher level of rent from Electric
Property but does not agree with the magnitude of change AWEC proposed. On rebuttal,
Avista includes an additional $0.6 million of electric revenue requirement for RY1 and
$0.2 million for RY2.1304
730 Andrews disagrees with the rationale Mullins used to calculate the increase in rent from
Electric Property in RY1,1305 and instead uses updated data from a completed audit to
project revenue growth for calendar year 2024 to arrive at the $0.6 million increase in
Rent from Electric Property in RY1.1306 Andrews states that Avista adopts the 5.6% growth
rate proposed by Mullins for RY2 and calculates an increase of$0.2 million in Rent from
Electric Property for RY2. 1307
731 In briefing,Avista disagrees with AWEC's adjustment proposed in its response testimony,
arguing that AWEC's adjustment is based on an atypical, one-time back-billing of joint
users for unauthorized attachments.13os Avista recommends that the Commission approve
the Company's proposed Pro Forma Adjustments AWEC1 (RY1) and AWEC2 (RY2),
which have been updated to include more recent data regarding pole attachments,1309 and
1301 Mullins,Exh. BGM-1T at 23:4—25:3.
1302 Mullins,Exh. BGM-IT at 25:4—26:1.
"03 M. Garrett, Exh. MEG-9T at 2:5-11,4:11-14.
1304 Andrews, Exh. EMA-6T at 53:5-11.
13os Andrews, Exh. EMA-6T at 53:16—54:20.
1306 Andrews, Exh. EMA-6T at 55:1-56:4.
1307 Andrews, Exh. EMA-6T at 56:5-10.
1308 Avista's Post-Hearing Brief, at¶ 114 (citing Mullins,Exh. BGM-1T at 24:9 26:1).
1309 Andrews, Exh. EMA-6T at 53:18—55:19.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 207
ORDER 08
to reflect incremental joint use revenue from other utilities.13 10 The effect of these
adjustments is to increase other electric revenue by$600,000 in RY1 and $200,000 in
RY2 1311
Decision
732 While Public Counsel continues in brief to urge the Commission to adjust Avista's
revenues to reflect AWEC's electric property rental concerns,1312 AWEC changes its
position.After reviewing Avista's rebuttal testimony,AWEC agrees with the revised
electric property rental revenue to $600,000 in RY1 and $200,000 in RY2.1313 Given this
resolution of the issue, the Commission accepts the adjustment Avista proposes on rebuttal
and to which AWEC agrees, resulting in increases to other electric revenue by $600,000 in
RY1 and $200,000 in RY2.1114 The additional analysis provided on rebuttal to support its
revised adjustment is appropriate. The analysis is based on updated, more recent data
regarding pole attachments.131s Avista also removes one-time back-billing costs from the
calculation of revenues related to electric property rents because those costs are unlikely to
reoccur during the rate effective period.1316 Finally, with respect to the anticipated growth
rate for RY2, the Commission notes that Avista has adopted Mullins'proposed growth rate
proposed.13 11
Coyote Springs
733 On rebuttal,Avista revised its proposal related to overhaul expenses for Coyote Springs 2.
The Company's original request for the recovery of expenses of the Coyote Springs 2
(CS2) overhaul in direct testimony,13" required every 32,000 fired-hours, was uncontested
by intervening parties.13"After the Company filed direct testimony, the Company
determined the actual run hours of CS2 have been greater than anticipated and may
require the maintenance overhaul to occur in 2025 instead of 2026. To account for this
13"Avista's Post-Hearing Brief, at¶ 114.
131'Avista's Post-Hearing Brief, at¶ 114.
1312 Public Counsel's Post-Hearing Brief, at¶ 102.
""AWEC's Post-Hearing Brief, at¶94 (citing Andrews,Exh. EMA-6T at 7:4-15).
1314 Andrews, Exh. EMA-6T at 7:4-15;AWEC's Post-Hearing Brief,at¶94 (Oct. 28, 2024).
""Andrews, Exh. EMA-6T at 53:18—55:19.
1316 Andrews, Exh. EMA-6T at 56:1-4.
1317 Andrews, Exh. EMA-6T at 56:5-10.
1318 Andrews, Exh. EMA-6T at 47:7—53:35.
1319 Andrews, Exh. EMA-6T at 74:8—75:8.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 208
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change, the Company requests that the Commission approve the deferral of Washington's
share of the actual costs of the overhaul when the overhaul occurs, regardless of if it
occurs in 2025 or 2026. The Company is not requesting any other changes to its proposed
amortization expense in RY2.1320
734 Specifically,Avista requests that the Commission defer the actual Washington share of
Coyote Springs 2 major maintenance, with a carrying charge of actual cost of debt on both
the deferred balance and during a four-year amortization period. 1321 Avista states that the
maintenance will be required in either 2025 or 2026 depending on the usage of Coyote
Springs 2 and its proposed amortization period will last from July 2026 to June 2030.1322
The Commission accepts Avista's uncontested adjustment related to Coyote Springs 2.
Directors'Fees
735 Avista requests a 90/10 split of directors'total compensation between ratepayers and
shareholders,1323 while AWEC and Public Counsel argue that it should be a 50150 split of
cash compensation with a full disallowance of stock compensation.
736 AWEC witness Mullins recommends the Commission allow Avista to recover only 50
percent of directors' fees from ratepayers, and that no stock compensation provided to
directors be included in the revenue requirement.1324 He cites the Commission practice of
allowing a 50 percent recovery of directors' fees established in Avista's 2015 general rate
case, in Docket UE-150204.1325 Similarly, Public Counsel witness M. Garrett recommends
that the Commission allow Avista to recover 50 percent of directors' fees from ratepayers,
and that no stock compensation provided to directors be included in the revenue
requirement.1326 M. Garrett argues that the directors'compensation should come from
value that they add through maximizing Avista's long-term earnings, as they represent
shareholders and not ratepayers.1327
1320 Andrews, Exh. EMA-6T at 75:9—76:16.
1321 Avista's Post-Hearing Brief, at¶ 121.
1322 Avista's Post-Hearing Brief, at¶ 121.
1323 WUTC a Avista Corp. d/b/a Avista Utils.,Dockets UE-240006 &UG-240007(consolidated),
filed Revisions to Tariff WN U-28 (Electric)and Tariff WN U-29 (Natural Gas) (Jan. 18, 2024).
1324 Mullins,Exh. BGM-IT at 32:12-17.
1321 Mullins,Exh. BGM-1 T at 31:3-13.
1326 M. Garrett, Exh. MEG-1T at 27:8-14.
1327 M. Garrett, Exh. MEG-1T at 27:14—28:6.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 209
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737 In rebuttal and on brief,Avista rejects the recommendation from AWEC and Public
Counsel.Avista argues that the Company's structure has changed significantly since the
Commission established a 50150 split between shareholders and customers as part of the
general rate case in Dockets UE-090134 &UG-090135, and that the Company has
divested from other interests and is now comprised almost entirely of utility operations.1328
Schultz also argues that the complex regulatory environment in which the Company
operates further justifies increased recovery of directors' fees from ratepayers.1329
738 Schultz also claims that the Commission has never excluded director stock compensation
specifically from rates. Schultz explains that the overall compensation given to directors is
a mix of cash and stock subject to the preference of each director, and that the overall
value of the compensation is recorded to FERC Account 930.2.1330
739 On briefing,AWEC argues that Avista's request to recover 90 percent of its directors' fees
from ratepayers is contrary to the Commission's precedent of splitting the recovery
equally between ratepayers and shareholders.1331 AWEC maintains that an equal division
of directors'fees between ratepayers and shareholders is appropriate because directors
prioritize the interests of shareholders in the event of a conflict between shareholders' and
ratepayers' interests.1332 AWEC further notes that in Avista's 2009 general rate case, the
Commission determined that the Board of Directors provided services that benefited
ratepayers to the same extent as it benefited shareholders without relying on the time
directors spent on utility activities rather than non-utility activities.1333 Additionally,
AWEC contends that even acknowledging that utility operations have become more
complex over time,Avista has not demonstrated that the skills necessary for complex
operations provide additional benefits to ratepayers relative to shareholders.1334 As such,
AWEC recommends that the Commission continue to allocate director cash compensation
equally between ratepayers and shareholders.
740 As to director stock compensation,AWEC requests that the Commission disallow the
portion of directors' fees associated with stock compensation because the purpose of stock
1328 Avista's Post-Hearing Brief, at¶ 107, fii. 148.
1329 Schultz, Exh. KJS-5T at 55:10—58:3.
1330 Schultz, Exh. KJS-5T at 58:4-17.
1331 AWEC's Post-Hearing Brief, at¶89.
1332 AWEC's Post-Hearing Brief, at¶89.
1333 AWEC's Post-Hearing Brief, at¶90.
1114 AWEC's Post-Hearing Brief, at¶90.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 210
ORDER 08
compensation is to align directors' interests with those of shareholders.1335 Furthermore,
AWEC contends that providing stock compensation to directors results in a dilution of
shareholder equity, which is not a cost that is includable in a revenue requirement
calculation and should be excluded from the revenue requirement.1336
741 Public Counsel argues that the Commission should only allow Avista to recover 50 percent
of the cash compensation of its Avista's Board of Directors from ratepayers and to wholly
preclude recovery of the Board of Directors' stock-based compensation.1337 Public
Counsel maintains that investor-owned utility directors and officers are biased toward
their shareholders' interests, as these executives owe a fiduciary duty to their shareholders,
but not toward ratepayers.1338 Public Counsel suggests that, as a result of the tension
between maximizing shareholder value and maintain low rates, as well the high level of
Avista's executive compensation relative to publicly-owned utility executives, it is
reasonable for ratepayers and shareholders to each bear 50 percent of the cost associated
with director-level compensation.1339 Public Counsel further contends that because the
primary value of Avista's Board of Directors is to the shareholders, a focus on shareholder
value is inappropriate in the context of regulated monopoly, and that the Board of
Directors must prioritize maximizing public value.1340
742 Turning to Avista's D&O liability insurance, Public Counsel states that while such
insurance is useful in attracting and retaining effective management personnel, other
jurisdictions have authorized an equal division of insurance related expenses between
ratepayers and shareholders.1341 Public Counsel maintains that the main beneficiary of
these insurance policies are shareholders and losses to the ratepayer are not compensable,
as payments from these policies only go to Avista, and that the benefits of attracting
qualified managers are ancillary to this benefit.1341 Consequently, Public Counsel argues
that the Commission should only allow Avista to recover 50 percent of its D&O liability
insurance costs from ratepayers.
1335 AWEC's Post-Hearing Brief, at¶91.
1336 AWEC's Post-Hearing Brief, at¶92.
1337 Public Counsel's Post-Hearing Brief, at¶ 104.
1338 Public Counsel's Post-Hearing Brief, at¶ 105.
1339 Public Counsel's Post-Hearing Brief, at¶ 105.
1340 public Counsel's Post-Hearing Brief, at¶ 105.
1341 Public Counsel's Post-Hearing Brief, at¶ 106.
1342 public Counsel's Post-Hearing Brief, at¶ 106.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 211
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Decision
743 The Commission authorizes Avista to recover 90 percent of its D&O liability insurance for
recovery through rates. Inclusion of this amount is consistent with Commission precedent
established in Avista's 2009 general rate case and is a reasonable component of executive
benefits intended to attract and retain qualified officers and directors)141 While both
AWEC and Public Counsel note that other state regulators have allocated D&O liability
insurance equally between shareholders and ratepayers or required ratepayers to bear less
of the costs than shareholders, the Commission addressed this issue in Avista's 2009
GRC.1344 As in that proceeding, those decisions offer limited insight into how to allocate
insurance costs in the context of this proceeding, and only represent a small subset of
other state regulatory jurisdictions.134' Furthermore, the Commission disagrees with Public
Counsel's assertion that D&O insurance provides no benefit to ratepayers, as the insurance
will shield ratepayers from financial harm in the event of shareholder litigation against
Avista's Board of Directors. Consequently, the Commission is not persuaded that it should
alter its precedent with respect to the allocation of D&O liability insurance in this case.
744 Turning to the issue of directors'fees, and the Commission rejects Avista's proposal to
increase the recovery of directors'fees from ratepayers from 50 percent to 90 percent.
According to Avista, the directors' allocation of time on utility vs. non-utility activities
demonstrate that the directors' activities predominantly benefit ratepayers, such that it is
appropriate for ratepayers to bear a larger proportion of directors' fees.1346 However, the
allocation of director time to utility functions does not necessarily imply that the function
is for the benefit of ratepayers, because a director's fiduciary duties to shareholders may
result in a director taking utility action that is to the benefit of shareholders, but not
ratepayers.As such, the Commission does not find that the allocation of director time and
the complexity of utility operation support changing Commission precedent with respect
to the allocation of directors' fees.Absent further evidence and argument as to why the
Commission should modify its precedent, the Commission will continue to allow 50
percent of directors' fees to be recovered from ratepayers.1347
1343 WUTC a Avista Corp.,Dockets UE-090134, UG-090135, &UG-060518, Order 10, 56-57¶
137 (Dec. 22, 2009).
1344 WUTC a Avista Corp.,Dockets UE-090134, UG-090135, &UG-060518, Order 10, 56¶ 136
(Dec. 22, 2009).
1341 WUTC a Avista Corp.,Dockets UE-090134, UG-090135, &UG-060518, Order 10, 56¶ 136
(Dec. 22, 2009).
1346 Avista's Post-Hearing Brief, at¶ 109.
1147 WUTC a Avista Corp.,Dockets UE-150204 &UG-150205, Order 5, 76¶220(Jan. 6,2016).

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 212
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745 The Commission also rejects Public Counsel and AWEC's request to exclude stock
compensation from the recovery of directors' fees from ratepayers.Assuming without
deciding that stock compensation is solely intended to incentivize directors to prioritize
the interests of shareholders over ratepayers, this consideration alone does not demonstrate
that stock compensation provides no benefit to ratepayers because, as witness Mullins
points out, shareholder interests may overlap with ratepayer interests.1348 In these
circumstances, director activities can be characterized as providing a benefit to ratepayers.
Furthermore, as Avista points out, the Commission has not previously excluded stock
compensation from director compensation in past rate cases and stock compensation is
recorded as a utility expense.1349 Consequently, the Commission declines to entirely
preclude the recovery of stock compensation to directors from ratepayers based on the
record in this case.
Labor-Executive(3.06 Pro Forma Labor Exec)
746 Public Counsel witness M. Garrett recommends that ratepayers should be responsible for
test year salaries of Avista's executives, but that shareholders should pay for the proposed
payroll escalations contained in Avista's pro forma adjustment. M. Garrett's
recommendation reduces electric O&M expense by $60,000, and the gas O&M expense
by $19,000.1350
747 M. Garrett justifies this position by stating that investor-owned utility(IOU) executive
salaries are higher than those at consumer-owned utilities (COU) and cooperative utilities,
claiming that this difference shows that increased executive salaries are not necessary
costs to provide utility service. M. Garrett also suggests that the Commission open an
investigatory docket to examine differences in compensation between IOUs, COUs, and
cooperative utilities, and require Avista to provide COU and cooperative compensation
data in its next GRC.1351
748 On rebuttal, Schultz testifies that its Pro Forma Labor Executive adjustment has been
updated to remove retired officers and reflect the current estimated breakdown of utility
and non-utility responsibilities, 96 percent to ratepayers and 4 percent to shareholders, as
well as to include the Board of Director approved labor increases.1311 On rebuttal, the
1341 Mullins,Exh. BGM-IT at 31:16-20.
1349 Schultz, Exh. KJS-5T at 6-11.
1310 M. Garrett, Exh. MEG-1T at 9:12-22, M. Garrett, Exh.MEG-4.
1311 M. Garrett, Exh. MEG-1T at 7:6—9:11.
1112 Schultz, Exh. KJS-5T at 28:6-15.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 213
ORDER 08
overall increase of the revenue requirement proposed by Avista above test period levels for
RY1 is $115,000 for electric and $37,000 for natural gas.1353
749 In response to Public Counsel's criticisms of Avista's pay structure, Schultz argues that a
significant portion of executive compensation is linked with goals related to specific items
of corporate performance that will likely produce shareholder value, and it is that
compensation that is charged to shareholders. Schultz claims that the appropriate amount
of compensation for utility activity is charged to ratepayers.Avista rejects Public
Counsel's recommendations to remove increased pro-forma executive compensation and
for the Commission to require a study comparing executive compensation between IOUs,
COUs, and cooperative utilities.
750 Both Avista and Public Counsel continue their arguments on brief.Avista disagrees with
Public Counsel's request to decrease director compensation based on the difference
between compensation between IOU executives and publicly-owned utility executives.1354
Avista argues that executive compensation is based on the particular responsibilities of
each officer, and divided into utility and non-utility activities.1355 Avista maintains that an
executive compensation survey is unnecessary because Avista completed a compensation
survey in Dockets UE-110876 & UG-110877.1356 Avista further argues that its proposed
increases to executive compensation in this case are reasonable relative to similarly sized
investor-owned utilities and notes that M. Garrett appears to agree with this
assessment.1357
751 Public Counsel requests that the Commission require Avista's shareholders pay for the
proposed adjustments related to director compensation, resulting in a$60,000 decrease to
electric revenue and a $19,000 decrease to gas revenue.1358 Public Counsel argues that the
differences in compensation between publicly-owned utility executives and IOU
executives is due to the fact that IOU executives owe dual fiduciary duties to both
shareholders and utility customers.1359 Public Counsel asserts that the difference in pay
between investor-owned and publicly-owned executives provides a reasonable estimate of
1353 Schultz, Exh. KJS-5T at 28:23-27.
1354 Avista's Post-Hearing Brief, at¶¶ 101-02.
1355 Avista's Post-Hearing Brief, at¶ 101 (See also, Schultz, Exh. KJS-5T at 44:7-14).
1356 Avista's Post-Hearing Brief, at¶ 101, fn. 139.
1357 Avista's Post-Hearing Brief, at¶ 102 (see also, M. Garrett, Exh. MEG-1T at 7:8-9).
1358 public Counsel's Post-Hearing Brief, at¶ 103.
1359 Public Counsel's Post-Hearing Brief, at¶ 103.Based on arguments presented in further
briefing, we understand Public Counsel to mean that Avista'executives do not have fiduciary
duties to their ratepayers.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 214
ORDER 08
the additional value that IOU executives provide to shareholders, and consequently that
Avista's shareholders should bear those Costs.1360 Public Counsel further recommends that
the Commission order Avista to conduct an executive salary survey, including
compensation data from both publicly-owned and investor-owned utilities.'361
Decision
752 We reject Public Counsel's proposed revisions to Adjustment 3.06 and decline to order
Avista to perform a compensation survey.As Avista explains, its updated adjustment only
includes the portion of executive activity attributable to utility functions (as opposed to
non-utility/shareholder functions) and excludes retired officers.1362 Furthermore, we agree
with Avista that IOU executive compensation is not directly comparable to publicly-
owned utility executive compensation due to the different responsibilities and relatively
greater complexity involved operating an IOU.1363 Additionally, that Avista's executive
compensation appears reasonable relative to other IOU executives supports the conclusion
that Avista's proposed executive compensation adjustment is appropriate.1364 Finally,
given that Avista previously performed a compensation survey in Dockets UE-110876 and
UG-110877, the Commission declines Public Counsel's request to require an additional
compensation survey.
Decoupling
753 Avista witness Anderson proposes to extend the Company's electric and natural gas
decoupling mechanisms, without modifications, through calendar year 2026, citing
benefits experienced by customers and the Company to date and a lack of adverse
impacts.1161
754 No party opposes Avista's request. Though the Company requests that the extension
continues through 2026,1366 Staff supports extending decoupling until Avista's next rate
case or until the Commission comes to a decision in Docket U-210590. Staff witness
Erdahl explains that the Commission is currently evaluating the merits of decoupling
1360 Public Counsel's Post-Hearing Brief, at¶ 103.
1361 Public Counsel's Post-Hearing Brief, at¶ 103.
1362 Schultz, Exh. KJS-5T at 28:7-15, 44:10-14.
1363 Schultz, Exh. KJS-5T at 46:7-15.
1364 M. Garrett, Exh. MEG-1T at 7:8-9.
1365 Anderson, Exh. JCA-1T 15:22—25:2.
1366 Anderson, Exh. JCA-1T 15:24— 16:1.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 215
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mechanisms, and that deciding the matter here would be premature.1367 AWEC also
supports Avista's proposal to continue its revenue decoupling mechanisms during the
multi-year rate plan.1368
755 Similarly, NWEC supports Avista's proposal to continue the revenue decoupling
mechanisms for the term of the MYRP. Witness McCloy clarifies that the transitions of
performance-based ratemaking and electrification may warrant a discussion to modernize
the mechanism.1369
756 While TEP does not comment on Avista's proposal to extend its decoupling mechanism
through 2025, Stokes does comment on Avista's proposal to discontinue its Quarterly
Decoupling Report. If the Commission allows the Company to discontinue its Quarterly
Decoupling Reports, it recommends that the relevant information from those reports
should be included in all future annual adjustment filings.1370 NWEC supports TEPs
request, stating that all Quarterly Decoupling Report information should be included in a
consolidated, accessible manner in future decoupling rate adjustment filings.1371
757 On rebuttal, witness Bonfield accepts witness Stokes'recommendation, stating that"the
Company will make sure all information from the quarterly reports is included in all future
annual adjustment filings."1372 Avista requests that the Commission approve the
Company's request to extend its current electric and natural gas decoupling mechanisms
through the multi-year rate plan until the end December 31, 2026 as uncontested by the
Parties.1373
Decision
758 The Commission accepts Avista's proposal to continue its decoupling mechanism during
its MYRP. The Commission anticipates that further discussion of whether to remove or
modify the mechanisms will occur during Avista's next general rate case or in the context
of Docket U-210590.
1317 Erdahl, Exh. BAE-IT 33:12—34:2
1368 AWEC's Post-Hearing Brief, at¶59.
1"9 McCloy, Exh. LM-1T 14:4— 15:2
1370 Stokes, Exh. SNS-1 T 40:17—42:4
1371 Thompson, Exh. CT-4T 11:18— 12:11.
1372 Bonfield, Exh. SJB-5T 44:10-21
1373 Avista's Post-Hearing Brief, at¶ 124.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 216
ORDER 08
Pro Forma Miscellaneous O&MAdjustment
Avistas Direct Testimony
759 This adjustment reflects escalated increases in certain Company operations and
maintenance (O&M) and administrative and general (A&G) expenses, from the historical
test year ending June 30, 2023, through RY1, not otherwise pro formed within the
Company's electric or natural gas Pro Forma Studies.1314 The Company applied an annual
escalation rate of 6.3 percent for electric and 4.57 percent for natural gas operations by
FERC account to certain O&M and A&G annual test period balances as of June 30, 2023,
through December 2025 (or 2.5 years).1315
760 This adjustment increases RY1 Washington expenses by $8,876,000 for electric and
$1,634,000 for natural gas and decreases RY1 Washington NOI by$7,012,000 for electric
and $1,291,000 for natural gas.1376
761 For RY2,Avista proposes Pro Forma Miscellaneous O&M Expense to reflect escalated
increases in certain Company O&M and A&G expenses, to reflect incremental expenses in
RY2, beyond RY 1 levels, effective December 2025, through December 2026, not
otherwise pro formed within the Company's electric or natural gas Pro Forma Studies.1377
The Company applied the same escalation growth rate used in RY1 of 6.3 percent for
electric and 4.57 percent for natural gas operations to escalate RY2 amounts above RY1
levels.1371
762 This adjustment increases RY2 Washington expenses by $3,550,000 for electric and
$653,000 for natural gas and decreases RY2 Washington NOI by$2,805,000 for electric
and $516,000 for natural gas.1379
AWEC's Response Testimony
763 AWEC contends that Avista's proposal to apply annual escalation factors of 6.30 percent
for electric services and 4.57 percent for gas services to the Historical Period non-labor
1374 Schultz, Exh. KJS-IT at 72:1-4.
1371 Schultz, Exh. KJS-IT at 72:4-7.
1371 Schultz, Exh. KJS-IT at 72:15-17.
1377 Andrews, Exh.AMM-IT at 12:4-8.
1371 Andrews, Exh.AMM-1T at 12:8-11.
1379 Andrews, Exh.AMM-1 T at 12:11-13.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 217
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O&M results is concerning as the escalation percentages are well above expected inflation
over the rate plan period.1380
764 AWEC argues that the trend Avista used was based on total O&M expense, excluding
power supply costs, not on non-labor O&M expense.1381 AWEC argues that the
percentages that Avista calculated are not representative of an escalation factor that
reasonably can be applied to non-labor O&M expense.1382
765 AWEC witness Mullins asserts that Avista's operating expenses for electric services
actually declined by 2.39 percent in 2023 and natural gas non-labor O&M expense
declined by 3.3 percent.1383 Given these reductions and AWEC's experience in the 2022
GRC, Mullins questions the veracity of what Mullins describes as aggressive non-labor
O&M escalation assumptions included in Avista's filing.1384
766 AWEC recommends including no rate escalation in RY 1, and a modest inflationary
escalator for RY 2. The inflationary adjustment AWEC recommends for RY 2 is 2.3
percent, which represents the mid-point Personal Consumption Expenditures inflation
forecast of the Federal Reserve, Federal Open Market Committee.1385
Public Counsel's Response Testimony
767 Public Counsel witness M. Garrett states that Avista's annual escalation rates substantially
overstate current inflation expectations through 2026.1386 Instead, M. Garrett calculated an
annual rate of 2.5 percent as a more reasonable inflation expectation through 2026 for the
Company's electric and gas operations.1381
768 According to Public Counsel, adjusting the electric utility's O&M escalation rate to 2.5
percent reduces the revenue requirement by $5.624 million for RY1 and by an additional
$2.249 million for RY2.1388 Public Counsel also testifies that the adjustments to reduce the
1380 Mullins,Exh. BGM-IT at 15:10-12.
1381 Mullins,Exh. BGM-IT at 16:2-3.
1382 Mullins,Exh. BGM-IT at 16:5-7.
" Mullins,Exh. BGM-IT at 19:5-6.
1384 Mullins,Exh. BGM-IT at 19:6-9.
1`5 Mullins,Exh. BGM-IT at 19:17-20.
1316 M. Garrett, Exh. MEG-1T at 11:4-5.
1317 M. Garrett, Exh. MEG-1T at 12:3-4.
1311 M. Garrett, Exh. MEG-1T at 14:28-29 and at 15:1-2.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 218
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gas utility's O&M escalation rate to 2.5 percent reduce the revenue requirement$778
thousand for RY 1 and an additional $170 thousand for RY2.13s9
Staffs Response Testimony
769 Staff contends that Avista's adjustment does not meet the Commission's standard of a pro
forma adjustment because the escalated increase is not known nor is it measurable. In
addition, the changes in the adjusted O&M expenses had significant fluctuations between
2018 and 2023.1390
770 Because the Company failed to provide evidence that the O&M expenses will escalate at
the level proposed in the rate year, Staff recommends including only the incremental
known and measurable 2023 O&M expenses not already included in the Company's test
year, and to disallow any escalation component.1391
Avista's Rebuttal Testimony
771 The Company modified its Pro Forma Miscellaneous O&M Adjustments 3.14 and 5.06, in
response to Public Counsel data request, PC-DR-297. This modification was intended to
reflect actual known changes in expense through end of 12 months ending in December
2023 (12ME December 2023), above the test period expense, which ended in June 2023
(12ME 6.2023). The Company also revised its annual historical O&M growth average to
include 2023 results (2019-2023), resulting in escalation growth rates of 4.57 percent for
electric and 4.28 percent for natural gas, above the actual results for the twelve-month test
year ending December 2023 (12ME 12.2023).1392
772 Witness Andrews further states that updating Avista's actual results to reflect known and
measurable increases in the specific O&M and A&G expenses as of 12ME 12.2023
produces an increase in actual electric O&M/A&G expense of$5.9 million above test
period levels, and shows a reduction in actual natural gas O&M/A&G expense of
$468,000.1393
773 Avista explains that if it were simply to support revised values for these expenses at 12ME
12.2023, for electric operations,Avista's electric pro forma Adjustment 3.14 would drop
1319 M. Garrett, Exh. MEG-1T at 15:5-7.
1390 Hillstead, Exh. KMH-lT at 16:7-10.
1391 Hillstead, Exh. KMH-IT at 16:13-16.
1392 Andrews, Exh. EMA-6T at 39:10-15.
'"'Andrews, Exh. EMA-6T at 39:16-19.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 219
ORDER 08
by $3.0 million, from a level of$8.9 million to $5.9 million. For natural gas,Avista's pro
forma Adjustment 3.14 would drop by $2.1 million, from an increase of$1.6 million to a
decrease of$0.5 million.1394
774 Additionally, the Company states that it now supports Public Counsel's proposed
inflationary rate of 2.5 percent annually through 2026.1395
775 With respect to Pro Forma Adjustments 3.14 and 5.06,Avista argues that the Commission
should approve its revised escalation adjustments from its rebuttal testimony that
incorporate both updated expenses from the 2023 test period and a 2.5 percent growth rate
as proposed by Public Counsel witness M. Garrett in RY 1 and RY 2.1396 The result of
these changes on rebuttal to Avista's electric and natural gas revenue requirement in RY I,
is an increase of$143,000 for electric, and a reduction of$1.5 million for natural gas.1397
For RY2, these changes reduce the Company's electric and natural gas revenue
requirements by $2.1 million for electric and $323,000 for natural gas.1398
Decision
776 The Commission authorizes a 2.5 percent escalation adjustment for Avista's Pro Forma
Adjustments 3.14 (RY 1) and 5.06 (RY2), as originally proposed by Public Counsel
witness M. Garrett.1399
777 Pursuant to Commission rule and precedent, a pro forma adjustment gives effect for the
test period to all known and measurable changes that are not offset by other factors.1411
Under this standard, an event that causes a change to revenue, expenses, or rate base must
be "known"to have occurred during or after the historical 12 months of actual results of
operations.141' The "known" component of the standard requires that the effect of the
event will be in place during the rate effective period.1412 Furthermore, the amount of the
change must be "measurable,"which traditionally has meant that the amount cannot be an
1394 Andrews, Exh. EMA-6T at 40:5-7.
1395 Andrews, Exh. EMA-6T at 43:16-17.
1396 Avista's Post-Hearing Brief, at¶ 111.
1397 Andrews, Exh. EMA-6T at 44:13-15.
1391 Andrews, Exh. EMA-6T at 44:15-16.
1399 M. Garrett, Exh. MEG-1T at 11:12- 13:6.
1400 WAC 480-07-510(3)(c)(ii).
1401 WUTC a Avista Corp.,Dockets UE-090134&UG-090135, Order 10, 21 ¶45 (Dec. 22,2009).
1402 WUTC a Avista Corp.,Dockets UE-090134&UG-090135, Order 10, 21 ¶45 (Dec. 22, 2009).

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 220
ORDER 08
estimate, projection, a product of a budget forecast, or some similar exercise of judgment,
even informed judgment, concerning future revenue, expense, or rate base.1403 There are,
however, exceptions to this general rule, for example in the context of attrition
adjustments and power cost modeling forecasts.1404 Finally, pro forma adjustments must
be matched with offsetting factors, factors that diminish the impact of the known and
measurable event, so as to avoid overstating or understating the known and measurable
change.1405
778 Avista witness Andrews testified that the purpose of the escalation adjustment was to react
to the anticipated effect of inflation during the rate effective period of the rate plan.1406 No
Party in this proceeding contends that inflation will not impact Avista's O&M expenses
during the rate effective period. Therefore, it is fair to conclude that the effect of inflation
on Avista's O&M expenses is "known."
779 Turning to the "measurable"prong of the analysis, the Commission determines that
although Avista's proposed adjustment is based on a projected forecast of the effect of
inflation, this adjustment, similar to power cost modelling forecasts, falls within the
exception to the usual precision required of pro forma adjustments. While the Commission
agrees that it is inappropriate to base this adjustment on Avista's own historical data on
this record, it is reasonable to rely on the inflation data published by the Federal Reserve,
in addition to other governmental sources, to forecast the likely effect of inflation during
the rate effective period.140' Reliance on this data strikes the appropriate balance between
allowing Avista to insulate itself from the anticipated effect of inflation and encouraging
Avista to control costs to the benefit of ratepayers.As such, the forecast of inflation data is
"measurable"within the exception to the Commission's general pro forma standard and
supports an adjustment of 2.5 percent for both RY1 and RY 2 of Avista's multi-year rate
plan.
780 Finally, the Commission is satisfied that Avista considered offsetting factors related to its
updated test year ending in December 2023.Avista witness Schultz's testimony contains
1403 WUTC a Avista Corp.,Dockets UE-090134&UG-090135, Order 10, 21 ¶45 (Dec. 22,2009).
1404 WUTC a Avista Corp.,Dockets UE-090134&UG-090135, Order 10, 21 ¶49(Dec. 22,2009)
(power cost modeling); WUTC v Avista Corp., Dockets UE-120436&UG-120437, and UE-
110876 &UG-110877, Order 09/14,26-28¶¶70-73 (Dec. 26, 2012) (attrition adjustment).
1405 WUTC a Avista Corp.,Dockets UE-090134&UG-090135, Order 10, 21 ¶46(Dec. 22, 2009).
1406 Andrews, Exh. EMA-1T at 13:8-14;Andrews, Exh. EMA-6T at 42:17—43:5.
1407 M. Garrett, Exh. MEG-1T at 11:1 — 13:6. See also, M. Garrett, Exh.MEG-1T at 13:2-3, fn. 8
(noting that a 2.5 percent inflation rate is consistent with numerous publicly available sources,
including Office of Management and Budget, Congressional Budget Office, Federal Reserve's
Open Market Committee, and several Federal Reserve Banks).

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 221
ORDER 08
information reflecting both electric and natural gas offsets for the Company's position on
rebuttal, including direct O&M offsets.140'Although Public Counsel asserts in briefing
that Avista did not properly consider offsetting factors related to its updated test year
proposed on rebuttal, they do not direct the Commission's attention to any specific
deficiencies or omissions in Avista's rebuttal analysis. Therefore, the Commission finds
that Avista's analysis properly incorporates consideration of offsetting factors.
781 In reaching this outcome, the Commission is mindful of RCW 80.28.425(3)(c), which
provides that the Commission"shall ascertain and determine the revenues and operating
expenses for rate-making purposes of any gas or electrical company for each rate year of
the multi-year rate plan."RCW 80.28.425(3)(d) further states in"projecting the revenues
and operating expenses of a gas or electrical company pursuant to (c) of this section, the
commission may use any formula, method, or theory of valuation reasonably calculated to
arrive at fair,just, reasonable, and sufficient rates."Based on this authority, and the pro
forma adjustment analysis described above, the Commission determines that it has the
discretion to authorize an inflation escalator adjustment to the miscellaneous expenses
contained in Avista's Adjustments 3.14 and 5.06. On the record developed in this
proceeding, the Commission chooses to exercise this discretion to approve a 2.5 percent
escalation increase to the expenses in Adjustments 3.14 (RY1) and 5.06 (RY2). The
Commission further orders Avista to provide the workpapers demonstrating its full
calculations of offsetting factors related its updated test year and adjustments as part of a
compliance filing in this docket.
FINDINGS OF FACT
782 Having discussed above in detail the evidence received in this proceeding concerning all
material matters, and having stated findings and conclusions upon issues in dispute among
the Parties and the reasons therefore, the Commission now makes the following summary
of those facts, incorporating by reference pertinent portions of the preceding detailed
findings:
783 (1) The Commission is an agency of the state of Washington vested by statute with
the authority to regulate rates, regulations, practices, accounts, securities, transfers
of property and affiliated interests of public service companies, including electric
and natural gas companies.
784 (2) Avista is a"public service company," an"electrical company," and a"gas
company" as those terms are defined in RCW 80.04.010 and used in Title
1401 Schultz, Exh. KJS-5T at 17:1 18:15; 31:10 32:2.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 222
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80 RCW. Avista provides electric and natural gas utility service to customers in
Washington.
785 (3) Avista's currently effective rates were determined by the Commission's Final
Order approving a full multiparty settlement in Wash. Utils. & Transp. Comm'n v.
Avista Corp. d/b/a Avista Utils., Dockets UE-220053, UG-220054 &UE-210854
(Consolidated), Order 08/05 (Dec. 12, 2022).
786 (4) In May of 2020, Avista issued its Wildfire Resiliency Plan. On October 30, 2020,
Avista filed with the Commission revisions to its currently effective Tariffs WN
U-28, Electric Service, and WN U-29, Natural Gas Service, and also filed its
Petition with the Commission to request accounting and ratemaking treatment of
costs associated with its Wildfire Resiliency Plan.
787 (5) Avista requests an increase in its annual electric revenue requirement of
approximately $28.5 million(5.38 percent), and an increase to its annual natural
gas revenue requirement of approximately $10.7 million (10.14 percent).
788 (6) On September 30, 2024, through October 1, 2024, the Commission held an
Evidentiary Hearing before Administrative Law Judges James E. Brown II and
Connor A. Thompson, who presided along with the Commissioners.
789 (7) The Commission finds it would be premature to conduct prudency reviews of
CCA costs and compliance on an annual basis.
790 (8) During Avista's annual submission of updates to its CCA tracker tariff, the
Company shall submit and present information pertaining to where CCA costs are
being included in decision making to include, but not be limited to IRPs, CEIPs,
dispatch, power purchase, carbon market transactions, and capital projects.
791 (9) CCA allowance prices and costs in dispatch, market purchases, and market sales,
and the Commission's policy surrounding their inclusion in NPE, should be
addressed in Docket U-230161 so that policy and implementation is consistent for
all regulated utilities, and each impacted utility has an opportunity to comment on
the issue.
792 (10) The Commission finds that the modeling errors should be addressed by the parties
before the Commission adjusts the dead and sharing bands under the ERM.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 223
ORDER 08
793 (11) The Commission finds that the modeling errors should be addressed by the parties,
and that the forecast error adjustment is not just, reasonable, or sufficient at this
time.
794 (12) Because Avista no longer collects GHG revenues in the WEIM since the CCA's
implementation, we find that AWEC's adjustment should be rejected.
795 (13) Avista uses an approved methodology to calculate non-energy WEIM benefits and
therefore we reject the adjustments proposed by AWEC and supported by Staff for
including additional non-energy benefits.
796 (14) The Commission finds that because the CAISO estimate does not account for the
opportunity cost of leaving the bilateral market, it should not be used to calculate
WEIM benefits for Avista at this time as the evidence suggests its adoption would
likely result in an overestimation of benefits not likely to be realized.
797 (15) The Commission finds that the Colstrip transmission assets should remain in rates
at this time.
798 (16) The Commission finds that each of AWEC's proposals related to Colstrip as it
relates to the ERM and NPE should be rejected.
799 (17) The Commission finds that the adjustment for COB proposed by AWEC to account
for COB margins was agreed to during the evidentiary hearing and should be
made.
800 (18) The provisional plant review process should continue to be assessed on a portfolio
rather than project-by-project basis.
801 (19) To allow for additional evaluation of provisional capital filings, the review process
should be extended to six months.
802 (20) Classification of plant and naming conventions should remain consistent
throughout the provisional capital review and general rate case process.
803 (21) A separate provisional plant tariff is not necessary at this time.
804 (22) Allowing new business cases is consistent with the Commission's Policy
Statement to allow flexibility and further the reduction of regulatory lag.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 224
ORDER 08
805 (23) The Commission finds Public Counsel's recommendation for an equal allocation is
fair,just, and reasonable, and that Avista's next cost study shall account for
removal of Colstrip from rates.
806 (24) Avista provided insufficient evidence to support its request to include its proposed
flotation cost adjustment in its calculation for return on equity.
807 (25) Avista's proposed flotation cost adjustment should be rejected from its calculation
for return on equity.
808 (26) The Commission finds that a $1.00 increase to the minimum charge for electric
and gas customers is supported by the record.
809 (27) AWEC's proposals regarding Schedule 13 and 23 should be rejected, and an equal
percentage of base revenue increase is appropriate, consistent with our approach to
rate spread generally and Avista's original filing.
810 (28) AWEC's three adjustments, as modified by Avista, to Schedule 25 are unopposed
and should be adopted. Those include (1) increasing demand charges for energy
blocks 1 and 2 by 25 percent in RY1 and 25 percent in RY2, (2) increasing the
primary voltage discount from $1.93/kW to $4.39/kW, and(3) changing language
in Schedule 25 to make the primary voltage discount applicable to customers
served through third party substations.
811 (29) Sierra Club's proposal to require a decarbonization plan is inappropriate given the
subsequent passage of Initiative 2066.
812 (30) Sierra Club and NWEC's proposals relating to line extension allowances are
inappropriate given the subsequent passage of Initiative 2066.
813 (31) In light of the record evidence, the Commissions adopts the Non-Pipeline
Alternatives framework used by the Oregon Public Utilities Commission, with
some modification as an appropriate balance. The first modification we deem
appropriate is that Avista must examine the relationship between any NPA and the
Climate Commitment Act and should not assume that all CCA allowances will be
purchased at the ceiling price. Second,Avista is required to provide an explanation
of the resulting investment selection (either the NPA or a traditional investment)
that compares the costs of both projects,but Avista is not required to rank or score
any NPA in its evaluation process.Avista must conduct at least two NPA analyses
on natural gas distribution projects related to customer growth for any potential
projects that exceed $500,000, using the criteria described above.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 225
ORDER 08
814 (32) In October of 2020,Avista filed with the Commission in Docket UE-200894 a
petition for an accounting order authorizing the accounting and ratemaking
treatment of the costs associated with the Company's Wildfire Resiliency Plan.
815 (33) The record evidence demonstrates that Avista continues to face increased wildfire
threats, risks, costs, and other circumstances.
816 (34) The record evidence demonstrates that Avista has been taking incremental
wildfire actions above normal activities, and that the circumstances it faces are
extraordinary.
817 (35) The record evidence demonstrates that the base level of Avista's wildfire expense
of its Wildfire Balancing Account should be adjusted to $8.3 million and applied
across Avista's two-year rate plan.
818 (36) AWEC failed to demonstrate that removal of standard undergrounding in non-fire
risk areas and standard vegetation management is appropriate.
819 (37) The record evidence demonstrates that Avista's proposal to recover carrying
charges related to the Wildfire at its cost of debt is appropriate.
820 (38) The record evidence demonstrates that increasing Avista's Insurance Expense
Balancing Account baselines to $12.8 million for electric and $2.3 million for
natural gas is appropriate.
821 (39) D&O insurance benefits both customers and shareholders as part of the
compensation package necessary to attract and retain qualified directors and
officers and allocating 90 percent to customers and 10 percent to shareholders is
appropriate.
822 (40) The performance measures outlined in Appendix A and their related reporting
requirements are fair,just, and reasonable, consistent with applicable law, in the
public interest, and will provide necessary information to allow the Commission to
evaluate Avista's operations during the MYRR
823 (41) The modified recurring reporting requirements outlined in Appendix B are fair,
just, and reasonable, consistent with applicable law, in the public interest, and will
provide necessary information to continue evaluating Avista's operations.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 226
ORDER 08
824 (42) The evidence supports Avista's proposed capital structure of 51.5 percent debt and
48.5 percent equity as reasonable and resulting in fair,just, reasonable, and
sufficient rates.
825 (43) The evidence supports Avista's proposed return on equity of 9.8 percent as
reasonable and resulting in fair,just, reasonable, and sufficient rates.
826 (44) The evidence supports Avista's proposed overall rate of return of 7.32 percent as
reasonable and resulting in fair,just, reasonable, and sufficient rates.
827 (45) Staff's proposed rate of return of 9.5 percent is unreasonably low and not
supported by persuasive cost of capital modeling.
828 (46) Public Counsel's proposed rate of return of 8.5 percent is unreasonably low and
not supported by persuasive cost of capital modeling.
829 (47) AWEC's proposed rate of return of 9.25 percent is unreasonably low and not
supported by persuasive cost of capital modeling.
830 (48) Walmart's proposed rate of return of 9.62 percent for electricity and 9.58 percent
for gas are unreasonably low and not supported by persuasive cost of capital
modeling.
831 (49) Avista provided insufficient evidence to support its request to include its proposed
flotation cost adjustment in its calculation for return on equity.
832 (50) Avista's proposed flotation cost adjustment should be rejected from its calculation
for return on equity.
833 (51) The Commission finds it appropriate to allow a return on Avista's Power Purchase
Agreements. The Commission further finds that the appropriate rate is the
company's cost of debt.
834 (52) The record evidence is insufficient to demonstrate that Avista should be required to
engage in a targeted electrification pilot as proposed by Sierra Club.
835 (53) The record evidence is insufficient to demonstrate that AWEC's proposed
adjustment to Avista's Working Capital Restating Adjustment (ISWC Adjustment
1.03) will result in rates that are fair,just, reasonable, and sufficient.
836 (54) The record evidence demonstrates that Avista's proposed Working Capital
Restating Adjustment(ISWC Adjustment 1.03) is based on a methodology

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 227
ORDER 08
previously approved by the Commission and is reasonably calculated to result in
rates that are fair,just, reasonable, and sufficient.
837 (55) AWEC's proposal to adjust Avista's wildfire and patent litigation costs as non-
recurring is not appropriate in light of the record evidence.
838 (56) AWEC's proposal to modify Avista's accounting of deferred tax credits balances is
inappropriate in light of the record evidence.
839 (57) The record evidence demonstrates that Avista's proposed adjustment to electric
property rent as revised on rebuttal is reasonable and appropriate.
840 (58) Avista's proposal to defer the actual Washington share of Coyote Springs 2 major
maintenance is uncontested and supported by the record.
841 (59) The record evidence does not support AWEC and Public Counsel's proposal to
exclude 50 percent of Avista's Directors' and Officers' liability insurance. Because
Directors' and Officers'liability insurance benefits both customers and
shareholders as part of the compensation package necessary to attract and retain
qualified directors and officers, allocating 90 percent to customers and 10 percent
to shareholders is appropriate.
842 (60) The record evidence does not support Avista's proposal to increase the ratepayer
share of directors'fees from 50 to 90 percent.Avista has not demonstrated that the
Commission should alter its precedent of allocating directors'fees equally between
ratepayers and shareholders, as established in Avista's 2009 GRC.
843 (61) The record evidence does not support AWEC and Public Counsel's proposal to
wholly exclude stock compensation from Avista's directors' fees.
844 (62) The record evidence supports including 50 percent of Avista's directors' fees in
rates, consistent with the Commission's precedent established in Avista's 2009
GRC.
845 (63) The record evidence does not support Public Counsel's proposal to adjust Avista's
executive compensation. Public Counsel has not demonstrated based on the
evidence in this case that the publicly-owned utility executive compensation is
directly comparable to investor-owned utility executive compensation.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 228
ORDER 08
846 (64) Public Counsel has not demonstrated that requiring Avista to conduct an executive
compensation survey including data from publicly-owned utility executives is
reasonable or appropriate based on the evidence in this case. Public Counsel has
not demonstrated based on the evidence in this case that the publicly-owned utility
executive compensation is directly comparable to investor-owned utility executive
compensation and Avista has previously performed an executive compensation
survey in Dockets UE-110876 and UG-110877.
847 (65) The incentive adjustment 3.08 shall utilize the six-year rolling average
methodology with no escalation factor, consistent with historic known and
measurable methodology.
848 (66) Avista's proposal to continue its revenue decoupling mechanisms during the multi-
year rate plan is uncontested and adequately supported by the record.
849 (67) The record evidence demonstrates that Avista's proposed 2.5 percent escalation
adjustment for Pro Forma Adjustments 3.14 and 5.06 is intended to respond to the
known effect of inflation during the rate effective period, that inflation is
measurable in a similar manner to other adjustments such as Avista's power cost
modeling, and that Avista has incorporated offsetting factors into its proposed
adjustment.
850 (68) The Commission finds that it is reasonable to require Avista to file its workpapers
supporting its pro forma adjustments regarding its updated test year ending in
December 2023, as part of a compliance filing within 45 days of this Order.
851 (69) Based on the evidence in the record and the Commission's denial of the forecast
error adjustment, the Commission authorizes a Washington Total Power Supply
Base of$34,116,983 for rate year 1, and $85,733,975 for rate year 2.
CONCLUSIONS OF LAW
852 Having discussed above all matters material to this decision, the Commission now makes
the following summary conclusions of law, incorporating by reference pertinent portions
of the preceding detailed conclusions:
853 (1) The Commission has jurisdiction over the subject matter of, and Parties to, this
proceeding.
854 (2) Avista is an electric company, a natural gas company, and a public service
company subject to Commission jurisdiction

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 229
ORDER 08
855 (3) At any hearing involving a proposed change in a tariff schedule the effect of
which would be to increase any rate, charge, rental, or toll theretofore charged,
the burden of proof to show that such increase is just and reasonable will be upon
the public service company. RCW 80.04.130 (4). The Commission's
determination of whether the Company has carried its burden is adjudged based
on the full evidentiary record.
856 (4) Avista's existing rates for electric and natural gas service are neither fair,just,
reasonable, nor sufficient, and should be adjusted prospectively after the date of
this Order.
857 (5) Avista shall submit and present information pertaining to where CCA costs are
being included in decision making to include, but not limited to Integrated
Resource Plans (IRPs), Clean Energy Implementation Plans (CEIPs), dispatch,
power purchase, carbon market transactions, and capital projects. This annual
report will be addressed and acknowledged through the Open Meeting process
and will help the Commission assess a utility's progress and decision making
leading up to the Commission's prudency determination at the conclusion of the
compliance period
858 (6) CCA allowance prices and costs in dispatch, market purchases, and market sales,
and the Commission's policy surrounding their inclusion in NPE, should be
addressed in Docket U-230161 affording opportunity to comment from all
regulated utilities.
859 (7) The Commission denies Avista's and Staff's proposals to modify the ERM at this
time.
860 (8) The Commission denies Avista's forecast error adjustment as it fails to meet the
known and measurable standard.
861 (9) Avista shall convene a workshop series with interested parties to address modeling
inputs, power supply modeling methodology, use of AURORA, and a changing
energy landscape. These conversations should include discussions regarding
inclusion of CCA costs and addressing the forecast error as well as other issues
raised by the parties in this proceeding.
862 (10) The EIM benefits calculation methodology proposed by Avista, resulting in$6.6
million in benefits is just and reasonable.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 230
ORDER 08
863 (11) Avista's transmission assets are used and useful and the Company has provided
evidence and testimony showing that they will remain so.
864 (12) There is insufficient evidence supporting the need for an update to the Colstrip
mark-to-market valuation and the Commission does not find that the benefits
would outweigh the costs of an additional rate proceeding to update that valuation.
865 (13) Consistent with the Commission's Used and Useful Policy, the provisional plant
review process should continue to be conducted on a portfolio basis, with a six-
month review period, with consistent classification of plant and naming
conventions, and shall not be tracked through a separate tariff at this time.
866 (14) In spite of our desire to maintain flexibility, and not be overly prescriptive, we
wish to provide further clarification on the Commission's expectations for
provisional plant filings. Specifically,Avista must conform to the following:
1) Identify if a business case is identified in the Clean Energy Implementation
Plan (CEIP);
2) Identify if a business case is required for CETA and/or Climate
Commitment Act (CCA) compliance;
3) Identify each new business case and provide a narrative for business need;
4) Provide information on an annual and cumulative rate-effective period
basis;
5) Provide a narrative that explains the filing structure and how worksheets fit
together; and
6) Maintain consistent naming conventions.
867 (15) The Commission finds Public Counsel's recommendation for an equal allocation is
fair,just, and reasonable, and that Avista's next cost of service study shall account
for removal of Colstrip in rates.
868 (16) Avista proposed a multi-year rate plan as required by RCW 80.28.425.
869 (17) The Commission should approve Avista's filing as a multi-year rate plan and not as
a traditional rate case filing.
870 (18) The Commission should authorize and require Avista to make a compliance filing
in these consolidated dockets to recover in prospective rates its revenue deficiency
of$11.882 for rate year 1 and an incremental $68.9 million in rate year 2, for
electric operations before offsetting Colstrip factors, and an increase of$14.2

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 231
ORDER 08
million in rate year 1 and an incremental $4.0 million for rate year 2, for natural
gas operations as provided in Appendix C (electric) and Appendix D (natural gas).
871 (19) A$1.00 increase to the minimum charge for electric and gas customers is
supported by the record and is just, reasonable, and sufficient.
872 (20) Avista must revise Schedule 25 to include (1) increasing demand charges for
energy blocks 1 and 2 by 25 percent in RY1 and 25 percent in RY2, (2) increasing
the primary voltage discount from $1.93/kW to $4.39/kW, and (3) changing
language in Schedule 25 to make the primary voltage discount applicable to
customers served through third party substations.
873 (21) For the proposals related to reallocating Colstrip and including Colstrip in rate
spread calculations, we agree with Avista that both AWEC and NWEC were
signatories to the original settlement, and that settlement should not be amended at
this time.
874 (22) The Commission should authorize a capital structure of 48.5 percent equity and
51.5 percent debt, a cost of debt of 4.99 percent, and an ROE of 9.8 percent,
resulting in a ROR of 7.32 percent.
875 (23) The flotation costs incurred by the Company's investors are not expenses the
ratepayers shall bear.
876 (24) In the recent election, voters approved Initiative Measure No. 2066, which in
pertinent part states:
(12) The commission shall not approve, or approve with conditions, a
multiyear rate plan that requires or incentivizes a gas company or large
combination utility to terminate natural gas service to customers.
(13) The commission shall not approve, or approve with conditions, a
multiyear rate plan that authorizes a gas company or large combination
utility to require a customer to involuntarily switch fuel use either by
restricting access to natural gas service or by implementing planning
requirements that would make access to natural gas service cost-prohibitive.
877 (25) The Commission should adopt the non-pipeline alternatives framework described
in paragraph 809, as fair,just, reasonable, sufficient and in the public interest.
878 (26) While the consideration of equity pursuant to RCW 80.20.425(1) is distinct from
the legal requirements pertaining to low-income customer programs, the

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 232
ORDER 08
Commission's equity analysis naturally focuses on low-income customer
programs, among other broader social, economic, and environmental impacts
related to utility rates, services, and practices.
879 (27) Avista has demonstrated sufficient evidence of its continued dedication to
promoting equitable outcomes by agreeing to: (1)retain the reporting requirements
in accordance with U-210800; (2) collaborate with EAAG and EAG on its
disconnection policies and its multilingual MLS strategy; and(3) obtain customer
demographic information for DER on an optional basis. The Commission therefore
rejects TEP's recommendations that Avista:
1) Prioritize customers for disconnection based on only current arrearage
amount and duration of current arrears;
2) Develop a separate LAP in coordination with EAG and EAAG;
3) Provide a new LINA/EBA and report data in its disconnection reduction
report using the stratification framework.
4) Publish its stratification and data reporting on its website.
880 (28) The Commission is legally obligated by RCW 80.28.425(7)to determine a set of
performance measures that will be used to assess Avista's operations under the
MYRR
881 (29) The Commission's determination of a set of performance measures need not be
based upon a company's initial filing, the record testimony and evidence, or the
proposals made by a company or party throughout the proceeding.1401
882 (30) The Commission should adopt the performance measures outlined in Appendix A
and Avista should be authorized and required to make necessary and sufficient
future compliance filings in accordance with the directions and conditions of this
Order.
883 (31) Avista should be authorized and required to make an annual compliance filing to
report the performance measures outlined in Appendix A for each year of the
MYRP (beginning January 1 and ending December 31 of each year) as an
appendix or appendices to its annual Commission Basis Reports.1410
1409 See RCW 80.28.425(7).
1410 In re Proceeding to Develop a Policy Statement Addressing Alternatives to Traditional Cost of
Service Rate Making, Docket U-210590,Policy Statement Addressing Initial Reported
Performance Metrics, 3-4¶ 11 (Aug. 2, 2024).

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 233
ORDER 08
884 (32) Avista should be authorized and required to make recurring reporting filings
consistent with the Commissions modifications outlined in Appendix B.
885 (33) The plain language of RCW 80.28.410 gives the Commission discretion to allow a
return on power purchase agreements costs to be deferred.
886 (34) Sierra Club's proposal to require Avista to engage in a targeted electrification pilot
should be rejected.
887 (35) AWEC's proposal to remove Avista's interest-bearing Wells and Mizuho accounts
from Avista's cash working capital should be rejected.
888 (36) The Commission should authorize Avista's Working Capital Restating Adjustment
(ISWC Adjustment 1.03) as reasonably calculated to result in rates that are fair,
just, reasonable, and sufficient.
889 (37) Avista's litigation costs related to wildfire and patent litigation are fair,just,
reasonable and in the public interest.
890 (38) Avista's accounting of deferred tax credit balances is fair,just, reasonable, and in
the public interest.
891 (39) The Commission should authorize Avista's proposed adjustment to electric
property rent as revised on rebuttal.
892 (40) The Commission should authorize and order Avista's proposed deferral regarding
Coyote Springs 2 major maintenance costs.
893 (41) Avista's Wildfire Balancing Account should be authorized with a baseline of
wildfire expense of$8.3 million, over Avista's two-year rate plan.
894 (42) Avista's proposal to recover carrying charges on the Wildfire Balancing Account at
its cost of debt should be approved by the Commission.
895 (43) Avista's Insurance Expense Balancing Account should be authorized with
baselines of$12.8 million for electric, and$2.3 million for natural gas.
896 (44) Public Counsel and AWEC's proposal to exclude 50 percent of Directors' and
Officers' liability insurance should be rejected.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 234
ORDER 08
897 (45) Avista's proposal to require increase ratepayers' share of directors' fees from 50 to
90 percent should be rejected.
898 (46) Public Counsel and AWEC's proposal to exclude stock compensation from Avista's
directors' fees should be rejected.
899 (47) The Commission should authorize Avista to recover 50 percent of its directors' fees
in rates.
900 (48) The non-executive labor incentive adjustment proposed by Avista, is based on
estimates and forecasts, and therefore does not meet the known and measurable
standard.
901 (49) Public Counsel's proposal to adjust Avista's executive compensation based on
comparisons to publicly-owned utility executive compensation should be rejected.
902 (50) Public Counsel's request to require Avista to conduct an executive compensation
survey including data from publicly-owned utility executives should be rejected.
903 (51) Avista's proposal to continue its revenue decoupling mechanism during the multi-
year rate plan should be accepted.
904 (52) The Commission should authorize Avista's proposed 2.5 percent escalation
adjustment for Pro Forma Adjustments 3.14 and 5.06.
905 (53) Avista should be authorized and required to make a compliance filing within 45
days of this Order to provide the workpapers supporting its pro forma adjustments
regarding its updated test year ending in December 2023.
906 (54) The Commission Secretary should be authorized to accept by letter, with copies to
all Parties to this proceeding, filings that comply with the requirements of this
Order.
907 (55) The Commission should retain jurisdiction over the subject matter and the Parties
to effectuate the terms of this Order.
908 (56) Based on the evidence in the record and the Commission's denial of the forecast
error adjustment, the Commission authorizes a Washington Total Power Supply
Base of$34,116,983 for rate year 1, and $85,733,975 for rate year 2.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 235
ORDER 08
ORDER
THE COMMISSION ORDERS:
909 (1) The proposed tariff revisions Avista Corporation, d/b/a Avista Utilities, filed in
these dockets on January 18, 2024, and suspended by prior Commission order, are
rejected.
910 (2) Avista Corporation, d/b/a Avista Utilities, is authorized and required to make
compliance filings in this docket including all tariff sheets that are necessary and
sufficient to effectuate the terms of this Order.
911 (3) The Commission Secretary is authorized to accept by letter, with copies to all
Parties to this proceeding, filings that comply with the requirements of this Order.
912 (4) The Commission retains jurisdiction to effectuate the terms of this Order.
DATED at Lacey, Washington, and effective December 23, 2024.
WASHINGTON UTILITIES AND TRANSPORTATION COMMISSION
< L-to 4%.J t,�4 : -10�
DAVID W. DANNER, Chairman
'4'9 zs�
ANN E. RENDAHL, Commissioner
MILT DOUMIT, Commissioner

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 236
ORDER 08
NOTICE TO PARTIES: This is a final order of the Commission. In addition to
judicial review, administrative relief may be available through a petition for
reconsideration, filed within 10 days of the service of this order pursuant to RCW
34.05.470 and WAC 480-07-850, or a petition for rehearing pursuant to RCW
80.04.200 or RCW 81.04.200 and WAC 480-07-870.

Service Date: December 20,2024
BEFORE THE WASHINGTON
UTILITIES AND TRANSPORTATION COMMISSION
WASHINGTON UTILITIES AND DOCKETS UE-240006 &
TRANSPORTATION COMMISSION, UG-240007 (Consolidated)
Complainant,
ORDER 08
V.
AVISTA CORPORATION, D/B/AAVISTA
UTILITIES, FINAL ORDER
Respondent.
SUMMARY
Synopsis: The Commission rejects the tariff sheets filed by Avista Corporation, d/b/a
Avista Utilities (Avista or the Company) on January 18, 2024, including the Company's
proposed multi year rate plan. The Commission, considering the full record, authorizes
and requires Avista to file tariff sheets reflecting a two-year multi year rate plan that will
result in an increase in revenue of approximately$783,000, or 0.13 percent in rate year I
and approximately $44.4 million, or 7.51 percent in rate year 2 after adjusting for
offsetting factors related to Colstrip,for its electric operations and an increase in revenue
of approximately $14.2 million, or 11.15 percent in rate year I and approximately $4.0
million, or 2.81 percent in rate year 2,for its natural gas operations, in accordance with
the decisions below.
The Commission adjusts the Company's return on equity to 9.80 percent and does not
authorize a flotation cost adjustment. The Commission accepts Avista's cost of debt of
4.99 percent. The Commission accepts the Company's proposed capital structure and
authorizes and sets rates with a capital structure of 48.5 percent equity, 51.5 percent debt.
This results in a rate of return for Avista of 7.32 percent.
The Commission authorizes an increase or adjustment to the energy recovery mechanism
baseline consistent with this Order to account for the increases in Washington's allocated
share of power costs and transmission costs. While the Commission allows the power cost
baseline to be reset in this proceeding, the Commission will continue to consider carefully

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 2
ORDER 08
any future adjustments to the baseline and will change it only under extraordinary
circumstances.
TABLE OF CONTENTS
SUMMARY......................................................................................................................I
BACKGROUND ..............................................................................................................3
MEMORANDUM............................................................................................................6
I. STANDARD OF REVIEW...................................................................................6
DISCUSSION AND DECISION.......................................................................................7
II. CONTESTED ISSUES..........................................................................................7
CCA Costs/Inclusion of Costs in Dispatch .................................................................7
Energy Recovery Mechanism/Net Power Expenses..................................................23
Capital Projects and Timing/Classification of Provisional Plant ...............................57
Decarbonization—Line Extension Allowances, Non-Pipe Alternatives, Customer
Reporting, and Planning...........................................................................................69
Equity—Low-Income Assistance and Disconnections, Language Access Plan, and
Energy Burden Analysis/Reporting..........................................................................80
The Multi-Year Rate Plan.........................................................................................88
Performance Measures and Other Reporting............................................................96
Costof Capital....................................................................................................... III
Cost of Service, Rate Spread and Rate Design........................................................143
Return on Purchase Power Agreements..................................................................155
Targeted Electrification Pilot..................................................................................162
Wildfire Expense Balancing Account.....................................................................167
Insurance Expense Balancing Account and Pro Forma Insurance Expense .............173
AssociationDues...................................................................................................180
Investor Relations Expense....................................................................................183
WorkingCapital.....................................................................................................185
FIT/DFIT/ITC Adjustment.....................................................................................190
Electric and Natural Gas Adjustments (3.03) Pro Forma EDIT Reverse South Georgia
Method (RSGM) Expense......................................................................................193
Misc. Restating Non-Utility/Non-Recurring Expenses ...........................................194
Miscellaneous Pro Forma Adjustments—Non-Executive Labor, Employee Benefits,
and Incentive Pay Pro Forma Labor, Non-Executive Adjustments..........................196
Pro Forma Employee Benefits................................................................................200

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 3
ORDER 08
Pro Forma Incentives.............................................................................................203
Miscellaneous Issues..............................................................................................206
ElectricProperty Rent............................................................................................206
CoyoteSprings ......................................................................................................207
Directors'Fees.......................................................................................................208
Labor - Executive (3.06 Pro Forma Labor Exec)....................................................212
Decoupling............................................................................................................214
Pro Forma Miscellaneous O&M Adjustment..........................................................216
FINDINGS OF FACT...................................................................................................221
CONCLUSIONS OF LAW...........................................................................................228
ORDER........................................................................................................................234
BACKGROUND
I PROCEDURAL HISTORY. On January 18, 2024, Avista Corporation d/b/a Avista
Utilities (Avista or Company) filed with the Washington Utilities and Transportation
Commission (Commission) revisions to its electric service tariff, Tariff WN U-28, and its
natural gas service tariff, Tariff WN U-29 (Initial Filing).' Through these filings, Avista
seeks to increase rates and charges for the electric and natural gas services the Company
provides to its Washington customers.
2 Avista's Initial Filing proposes a rate of return of 7.61 percent(with 48.5 percent equity
and a 10.40 percent return on equity). Avista proposes a Two-Year Rate Plan, which
would begin with new base rates effective in December 2024 (Rate Year 1) and December
2025 (Rate Year 2).
3 For Rate Year 1, Avista proposes an increase to electric base revenue of$77.1 million, or
13.0 percent, and an increase to natural gas base revenue of$17.3 million, or 13.6 percent.
For Rate Year 2, Avista proposes an increase to electric base revenue of$53.7 million, or
11.7 percent, and an increase to natural gas base revenue of$4.6 million, or 3.2 percent.
4 On January 31, 2024, the Commission entered Order 01 consolidating dockets UE-240006
and UG-240007, suspending the tariffs, and setting the matters for adjudication.
' WUTC a Avista Corp. d/b/a Avista Utils.,Dockets UE-240006 &UG-240007(consolidated),
filed Revisions to Tariff WN U-28 (Electric)and Tariff WN U-29 (Natural Gas) (Jan. 18, 2024).

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 4
ORDER 08
5 On February 20, 2024, the Commission convened a virtual prehearing conference before
Administrative Law Judges James E. Brown II and Paige Doyle.
6 On February 27, 2024, the Commission entered Order 02 Prehearing Conference Order;
Notice of Hearing, establishing the Procedural Schedule, granting petitions to intervene,
and noticing an evidentiary hearing for September 30, 2024, continuing if needed to
October 1, 2024. On the same day, the Commission entered Order 03, establishing a
protective order.
7 On March 20, 2024, Commission staff(Staff) filed a Motion for Partial Summary
Determination(Motion). In its Motion, Staff asked for summary determination that
Avista's proposed portfolio forecast error adjustment, as included in Avista's proposed
Tariff WN U-28, should not be incorporated into Avista's pro forma power cost
adjustment, or its Energy Recovery Mechanism (ERM).2
8 On August 7, 2024, following extensive briefing by the parties, the Commission issued
Order 07 Denying Staff s Motion For Partial Summary Determination(Order 07), Order
07 denied Staff s Motion because granting the motion would decide a substantial portion
of the matter"without the benefit of a full proceeding where the testimony and evidence
are examined" and cross-examined.3 Order 07 reiterated the importance of the
Commission's discretion and having the ability to weigh the evidence, hear witness
testimony, and ask questions of the parties so the Commission can reasonably balance the
interests of the parties and issue a decision in the public interest.4
9 Beginning on September 30, 2024, the Commission held a two-day evidentiary hearing in
this matter before the Commissioners, with Administrative Law Judges, James E. Brown
II and Connor A. Thompson presiding.
10 The parties submitted initial and responsive briefs in the proceeding on October 28, 2024,
and on November 12, 2024, Alliance of Western Energy Consumers (AWEC) filed a
Motion to File a Limited Response to Public Counsel's Post-Hearing Brief.
11 PARTY REPRESENTATIVES. David Meyer, in-house counsel, represents Avista. Jeff
Roberson, Josephine R. K. Strauss, Lisa Gafken, Nash Callaghan, Liam Weiland, and
z Dockets UE-240006&UG-240007, Commission Staff's Motion for Partial Summary
Determination(Motion) (Mar. 20, 2024).
3 Dockets UE-240006&UG-240007, Order 07,Denying Staff's Motion for Partial Summary
Determination pg. 36¶ 105 (Aug. 7, 2024).
4 Dockets UE-240006&UG-240007, Order 07,pgs. 36-37¶¶ l 03-07.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 5
ORDER 08
Colin O'Brien, Assistant Attorneys General, Olympia, Washington, represent Commission
staff(Staff).5 Tad Robinson O'Neill, Jessica Johanson-Kubin, and Robert Sykes, Assistant
Attorneys General, Seattle, Washington, represent the Public Counsel Unit of the Attorney
General's Office (Public Counsel). Tyler C. Pepple and Sommer J. Moser, of Davison Van
Cleve, P.C., represent the Alliance of Western Energy Consumers (AWEC). Michael
Goetz, in-house counsel, represents the Northwest Energy Coalition(NWEC). Yochi
Zakai and Josh Kirmsse, of Shute, Mihaly &Weinberger LLP, represents The Energy
Project(TEP). Gloria Smith, of Sierra Club Environmental Law Program, represents
Sierra Club. Justina A. Caviglia represents Walmart, Inc (Walmart).
12 COMMISSION DETERMINATIONS. Based on the decisions we make in this Order,
we authorize an increase in Avista's revenue requirement of approximately $783,000, or
0.13 percent in rate year 1 and approximately $44.4 million, or 7.51 percent in rate year 2
after adjusting for offsetting factors related to Colstrip, for the Company's electric
operations and an increase in revenue of approximately $14.2 million, or 11.15 percent in
rate year 1 and approximately $4.0 million, or 2.81 percent in rate year 2, for its natural
gas operations. Summaries of both the electric and natural gas revenue requirements are
attached hereto at Appendix C (electric) and Appendix D (natural gas).
13 PRELIMINARY MATTERS. We note that on November 12, 2024, AWEC filed a
Motion to File a Limited Response to Public Counsel's Post-Hearing Brief(Motion) along
with a Limited Response to Public Counsel's Post-Hearing Brief(Response).6 According
to AWEC's Motion, the Limited Response addresses an alleged inaccuracy in Paragraph
132 of Public Counsel's Post-Hearing Brief. AWEC claims that it filed its response with
the intent to ensure a clear evidentiary record. No other parties, including Public Counsel,
filed an Answer to AWEC's Motion. Upon review and consideration, we grant AWEC's
motion to ensures a clear and complete record in this proceeding.
s In formal proceedings such as this, the Commission's regulatory staff participates like any other
party, while the Commissioners make the decision.To assure fairness,the Commissioners, the
presiding administrative law judge, and the Commissioners'policy and accounting advisors do not
discuss the merits of this proceeding with the regulatory staff, or any other party, without giving
notice and opportunity for all parties to participate. See RCW 34.05.455.
6 Dockets UE-240006&UG-240007,AWEC's Motion to File a Limited Response to Public
Counsel's Post-Hearing Brief(Motion) (November 12,2024).

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 6
ORDER 08
MEMORANDUM
I. STANDARD OF REVIEW
• Regulating in the public interest and determining equitable, fair,just,
reasonable, and sufficient rates
14 The Legislature has entrusted the Commission with broad discretion to determine rates for
regulated industries. Pursuant to RCW 80.28.020,whenever the Commission finds after a
hearing that the rates charged by a utility are "unjust, unreasonable, unjustly
discriminatory or unduly preferential, or in any wise in violation of the provisions of the
law, or that such rates or charges are insufficient to yield a reasonable compensation for
the service rendered, the commission shall determine the just, reasonable, or sufficient
rates, charges, regulations,practices or contracts to be thereafter observed and in force,
and shall fix the same by order."
15 As a general matter, the burden of proving that a proposed increase is just and reasonable
is upon the public service company.' The burden of proving that the presently effective
rates are unreasonable rests upon any party challenging those rates.9
16 More recently, in 2019, the Legislature expanded the traditional definition of the public
interest standard. As Washington state transitions to a clean energy economy, the public
interest includes: "The equitable distribution of energy benefits and reduction of burdens
to vulnerable populations and highly impacted communities; long-term and short-term
public health, economic, and environmental benefits and the reduction of costs and risks;
and energy security and resiliency."10 In achieving these policies, "there should not be an
increase in environmental health impacts to highly impacted communities."11
17 In 2021, the Legislature again expanded upon the public interest standard in the context of
reviewing multiyear rate plans. RCW 80.28.425 provides that "[t]he commission's
consideration of a proposal for a multiyear rate plan is subject to the same standards
See also RCW 80.01.040(3) (providing that the Commission shall"[r]egulate in the public
interest").
a RCW 80.04.130(1).
9 WUTC a Pacific Power and Light Company,Cause No. U-76-18 (December 29, 1976) (internal
citations omitted).
10 RCW 19.405.010(6).
11 Id.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 7
ORDER 08
applicable to other rate filings made under this title, including the public interest and fair,
just, reasonable, and sufficient rates."The statute continues, "In determining the public
interest, the commission may consider such factors including, but not limited to,
environmental health and greenhouse gas emissions reductions, health and safety
concerns, economic development, and equity, to the extent such factors affect the rates,
services, and practices of a gas or electrical company regulated by the commission. ,12
18 Following the passage of RCW 80.28.425, the Commission indicated its commitment to
considering equity while regulating in the public interest: "So that the Commission's
decisions do not continue to contribute to ongoing systemic harms, we must apply an
equity lens in all public interest considerations going forward. ,13 The Commission also
indicated that regulated companies should be prepared to address equity considerations in
future cases: "Recognizing that no action is equity-neutral, regulated companies should
inquire whether each proposed modification to their rates, practices, or operations corrects
or perpetuates inequities.'"
19 During general rate case proceedings, the Commission may determine the prudence of
utility actions by reviewing whether the utility made reasonable business decisions in light
of the facts and circumstances known or that reasonably should have been known to the
utility at the time decisions were made.15 What is reasonable requires assessment of
choices made, in light of circumstances and possible alternatives, based on industry norms
and practices.16 Prudence does not require a single, ideal decision, but requires the utility
to make a reasonable decision among a number of alternatives which the Commission
might find prudent."
DISCUSSION AND DECISION
II. CONTESTED ISSUES
CCA Costs/Inclusion of Costs in Dispatch
12 Id.
13 WUTC a Cascade Natural Gas Corporation, Docket UG-210755 Order 10¶58 (August 23,
2022).
14 Id.
15 WUTC a Puget Sound Energy, Inc., Docket UE-031725, Order 12 at¶ 19(Apr. 7, 2004).
"See, id.
17 WUTC a Puget Sound Energy, Inc.,Dockets UE-090704 and UG-090705 (consolidated),
Order 11 at¶337 (Apr. 2, 2010).

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 8
ORDER 08
Avistas Direct Testimony
20 Company witness Kinney testifies that Avista has added significant work processes to both
its power and natural gas supply departments to account for increased activity associated
with CCA compliance.18 Currently, this added CCA work has been performed by existing
employees. However, Kinney states that this resource approach cannot be sustained as
other critical work has been either delayed or not adequately supported.19
21 As such, Kinney states that the Company plans to hire four more positions in 2024 to
support compliance with CCA. These include a Climate Compliance Manager, a CCA
Portfolio Manager, an Energy Supply Analyst, and an Investment Program Manager.20 The
Company notes that it expects it will need to hire additional positions beyond these four as
it continues to understand what it characterizes as the broad reaching effects of the CCA.21
22 Avista witness Kinney states that the CCA labor adjustment is the only pro forma
adjustment in this case where the Company is seeking approval of incremental costs
incurred to comply with CCA.22
23 Kinney testifies that its Pro Forma CCA Labor Expense adjustment reflects the
incremental labor expense of four additional employees in 2024, totaling approximately
$494,000 ($381,000 to electric and$113,000 to gas).23 This adjustment decreases Net
Operating Income (NOI)by $301,000 for electric and $89,000 for gas.24
24 The Company testifies that its strategy for natural gas decarbonization includes
diversifying and transitioning from conventional fossil fuel natural gas to Renewable
Natural Gas (RNG), hydrogen, other renewable fuels, and reducing consumption via
conservation and energy efficiency.25 Additionally,Avista testifies that it will purchase
carbon offsets as necessary to meet the CCA compliance obligations.26
18 Kinney, SJK-1T at 9:3-4.
19 Kinney, SJK-1T at 9:4-7.
20 Kinney, SJK-1T at 9:7-9.
21 Kinney, SJK-IT at 10:4-8.
22 Kinney, SJK-1T at 10:18-20.
23 Schultz, Exh.KJS-IT at 69:13-15.
24 Schultz, Exh.KJS-IT at 70:1-2.
2s Thackston,Exh. JRT-IT at 9:5-8.
26 Thackston,Exh. JRT-1T at 9:9.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 9
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25 Avista contends that based on the CCA's cap-and-trade program's current allowance price
range of$22-$82 USD, natural gas with a carbon offset or Renewable Thermal Credits
(RTC) will continue to most cost effectively serve Washington customers.27
26 The Company also argues that in the short term, the best approach to recover CCA costs is
to have them flow through a 95/5 Energy Recovery Mechanism (ERM) without
deadbands.28 Kinney states that allowing those CCA costs to flow through the ERM at
95/5 obligates the Company to pay 5 percent of anticipated CCA costs but avoid
disagreements among parties over the magnitude of costs that cannot be known at this
point.29
27 Kinney contends that requesting 100 percent recovery of CCA costs would be the fairest
outcome and reflect the legislation's intent.30 However, as part of an overall package to
simplify the ERM and address increasing forecast costs, he states that the Company is
offering this 95/5 split as a compromise.31
Staff's Response Testimony
28 Staff witness Erdahl testifies that Avista does not currently and, unless ordered by the
Commission, does not plan to incorporate the cost of carbon allowances in future dispatch
decision.32
29 Erdahl contends that the failure to include allowance costs in dispatch may result in
polluting thermal units being dispatched too frequently, which creates equity concerns
when those thermal units are located in or near vulnerable populations or highly impacted
communities.33 Erdahl identifies the Boulder Park facility and the Northeast Combustion
Turbine as thermal units located within vulnerable population census areas, and the Kettle
Falls Biomass Facility which is located within a highly impacted community(HIC).34
27 Thackston,Exh. JRT-1T at 9:12-15.
28 Kinney,Exh. SJK-1T at 64:18-19.
29 Kinney,Exh. SJK-1 T at 64:19-20 and 65:1-2.
30 Kinney,Exh. SJK-1 T at 65:4-5.
31 Kinney,Exh. SJK-IT at 65:6-9.
32 Erdahl, Exh. BAE-1 T at 21:16-17, 22:3-4.
33 Erdahl, Exh. BAE-1T at 22:6-10.
29 Erdahl, Exh. BAE-IT at 23:15-17.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 10
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30 She recommends that the Commission direct Avista to include the cost of carbon
allowance instruments in its forecasting and day-to-day dispatch decisions.35
31 Erdahl notes that Puget Sound Energy (PSE) applies a CCA allowance instrument cost
adder into costs associated with thermal fleet dispatch to supply secondary and wholesale
market sales.36
32 Erdahl acknowledges that the inclusion of CCA allowance costs in dispatch decision could
result in reduced dispatch of Avista's thermal resource under certain conditions, which
could reduce the Company's wholesale and secondary sale revenues.37 However, Erdahl
emphasizes that several of Avista's thermal resources are located within vulnerable
populations and highly impacted communities.38
33 Staff Witness Wilson testifies that it does not appear that Avista's carbon allowances are
being tracked consistently with the CCA.39 According to Wilson, in the Company's CCA
Compliance Model,Avista expects that its no-cost allowances are intended to be used both
for emissions associated with serving retail load and for emissions associated with
wholesale sales whose revenues benefit its retail customers.40
34 However, Wilson states that this understanding is incorrect as Ecology allocated no-cost
allowances to Avista based on its requirements to serve Washington retail load, and that
Avista remains responsible for obtaining allowances for its wholesale load.al
35 To the extent that Avista is relying on the understanding that Ecology is allocating no-cost
allowances to Avista for emissions associated with wholesale sales, Staff believes that
such reliance is likely to lead to imprudent decisions.42
36 Wilson also contends that the Company has placed too much weight on Ecology's "true-
up"mechanism.43 According to Staff, Ecology has said that it anticipates that future
" Erdahl, Exh. BAE-1 T at 24:1-2.
36 Erdahl, Exh. BAE-IT at 24:7-8.
37 Erdahl, Exh. BAE-1 T at 24:21-22 and at 25:1-2.
38 Erdahl, Exh. BAE-IT at 25:6-9.
39 Wilson,Exh. JDW-ITC at 17:5-6.
40 Wilson,Exh. JDW-ITC at 17:6-10.
41 Wilson,Exh. JDW-ITC at 17:11-17.
42 Wilson,Exh. JDW-ITC at 17:18-20.
43 Wilson,Exh. JDW-ITC at 20:7-9.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 11
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allocation decisions will be based on concepts such as the reasons for the difference
between forecast and actual emissions as well as the expectation that allowance costs will
be a factor in dispatch.aa Given Ecology staff's statement that the true-up will not be one-
for one, Staff witness Wilson emphasizes that Avista may need to purchase some
allowances for its retail load and especially for its wholesale load, unless those loads are
served by energy that does not incur a CCA compliance obligation.45
37 Wilson asserts that this strongly suggests that Avista should consider the price of carbon
allowances in its dispatch decisions and, hence, in its Net Power Expense (NPE)
forecast.46
38 Witness Wilson further opines that Avista's no-price dispatch approach puts its allocation
of no cost allowances at risk. Given that Ecology is going to consider the reasons for any
difference between allocated allowances and actual emissions, if Avista excludes the cost
of carbon allowances from its dispatch decisions, Ecology staff will likely look
unfavorably on a request to fully true-up Avista's allowances.47
39 Staff Witness Wilson testifies that a key complication for the Commission's review of the
forecast and actual NPE is that Ecology's CCA compliance requirements do not occur at
the end of each calendar year,but require partial and then final surrender of required
allowances over a four-year compliance period.a$ Therefore, Wilson contends that the
Commission must determine if it will expect Avista to record allowance costs to show
compliance on an annual basis or not.49
40 If the Commission chooses to do so, then witness Wilson states that Avista's actual NPE
would include the actual net cost of CCA allowance transactions in its annual NPE filing
and, for any surplus or deficit in allowance transactions,Avista would determine an
additional net cost on a mark-to-market basis.5'According to Staff, this option would have
at least two disadvantages:51
44 Wilson,Exh. JDW-ITC at 20:24-26, 21:1.
45 Wilson,Exh. JDW-ITC at 21:7-10.
46 Wilson,Exh. JDW-ITC at 21:11-12.
47 Wilson,Exh. JDW-ITC at 21:13-17.
as Wilson,Exh. JDW-ITC at 23:3-7.
49 Wilson,Exh. JDW-ITC at 23:7-9.
50 Wilson,Exh. JDW-ITC at 23:10-13.
51 Wilson,Exh. JDW-1TC at 23:13-16.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 12
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• The methods for pricing its unsold(or unpurchased) allowances would need to be
developed; and
• Reviews and the resulting net value would need to be carried forward to
subsequent years.
41 Wilson notes that this option would have the advantages of providing the Commission
with a clear opportunity to review the prudence of Avista's transactions and pricing
decisions.52
42 If the Commission does not require Avista to show compliance on an annual basis, then
Avista could simply record its actual net transaction costs for the year and defer the
valuation of any allowance surplus or deficit to the future.53 Wilson notes that this option
would be far more administrable and eliminate the need to develop a mark-to-market
pricing method.14
43 However, since Avista would only encounter a compliance date at which it is required to
fully account for its emissions by surrendering allowances every four years,Wilson
identifies that the Commission could find it more challenging to review the prudence of
Avista's transactions and pricing decisions.55
44 Wilson believes that the Commission will find it most efficient to review the prudence of
Avista's CCA allowance use and transactions in annual NPE review proceedings due to
the Commission every year.56
45 Accordingly, Staff argues that in future NPE proceedings,Avista should demonstrate that
throughout each reporting year, it has identified an appropriate carbon allowance price and
that its unit dispatch and power purchase decisions were prudent, which should include a
clear demonstration that those decisions were consistent with its current estimate of the
carbon allowance price.51 Wilson also argues that in future NPE proceedings,Avista will
also need to demonstrate that its purchase or sale of allowances is prudent.58
52 Wilson,Exh. JDW-ITC at 23:16-18.
53 Wilson,Exh. JDW-ITC at 23:19-20.
54 Wilson,Exh. JDW-ITC at 23:20-22.
55 Wilson,Exh. JDW-1 TC at 23:22-23, 24:1-3.
56 Wilson,Exh. JDW-ITC at 24:16-17.
57 Wilson,Exh. JDW-ITC at 24:22-25:3.
58 Wilson,Exh. JDW-ITC at 25:4-5.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 13
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46 Wilson also suggests the following five factors for the Commission to weigh when
determining how to review the prudence of CCA use and transactions:59
• Administrative simplicity;
• Necessity of reviewing the allowance price and other factors that should be
considered in unit dispatch and power purchase decisions during the annual NPE
proceeding;
• Consideration that decisions to transact (or not transact) in the carbon market and
carbon auctions depend on the reasonableness of the carbon price estimate and
carbon price forecast as it existed during the year;
• Consideration that it is preferable to account for the costs (or benefits)resulting
from decisions to transact (or not transact) in the year in which those transactions
affect NPE (using mark-to-market valuations for unused allowances, as discussed
above); and
• Consideration that it will be easier to review the reasonableness of a utility's
carbon price forecasting method after that method is exposed to a variety of real-
world circumstances, which may take several years to manifest.
47 While Avista has not estimated CCA costs, Wilson states that in response to a data
request60,Avista provided an illustration of how CCA costs might affect the ERM. In its
illustration,Avista suggests that a"bad case, representing approximately a 25% overrun of
current(2023) allowance grant levels"would result in an annual cost of as much as $30
million.61
48 Witness Wilson recommends that the Commission direct Avista to include CCA allowance
costs in the dispatch of its thermal generation plants, whether to serve customer load or to
sell electricity into the wholesale market. Wilson opines that Avista should then offset the
allowance costs for its retail customer load with no-cost allowances.62
49 Wilson also believes that it is most appropriate for the prudence of allowance costs to be
reviewed in each utility's respective NPE true-up proceeding—in Avista's case, its annual
ERM proceeding.63
AWEC's Cross-Answering Testimony
59 Wilson,Exh. JDW-ITC at 25:12-27 and at 26:1-3.
60 See Staff DR-171 Supplemental.
61 Wilson,Exh. JDW-ITC at 27:12-16;see also JDW-11 Avista's Response to DR No. 171.
62 Wilson,Exh. JDW-ITC at 31:19-22.
63 Wilson,Exh. JDW-ITC at 32:12-14.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 14
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50 AWEC Witness Mullins contends that the decision for how to respond to the uncertainty in
the rule is best made by Avista, not the Commission. He states that it is appropriate for
Avista to take on the risk of a prudence disallowance if it is not appropriately considering
CCA allowance costs in dispatch (both for operations and forecast NPE) or incorrectly
interpreting guidance or regulations from Department of Ecology("Ecology").64 Mullins
recommends that the Commission not adopt a prescriptive approach as advocated by Staff
in this case.65
51 Mullins also states that the impacts of including CCA costs in plant dispatch may produce
different impacts for differing customer classes.66
52 He also expressed concerns about the Commission committing at this time to undertake a
prudence review on an annual basis as part of Avista's ERM.67 Since the CCA has four-
year compliance periods, Mullins argues that it is not clear what the benefits of annual
prudence reviews would be if performed within compliance periods,68 and that committing
to annual prudence reviews now may create different compliance incentives that
ultimately put upward pressure on rates.69
53 Mullins recommends that the Commission not direct Avista to alter its modeling of CCA
costs in the net power supply expense baseline in this case.70 Mullins also recommends
that the Commission not commit to the process and venue for a prudence review of
Avista's CCA costs at this time.71 Finally, Mullins recommends that the Commission not
impose any obligations on Avista with regards to the way that it operates its system and
with regard to participation in the carbon allowance market at this time.72
Puhlic Counsel's Cross-Answering Testimony
64 Mullins,Exh. BGM-8T at 10:5-9.
65 Mullins,Exh. BGM-8T at 10:10-11.
66 Mullins,Exh. BGM-8T at 11:2-3.
67 Mullins,Exh. BGM-8T at 11:13-15.
68 Mullins,Exh. BGM-8T at 11:16-18.
69 Mullins,Exh. BGM-8T at 11:18-20.
70 Mullins,Exh. BGM-8T at 12:21-22.
71 Mullins,Exh. BGM-8T at 13:9-10.
72 Mullins,Exh. BGM-8T at 13:11-14.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 15
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54 Public Counsel Witness Earle argues that while review of CCA allowance costs in the
annual ERM review may be useful to provide guardrails, full determination of prudency
cannot be reasonably determined until the compliance period and 10-month balancing
period is over.73 He says the Commission should only provide a final determination of
prudency after the four-year compliance period and 10-month balancing period is over.74
Staffs Cross-Answering Testimony
55 Staff witness Wilson contends that considering the basic economics, it is cost-efficient for
Avista and other Washington utilities to include the cost of CCA allowances in their
dispatch decisions.75
56 Additionally, Wilson testifies that Avista's modeling found that including a CCA
allowance price of$71.15 per ton resulted in a net increase of$73,333,559 in power
costs.76
57 Wilson argues that a $71.15-per-ton allowance price is not representative of recent market
prices.77 He states that a recent forward market price for CCA allowances was $38.09 per
ton, which traded at about $38 per ton according to the Intercontinental Exchange (ICE)
forward price for December 2025 from August 1, 2024.78 Using this price, Staff forecasts
a CCA allowance cost of$43.1 million.79
58 Wilson contends that if Avista dispatches its system using a market price for CCA
allowances, its 2025 emissions are forecast to be reduced by 18 percent relative to its
proposal.80
Avista's Rebuttal Testimony
73 Earle, Exh. RLE-17T at 6:1-3.
74 Earle, Exh. RLE-17T at 6:4-5.
75 Wilson,Exh. JDW-24CTr at 14:2-4.
76 Wilson,Exh. JDW-24CTr at 9:1-2.
77 Wilson,Exh. JDW-24CTr at 10:14-15.
78 Wilson,Exh. JDW-24CTr at 13:1-3.
79 Wilson,Exh. JDW-24CTr at 12:2-3.
80 Wilson,Exh. JDW-24CTr at 13:4-5.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 16
ORDER 08
59 Company Witness Kinney disagrees with Staff's recommendation that it include CCA
allowance costs in thermal plants dispatch.81 Kinney states that there is no requirement for
Avista to include carbon prices and emission allowance obligation in all unit dispatch and
power supply decisions.82
60 To help illustrate the impact of including CCA allowance costs in thermal plant dispatch
is, the Company ran a scenario based on its original filing. The result was a $73.3 million
(system) increase (42%) in NPE, caused by lower surplus sales and additional market
purchases to serve load in cases where the "phantom" carbon cost prevents dispatching
lower-cost generation.83
61 Kinney asserts that including CCA costs in dispatch would require base rates requested in
this proceeding to be substantially increased and lists the following arguments against its
inclusion:84
• The CCA does not require carbon to be added to dispatch, which is an operational
decision;
• The Commission has not provided any policy and direction to include carbon in
dispatch decisions;
• As illustrated in the modeled scenario, adding the price of carbon could add $73.3
million(system) to the annual NPE;
• The Department of Ecology has not finalized the true-up mechanism, and Avista
expects it could be granted no-cost allowances covering wholesale transactions
made on behalf of customers; and
• Even if Avista is not given no-cost allowances for wholesale transactions, the
Company has multiple ways to mitigate allowance requirements associated with
these sales.
62 Kinney contends that it would be imprudent to add the cost of carbon in Avista's resource
dispatch resulting in $73.3 million(system) of additional cost to customers.85 Additionally,
Company witness Kinney asserts that adding a carbon price to thermal resource dispatch
81 Kinney,Exh. SJK-17T at 30:21-22 and at 31:1.
82 Kinney,Exh. SJK-17T at 31:5-6.
83 Kinney,Exh. SJK-17T at 31:18-22.
84 Kinney,Exh. SJK-17T at 32:12-22 and at 33:2-4.
85 Kinney,Exh. SJK-17T at 33:17-19.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 17
ORDER 08
reduces wholesale revenue to Idaho customers not obligated to meet CCA compliance and
who do not receive no-cost allowance grants from the Department of Ecology.86
63 Kinney testifies that absent publicly available guidance, it remains unclear if the
Department of Ecology will essentially "claw back" or withhold a commensurate number
of allowances in future distribution allocations as part of the true-up process.As such, it is
just as plausible for Avista to assume the true up mechanism will apply to wholesale
market transactions (in effect a"one-for-one" application) as it is to assume it will not.87
64 Kinney also argues that contrary to the statement by Staff Witness Wilson,Avista's view
of allowance costs is correct—namely, that the CCA is not intended to be the primary
means of carbon reduction for electric customers.88 While Wilson suggests engaging in
auctions or bilateral markets to counter the impacts of reduced sales. Kinney contends that
there are no statutory or regulatory requirements for utilities to sell their no-cost
allowances in at least the initial two compliance periods, to do so may be premature.89
65 Regarding the necessity of prudency reviews, Kinney states that if the Company incurs
any costs associated with the purchase of CCA allowances to cover the emissions
associated with wholesale transactions, those costs will flow through Account 509 in the
ERM.90 FERC accounting requires that all costs and benefits associated with a single
transaction must be recorded during the same period and should be recovered (or passed
back to customers) at the same time.91 Thus, Kinney argues this necessitates the need to
evaluate the prudency of certain costs and benefits associated with the CCA in the annual
ERM filing,but only when it has incurred CCA allowance costs.9'
66 Kinney contends that it makes sense for the prudence review of procuring allowances for
natural gas local distribution company (LDC)-related emissions to occur at the end of the
compliance period because of the requirements to consign no-cost allowances and turn in
30 percent of current year vintage allowances annually, and because natural gas companies
must procure significant allowances to cover emissions.93 However, the Company argues
86 Kinney,Exh. SJK-17T at 34:1-3.
87 Kinney,Exh. SJK-17T at 35:7-11.
88 Kinney,Exh. SJK-17T at 35:19-21.
89 Kinney,Exh. SJK-17T at 37:8-11.
90 Kinney,Exh. SJK-17T at 40:13-15.
91 Kinney,Exh. SJK-17T at 40:15-18.
92 Kinney,Exh. SJK-17T at 40:18-20.
93 Kinney,Exh. SJK-17T at 41:1-4.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 18
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that prudence of CCA purchases on the electric side likely will need to be reviewed both
annually and then in totality after the 4-year compliance period due to the lag between
forecasted and actual emissions.94
Parties'Briefs
Avista
67 In its post-hearing brief, the Company maintains its position that CCA allowance costs
should not be included in thermal plant dispatch. To do otherwise,Avista argues would be
to require something that was contained in a retracted Policy Statement and is not well
understood, but could result in increased power costs of$73.3 million, or a 42 percent
increase to NPE.95
Staff
68 In its post-hearing brief, Staff reiterates its position that the costs associated with the CCA
should be reviewed annually to ensure prudent management and that CCA costs should be
included in dispatch decisions as it pertains to meeting Washington retail load.96
69 Regarding annual reviews, Staff notes that despite Public Counsel and AWEC disagreeing
with Staff's proposal, Public Counsel witness Earle acknowledges annual reviews might
be useful to guard against overruns and AWEC witness Mullins admits there is uncertainty
about overruns until the end of the compliance period.97 This uncertainty, Staff states is the
exact reason there should be annual reviews coinciding with review of power costs, which
will avoid rate shock to customers and ensure prudent management of costs.
70 For inclusion of CCA costs in dispatch, Staff argues that the economic benefits of thermal
dispatch should not be overstated and the risk of emissions exceeding no-cost allowances,
resulting in higher costs, "outweigh the lower surplus sales revenues that will result from
excluding CCA costs."98 Staff counters arguments from Avista against inclusion of CCA
costs, stating that Avista will still be able to market thermal resources into states such as
94 Kinney,Exh. SJK-17T at 41:9-11.
95 WUTC a Avista Corp.,Dockets 240006 &240007,Avista's Post-Hearing Brief¶¶91-92(Oct.
28, 2024) (Avista's Post-Hearing Brief).
96 WUTC a Avista Corp.,Dockets 240006 &240007, Staff's Post-Hearing Brief¶88 (Oct. 28,
2024)(Staff's Post-Hearing Brief).
97 Staff's Post-Hearing Brief, at¶¶94-95.
98 Staff's Post-Hearing Brief, at¶96.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 19
ORDER 08
Oregon, which do not require CCA compliance, excluding the CCA adder.99 Staff also
notes that Avista's arguments regarding wheeling thermal power into Washington ignore
Ecology's rules on the issue, which would still require Avista, as the "first jurisdictional
deliverer"to hold the compliance obligation.'00
71 In response to AWEC's criticism of including CCA costs in dispatch, Staff argues that the
Commission has a duty to regulate rates and that necessitates consideration of CCA costs,
despite witness Mullins assertion that the Commission should not enforce CCA
compliance.101 Further, Staff takes issue with witness Mullins example of Coyote Springs
dispatch decisions being binary, that is either to dispatch Coyote Springs or buy
unspecified power, which also has a compliance obligation. Staff argues that this is an
oversimplification, and in fact, power is available that is bundled with renewable energy
certificates, and that not including CCA costs in dispatch favors thermal dispatch of Avista
assets like Coyote Springs because CCA costs would need to be assigned to unspecified
wholesale power.112
Public Counsel
72 Public Counsel opposes Staff's recommendation to review CCA allowance costs annually
for prudence. Public Counsel specifically argues that "the four year and 10-month CCA
compliance period does not align with an annual review process" and would be better
addressed on an interim basis during GRCs and ultimately decided at the conclusion of the
compliance period.10'
AWEC
73 In its post-hearing brief,AWEC argues against including CCA costs in dispatch because it
will increase the amount actually paid by customers based on a forecast of CCA costs and
does not in any way impact Avista's operations or ability to comply with the CCA.104
99 Staff's Post-Hearing Brief, at¶97.
100 Staff's Post-Hearing Brief, at¶98.
101 Staff's Post-Hearing Brief, at¶99.
102 Staff's Post-Hearing Brief, at¶ 100.
103 WUTC a Avista Corp.,Dockets 240006 &240007,Public Counsel's Post-Hearing Brief¶77
(Oct. 28,2024)(Public Counsel's Brief).
104 YVUTC a Avista Corp.,Dockets 240006 &240007,AWEC's Post-Hearing Brief¶31 (Oct. 28,
2024)(AWEC's Post-Hearing Brief).

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 20
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74 Further AWEC argues there is no statute, rule, or formal requirement mandating inclusion
of CCA costs in dispatch for retail or wholesale sales when forecasting NPE, and the
Ecology guidance on a true-up mechanism that Staff points to for support of its position is
not finalized.'0'
75 AWEC also argues that Staff's proposal needlessly shifts CCA compliance risks from
shareholders to customers, arguing that Staff's proposal artificially imposes a"bad case"
compliance obligation on customers prior to Avista incurring those costs and a
Commission prudence determination.106 AWEC also points out that Staff's position is
inconsistent with other dockets and that if the Commission is to set a policy, it should be
done in Docket U-230161 so that policy and implementation is consistent for all regulated
utilities.10'AWEC argues the same concerns over shifting costs to customers and
uncertainty from Ecology should weigh against inclusion of forecast CCA costs in
wholesale sales transactions in NPE.108
76 Finally,AWEC argues the Commission should refrain from conducting an annual review
and prudence determination of CCA costs because of the uncertainty from Ecology and
because the law includes a four-year compliance period.109
Decision
77 The Commission recognizes the gravity of the need to meet the goals as outlined in the
CCA and the Clean Energy Transformation Act(CETA). The emissions reductions
required by Washington law creates a situation where Washington's regulated utilities are
faced with being first movers on decarbonization compared to most utilities across the
country, a place utilities are often uncomfortable being in. This is all happening in a time
when technologies and emissions reduction techniques are rapidly improving and being
developed.Additionally, as the parties seem to agree, compliance and enforcement rules,
policies, and guidance from Ecology and the Commission are still being developed, and
when combined with the statutory compliance period of four years, there is still
uncertainty in how utilities will comply with the law and how they might achieve their
statutorily required goals.
105 AWEC's Post-Hearing Brief, at¶35.
106 AWEC's Post-Hearing Brief, at¶¶38-39.
107 AWEC's Post-Hearing Brief, at¶¶40-42.
108 AWEC's Post-Hearing Brief, at¶¶43-47.
109 AWEC's Post-Hearing Brief, at¶48.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 21
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78 Due to this uncertainty, the Commission finds it prudent to carefully address the issues
presented by the parties. The Commission is faced with a seemingly precarious balance to
maintain, ensuring that the Commission fulfills its duties to regulate rates in the public
interest, provide guidance for the regulated community, and retain flexibility for the
Commission and the regulated community to achieve ultimate CCA compliance.All of
this must be done in a way that achieves the mandates of CCA and CETA, while
maintaining affordable and reliable service.
79 In balancing these interests, the Commission must make decisions based on the record
before it. Public Counsel and AWEC oppose annual review and prudence determinations
of the CCA costs, arguing that an annual prudence determination is impractical due to the
four-year compliance period plus ten months in which the utilities must comply with
allowance submission requirements."0 We agree.
80 RCW 70A.65.120 and 70A.65.130 discuss the allocation of allowances to both electric
and natural gas investor-owned utilities, respectively. RCW 70A.65.200 discusses
penalties and enforcement.All three sections reference and frame compliance, allowance
allocations, and penalty enforcement around the "compliance obligation" and"compliance
period."RCW 70A.65.020(19) defines "compliance obligation"to mean"the requirement
to submit to the department the number of compliance instruments equivalent to a covered
or opt-in entity's covered emissions during the compliance period." RCW 70A.65.020(20)
defines "compliance period" to mean"the four-year period for which the compliance
obligation is calculated for covered utilities."
81 Given the structure of the CCA, and the timing of the "compliance obligation"which may
significantly impact a utility company's cost of compliance and subsequent penalties, we
find that the costs are unlikely to be known and measurable with finality until the
"compliance obligation" date. Said differently, the Commission finds it would be
premature to conduct prudence reviews of CCA costs and compliance on an annual basis.
To do otherwise may result in the Commission wrongly predetermining prudence when
decisions later turn out to be imprudent, or imprudent when they later appear prudent. This
may inappropriately shift costs to customers before final compliance obligations are
known. Moving forward, as the first compliance period comes to a close, and the rules
surrounding compliance become more developed, the Commission may be able to perform
more frequent reviews in later compliance periods, but at this time finds the potential
perils of annual compliance reviews outweigh the benefits put forward by Staff.
82 Despite our decision to decline annual prudence reviews at this time, Staff's arguments
and witness Wilson's five factors presented for consideration do weigh in favor of
10 See, e.g.,Earle, Exh. RLE-17T at 5:13-19.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 22
ORDER 08
increased scrutiny of CCA costs on an annual basis."' While the compliance obligation
may not be final until the end of the compliance period,Avista and others are making
decisions now which will undoubtedly impact the costs Washingtonians will ultimately
face at the conclusion of the current compliance period. Wilson's first and second factors
are particularly persuasive in outlining just two of many decision points the Commission
feels should be addressed annually.
83 Accordingly, the Commission finds that during Avista's annual submission of updates to
its CCA tracker tariff, the Company shall submit and present information pertaining to
where CCA costs are being included in decision making to include, but not limited to
Integrated Resource Plans (IRPs), Clean Energy Implementation Plans (CEIPs), dispatch,
power purchase, carbon market transactions, and capital projects. This annual report will
be addressed and acknowledged through the Open Meeting process and will help the
Commission assess a utility's progress and decision making leading up to the
Commission's prudency determination at the conclusion of the compliance period.
84 Aside from recommending an annual prudence review as part of the ERM filing, Staff also
recommends the Commission require Avista to account for CCA costs in dispatch.
Specifically, Wilson recommends adjusting the ERM to account for CCA costs by adding
$21,591,885 to account for CCA allowance prices in dispatch and market purchases and
$43,128,017 to account for CCA allowance costs for market sales.112 The adjustments are
calculated using a $38.09 per ton allowance price multiplied by emissions.
85 While the Commission sees merit to Staff's approach, we are concerned that the proposal
is not fully developed and would result in disparate treatment with the approaches taken
with other utilities. These concerns are described by AWEC in their post-hearing brief 113
Further, the price point used for calculating CCA costs remains a point of contention
between the parties.At this time the Commission notes that there is a lack of trading data
on which the Commission can reasonably rely to determine a single price point for CCA
allowances for inclusion in dispatch decisions, considering that the price of CCA
allowances will change multiple times annually.Accordingly, we decline to require CCA
allowance prices and costs in dispatch, market purchases, and market sales at this time.
86 The Commission finds that CCA allowance prices and costs in dispatch, market purchases,
and market sales, and the Commission's policy surrounding their inclusion in NPE, should
be addressed in Docket U-230161 so that policy and implementation is consistent for all
111 Wilson,Exh. JDW-1TCr at 25:4-26:9.
112 Wilson,Exh. JDW-24CT at 7 (Table 1).
113 AWEC's Post-Hearing Brief, at¶¶38-47.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 23
ORDER 08
regulated utilities, and each impacted utility has an opportunity to comment on the issue.
However, regulated utilities should consider accounting for the prices and costs as
proposed by Staff. The Commission will continue to monitor how Avista and others are
addressing CCA compliance in their decision making moving forward and will ultimately
determine whether their actions were prudent when Avista seeks cost recovery and a
prudence determination of CCA costs. Further,Avista and other regulated utilities will
need to demonstrate the impacts of the CCA on their decisions including dispatch, market
purchases, and market sales moving forward. We expect the utilities will continue to
develop compliance strategies in response to the adoption of rules and guidance
established by Ecology and the Commission, as we collectively move towards meeting the
mandates of both the CCA and CETA.
Energy Recovery Mechanism/Net Power Expenses
Avista—Direct Testimony
87 Avista's proposed authorized NPE and revenue in its initial filing is $112.8 million for
RY 1 and $146.4 million for RY2 (Washington-basis).114 Company witness Kalich
provides a list of non-modeled NPE items in Exhibit CGK-3, which includes the Forecast
Error Adjustment of$65.8 million, as well as miscellaneous fuel, transmission, and other
costs related to power supply."' Kalich also notes that forecast NPE rises significantly in
RY2, approximately $89 million, due to the removal of Colstrip coal-fired generation
Units 3 and 4 from Avista's portfolio. This increase is partially offset by a$35 million
decrease in depreciation and fixed O&M Costs.116
ERM
88 Beyond the increase to NPE, the Company also proposes modifying its Energy Recovery
mechanism, or ERM, by moving to a single 95% customer/ 5% Company(95/5) sharing
level applied to the entire difference between actual and authorized power supply costs117
as well as eliminating the deadbands.118 The Company cites Forecast Error, Regional
Resource Adequacy, Lack of Market Liquidity, Carbon Emission Policy, and Changing
114 Kalich, Exh. CGK-IT at 31:9-20.
115 Kalich, Exh. CGK-1T at 23:20-24:6.
16 Kalich, Exh. CGK-IT at 14:23-15:10.
117 Kinney,Exh. SJK-IT at 50:3-5.
118 Kinney,Exh. SJK-1T at 50:9.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 24
ORDER 08
Market Dynamics as the reasons for making their recommended changes to the ERM and
deadbands.119
89 The ERM and deadbands are currently structured as follows:
Table 1: ERM and deadbands
Power Supplyi Rate Bases
Surcharge (Power costs higher than First $4M absorbed by AVA
authorized) Next $6M, 50150 split between customers
and AVA
Over $1OM, 90/10 split between
customers and AVA
$0
Rebate (Power costs lower than First $4M absorbed by AVA
authorized) Next $6M, 50150 split between customers
and AVA
Over $10M, 90/10 split between
customers and AVA
90 Company Witness Kinney argues that deadbands skew risks in favor of one party or the
other, are not an industry standard, and focus utility rate proceedings on power supply
expense deadband management instead of overall costs estimation.120 He further contends
that for deadbands to be beneficial, two criteria must be met at minimum:
• The Company has the opportunity for actions resulting in significant cost
reductions and the commensurate benefits of the deadband, and
• The net power cost forecast must be accurate and without significant error."'
91 Kinney argues that neither criteria is currently met, leaving risk unshared and one party
benefiting at the expense of the other."'
92 While forecast error has always existed, Kinney argues that new Company analysis
prepared for this filing demonstrates that power supply costs cannot be forecasted
accurately for reasons outside of utility control."'
19 Kinney,Exh. SJK-1 T at 50:11-34.
120 Kinney,Exh. SJK-IT at 53:7-9.
121 Kinney,Exh. SJK-IT at 53:9-13.
122 Kinney,Exh. SJK-1 T at 53:13-16.
123 Kinney,Exh. SJK-1T at 54:6-8.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 25
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93 Regarding the Forecast Error Adjustment, Kinney claims that due to volatile market
conditions, the Company is incapable of forecasting power supply costs accurately, and
therefore managing the forecast error is outside of the Company's control.124 Kinney
further testifies that though NPE forecast error has always been present, forecasts continue
to get worse with new and"nearly impossible to predict"variables,121 such as the implied
market heat rate,126 rising market volatility,121 falling market liquidity,121 the CCA,129 and
the increasing value of Avista's thermal generation fleet.130
94 The Company further argues that a shift to a 95/5 split would benefit customers as looking
at individual years of history, customers would have benefitted with the 95/5 approach in
nine of twelve years, or 75 percent of the time.131
95 Beyond the significant forecasting error, Kinney argues that the Commission should re-
consider the removal of deadbands, despite rejecting this request in 2012, due to the
uncertainty caused by CCA regulations.132 The Company considered including a CCA cost
estimate in a pro forma adjustment but decided against it because of uncertainty in the
implementation and impacts of the CCA.133 Kinney contends that depending on
Commission guidance, the Company may have to include carbon costs in its dispatching
decisions, which the Company argues would increase NPE by tens of millions of
dollars.134 Kinney argues that not including this estimate could harm the company if
deadbands remain.13' Kinney also notes that had the Company included an estimate in its
NPE and thus overstated its cost, customers would be harmed by the first $4 million
flowing directly to the Company in the first deadband, and another$1.5 million through
the 50150 sharing band.136
124 Kinney, Exh. SJK-1 T at 50:11-15.
125 Kinney,Exh. SJK-1T at 54:2-9.
126 Kinney,Exh. SJK-IT at 58:6-60:3.
127 Kinney,Exh. SJK-1T at 60:14-62:8.
12'Kinney,Exh. SJK-1T at 62:9-63:2.
129 Kinney,Exh. SJK-1T at 64:3-65:9.
130 Kinney,Exh. SJK-IT at 69:15-71:14.
131 Kinney,Exh. SJK-lT at 54:22-23.
132 Kinney,Exh. SJK-IT at 56:8-10.
133 Kinney,Exh. SJK-1 T at 56:11-12.
134 Kinney,Exh. SJK-IT at 56: 15-17.
135 Kinney,Exh. SJK-IT at 56:17-19.
136 Kinney,Exh. SJK-1T at 56:19-22.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 26
ORDER 08
96 According to the Company, throughout the history of the ERM, sharing bands were a
means to distribute the impacts of varying electric and natural gas prices, along with hydro
variability risk. When the Company's thermal fleet had an expected annual value of$30 to
$50 million, even 10 to 20 percent error resulted in costs falling within the deadbands.
However, with today's annual thermal fleet value estimated at $500 million, that same 10
to 20 percent error becomes multiples of the deadbands and overwhelms Company efforts
to reduce costs.137
97 Kinney asserts that because of a lack of liquidity and the much higher expense of margin
calls to hedge forward transactions, hedging in the forward markets to lock in projected
value no longer is an option for most of Avista's business.138 He further argues that being
unable to capture forward resource value results in the Company taking more of the
financial risk with the current ERM deadbands and recovery structure.139
98 The Company argues that in the short term, the best approach to recover CCA costs is to
have them flow through a 95/5 ERM without deadbands.140 Kinney states that allowing
those CCA costs to flow through the ERM at a sharing level of 95/5 obligates the
Company to pay 5 percent of anticipated CCA costs but avoids disagreements between
parties over the magnitude of costs that cannot be known at this point.141
99 Kinney contends that requesting 100 percent recovery of CCA costs would be the fairest
outcome and reflect the legislation's intent.142 However, as part of an overall package to
simplify the ERM and address increasing forecast costs, he states that the Company is
offering this compromise.143
100 Avista also notes that while the transformation to new markets creates efficiencies and
lower NPE, it also reduces the Company's ability to affect costs.144 Thus, when the
137 Kinney,Exh. SJK-1T at 60:17-21, 61:1.
138 Kinney,Exh. SJK-IT at 62:19-21.
139 Kinney,Exh. SJK-1T at 62:22-23, 63:1-2.
140 Kinney,Exh. SJK-1T at 64:18-19.
141 Kinney,Exh. SJK-1 T at 64:19-20 and 65:1-2.
142 Kinney,Exh. SJK-IT at 65:4-5.
143 Kinney,Exh. SJK-IT at 65:6-9.
144 Kinney,Exh. SJK-1 T at 65:11-16.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 27
ORDER 08
benefits of new markets are reflected in power supply modeling, as is currently the case, it
is reasonable to remove deadbands.145
101 The Company also argues that the existing deadbands were identified as a significant
credit weakness, and that the ERM's current design disadvantages Avista compared to
other regional utilities.146
Colstrip
102 Regarding Colstrip, the Company includes Colstrip's net power supply costs in Pro Forma
Power Supply Adjustment 3.00P and the ERM baseline in RYI. The breakdown of
Washington's Electric RY2 revenue requirement without Colstrip can be seen in Table
2 147
Table 2: Washington Electric RY2 revenue requirement—Colstrip Offset
Breakdown of Washington Electric RY2 Revenue Requirement
($OOOs)
Net Expense/Capital Investment Increase $ 18,618
Colstrip Power Supply Increase $ 59,512
Subtotal- Base Rate Increase $ 78,130
Schedule 99 Colstrip Tracker Reduction $ 24,419
Ovenall Bill Impact S 53,711
EIM Benefits
103 Finally,Avista witness Kalich details the methodology the Company uses to quantify the
value gained from participation in the intra-hour Energy Imbalance Market (EIM)141
145 Kinney,Exh. SJK-lT at 65:17-20.
146 McKenzie, Exh.AMM-1 T at 18:11-14.
147 Andrews, Exh. EMA-IT at 6:15-8:21
148 The acronyms EIM and WEIM are used interchangeably by the parties throughout their
testimony and briefs. They appear as used by the parties throughout their filings.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 28
ORDER 08
offered by CAISO, developed with the help of consulting firm Borismetrics.149 Kalich
states that Avista has determined an EIM system benefit of$5.5 million in 2025.150
Staffs Response Testimony
ERM
104 Staff Witness Wilson testifies that Staff is unconvinced that the current sharing/deadband
schedules provide the Company with material incentives that affect its current resource
decisions.151 Wilson further testifies that considering both base rates and NPE, the cost-
effectiveness of Avista's wind and hydropower procurements could easily have a more
substantial rate impact than the natural gas plants. However, he does acknowledge that
once procured, any impacts of wind and hydropower on NPE are largely indirect and
outside a utility's control.112
105 Staff contends that in the PacifiCorp order, the Commission pointed out that the effect of
the sharing/deadband schedules is to insulate customers from cost increases and provide a
balancing effect between years in which power costs are under- or over-forecast.1" Staff
agrees that this is a reasonable policy position to take and gives it strong deference.154
106 Staff recommends simplifying the current sharing portion of the mechanism to a
symmetric 90/10 sharing."' Staff asserts that this ratio equitably shares risk between
customers and Avista, while continuing to provide the Company with a reasonable
incentive to manage or control power costs.156
107 Additionally, with respect to the deadband, Staff recommends reducing the deadband from
$4 million to $3 million.157 The Commission retained the $4 million deadband in the
149 Kalich, Exh. CGK-1T at 4:14-14:7. The detail provided by Kalich in direct testimony does not
specifically pertain to arguments made in response by intervening parties, since those arguments
consider what is absent from the analysis.
150 Kalich, Exh. CGK-IT at 13:14-14:7.
151 Wilson,Exh. JDW-ITC at 35:19-21.
152 Wilson,Exh. JDW-ITC at 36:1-5.
153 Wilson,Exh. JDW-ITC at 36:8-11.
154 Wilson,Exh. JDW-ITC at 36:11-12.
155 Wilson,Exh. JDW-ITC at 37:3-4.
156 Wilson,Exh. JDW-ITC at 37:4-6.
157 Wilson,Exh. JDW-ITC at 37:7-8.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 29
ORDER 08
PacifiCorp case, which is approximately 2 percent of its net power Costs.158 Since Avista's
proposed NPE is much smaller than that of PacifiCorp, Staff finds it inequitable to expose
Avista to a relatively larger deadband risk.159
Forecast Error Adjustment
108 Staff witness Wilson recommends that the Commission reject Avista's proposed Forecast
Error Adjustment as not justified.160 Wilson describes the Forecast Error Adjustment as a
pre-payment of revenue requirement that Avista expects based on historical NPE trends
but is not itself an expense.161 Wilson argues that"Avista is proposing to include in its
NPE forecast recovery of a revenue requirement that does not yet exist. ,162 While
acknowledging that some drivers of NPE are outside of Avista's control,Wilson also
claims that several significant drivers remain in the Company's control163, and that it is
unreasonable to forecast a cost that may not even occur. 164
109 Wilson also notes concern that Avista does not appear to pay attention to its
responsibilities to help minimize NPE costs to customers in direct testimony.161 Wilson
contends that while there are increased challenges for Avista with respect to hedging, it
has not provided detailed information regarding the carbon allowance or natural gas
markets Avista participates in.166
Errors
110 Wilson identifies several forecast errors in Avista's net power cost filing and recommends
that the Commission accept Staff's corrections to Avista's 2025 and 2026 forecast NPE.167
Wilson also recommends that the Commission direct Avista to update its model to address
the input errors identified by Staff, specifically the Lancaster PPA and the Rattlesnake
158 Wilson,Exh. JDW-ITC at 37:8-9.
159 Wilson,Exh. JDW-ITC at 37:9-11.
160 Wilson,Exh. JDW-1TCr at 4:9-12.
161 Wilson,Exh. JDW-1TCr at 8:1-16.
162 Wilson,Exh. JDW-1TCr at 9:9-10.
163 Wilson,Exh. JDW-1TCr at 9:18-11:5.
164 Wilson,Exh. JDW-1TCr at 14:19-15:3.
165 Wilson,Exh. JDW-1TCr at 11:6-10.
166 Wilson,Exh. JDW-1TCr at 12:1-14:9.
167 Wilson,Exh. JDW-1TCr at 5:6-8.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 30
ORDER 08
Flats Wind Project.168 Avista already acknowledged multiple other errors Wilson identified
in the Company's forecast NPE.161
Colstrip
III Regarding Colstrip, Wilson claims that the modeling assumption used by Avista to
determine the marginal fuel price for Colstrip is dependent on an extremely unlikely
circumstance where Avista does not meet its minimum contractual fuel consumption in
2025. Since Avista is currently projected to exceed the minimum annual amount, Wilson
argues that the marginal price of fuel should be the highest annual marginal price.170
Wilson further argues that failure to dispatch Colstrip to the proper marginal cost would be
imprudent.171
Power Cost Update (In Case of MYRP Rejection)
112 Should the Commission accept Staff's recommendation and reject the MYRP, Staff
witness Erdahl recommends that the Company should be allowed to file a power cost
update with a rate effective date of December 31, 2025. This update would provide Avista
an opportunity to update power costs while removing Colstrip from rates on or before
December 31, 2025. Erdahl recommends that the power cost update also update fuel
expenses and market sales for resale.172
EIM Benefits
113 Staff witness Wilson claims that Avista does not include non-energy expenses and
revenues from the Western Energy Imbalance Market(WEIM), such as congestion
charges. While Wilson notes that Avista's methodology seems reasonable for forecasting
energy transaction costs, Wilson argues that the Company has earned on average $1.4
million per year in non-energy benefits from the WEIM which is not reflected in the
model.173
168 Wilson,Exh. JDW-1TCr at 42:3-6;40:15-41:3;41:5-13.
169 Wilson,Exh. JDW-1TCr at 37:16-38:6.
170 Wilson,Exh. JDW-1TCr at 39:1-40:7.
171 Wilson,Exh. JDW-1TCr at 40:9-13.
172 Erdahl, Exh. BAE-1 T at 15:9-17.
173 Wilson,Exh. JDW-1TCr at 38:13-22. The $1.4 million figure does not include a citation.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 31
ORDER 08
114 Wilson recommends that the Company update its dispatch to include the non-energy
WEIM charges and benefits. Staff does not have an estimate of how this recommendation
would ultimately affect NPE.174
Public Counsel's Response Testimony
ERM
115 Public Counsel contends that the Company's entire argument is based on its self-declared
inability to forecast or prepare for market changes."'Witness Earle argues that the
Company is effectively testifying that it lacks the competency to adapt to normal
occurrences in the market, and as a result the Company wants to shift 95 percent of the
risk for its decision onto ratepayers.176
116 Earle contends that it is apparent that the ERM is working as it was designed to as there
are some years in which costs are shared, and other years in which benefits are shared.177
The existence of years such as 2022 with large shortfalls is concerning and may be an
indication of insufficient hedging.178 Before considering altering the ERM deadbands and
sharing bands, Public Counsel urges the Commission to order Avista to provide a
comprehensive report on its hedging policies and practices.179
117 Earle also contends that both conditions that Avista states are needed for deadbands to be
beneficial are met.180 Earle argues that Avista can take actions to reduce costs, and the
NPE forecast, while not perfect, has a track record that supports the idea that costs are
forecastable.181
118 Public Counsel testifies that the Commission should reject any conclusions from Avista's
historical comparison as being dispositive.182 Public Counsel states that the historical
comparison the Company makes is problematic as it unreasonably assumes that changes to
14 Wilson,Exh. JDW-1TCr at 42:3-6.
15 Earle, Exh. RLE-1 CT at 8:11-12.
16 Earle, Exh. RLE-1 CT at 8:19-20, 9:1-2.
17 Earle, Exh. RLE-1CT at 14:12-15.
17'Earle, Exh. RLE-1CT at 14:15-17.
179 Earle, Exh. RLE-1CT at 14:17-19.
180 Earle, Exh. RLE-1CT at 16:7-11.
18' Earle, Exh. RLE-1 CT at 16:11-13.
182 Earle, Exh. RLE-1CT at 17:5-6.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 32
ORDER 08
the incentive structure would not have changed behavior.183 A proper calculation of the
different outcomes under various risk sharing mechanisms should consider the effects of
the risk sharing mechanisms on NPC variance.184
119 Public Counsel also argues that Avista's justifications for changing the ERM are not new
and that between 2012-2022, actual NPE was less than the authorized level for eight of
those years.185
120 Public Counsel further states that the history of the difference between authorized and
actual NPE shows Avista's claims such as "our forecasts continue to get worse" and
"power supply costs cannot be forecasted accurately, and for reasons outside of utility
control" are unsubstantiated."'
121 Public Counsel also finds Avista's complaints on market liquidity to be unreasonable.187
Earle states that the Company's forward electricity purchases were at low levels in 2020
and 2021 compared to previous years and then disappear from 2022 onwards."' Earle
contends that this is concerning and surprising given the ability of other utilities to buy
electric power forward, contributing to the unreasonableness of the Company's
complaint."'
122 While Public Counsel agrees that Avista should address the uncertainty in the carbon
emissions policy, Earle argues uncertainty is not a reason for inaction and placing nearly
all of the risk on ratepayers."' Contrary to Avista's claims of having no control, Earle
argues that the Company can modify its operations in response to observed costs and
purchase and sell allowances in the market to mitigate risk.191 Additionally, Earle
emphasizes that compliance periods for allowances are four years followed by 10 months
to transfer compliance instruments for the compliance period, allowing Avista to perform
substantial risk mitigation over a period of almost five years.192
183 Earle, Exh. RLE-1CT at 16:15-18.
184 Earle, Exh. RLE-1CT at 17:3-5.
115 Earle, Exh. RLE-1CT at 9:9-10.
116 Earle, Exh. RLE-1CT at 10:20-24.
187 Earle, Exh. RLE-1CT at 13:2-3.
188 Earle, Exh. RLE-1CT at 12:7-8.
189 Earle, Exh. RLE-1 CT at 13:1-3.
190 Earle, Exh. RLE-1CT at 13:5-8.
191 Earle, Exh. RLE-1CT at 13:8-11.
192 Earle, Exh. RLE-1 CT at 13:11-14.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 33
ORDER 08
123 Earle also emphasizes that unplanned changes in the weather are not a new
phenomenon.193 While climate change may make variation more severe, it does not mean
planning cannot occur or contingencies be put into place to handle them.'94
Forecast Error Adjustment
124 Earle recommends that the Commission reject Avista's proposal to add a forecast error
adjustment of$65.8 million to the forecast NPE. Earle states that the adjustment does not
entail actual costs that Avista has incurred, or will incur, on behalf of its customers and the
Commission has repeatedly rejected the premise that it is impossible to forecast NPE.195
125 Citing Avista witness Kinney, Earle describes the Forecast Error Adjustment as the
difference between Avista's forward looking evaluation and after-the-fact evaluation of its
generation resources, which Avista proposes to be $65.8 million on top of the standard
forecast NPE.196 Earle argues that the Forecast Error Adjustment is not a separate cost that
the Company incurs on behalf of ratepayers, and that the ERM already accounts for
various forecast errors.19' Earle claims that the Company's argument that forecasting has
continued to get worse and that power supply costs cannot be forecasted accurately are
disproved by Avista's performance forecasting NPE since the ERM was implemented in
2003. Earle includes the following figure in his testimony, a waterfall graph of Avista's
performance calculating forecast NPE since 2003.19'
19' Earle, Exh. RLE-1CT at 14:2-3.
194 Earle, Exh. RLE-1CT at 14:3-5.
195 Earle, Exh. RLE-1CT at 2:19-26.
196 Earle, Exh. RLE-1CT at 3:18-4:3.
19'Earle, Exh. RLE-1CT at 4:4-11.
19'Earle, Exh. RLE-1CT at 5:8-7:10.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 34
ORDER 08
Figure 1: Waterfall diagram of Avista's (Actual NPE -Authorized NPE)
($million).199
■ Increase ■ Decrease ■ Total
120.0
14.5
100.0 24.8 . ,
`W 90.0 ' 19.2 . 5.0
►W 13.6
.0 60.0 20.7 . - 14.7 • , 48.8
V
40.0 33.8 , -17.6
8.4
6.2 .� 20.0
-15.6 16.4
5.5 . .
� 0.0
U -17.5
-20.0
2003 2004 2005 2006 2007 2008 2009 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022
126 Earle highlights that the 2022 NPE forecast as authorized to be $72.3 million with a final
incurred NPE of$121.1 million, under-collecting by $48.8 million. However,Avista had
calculated its 2022 portfolio error to be $202.7 million, which would have resulted in an
over-collection of$154 million if it had been allowed into the NPE forecast for 2022.200
EIM Benefits
127 Earle finds Avista's estimate of EIM benefits to be unreasonable. Earle asserts that the
Company's modeling methodology contains errors, including gaps in pricing data used in
its regression analysis201 and flawed assumptions that reduce the variability of intra-hour
prices.202 As a result of these flaws, Earle recommends rejecting Avista's estimate of
WEIM benefits.203
1" Earle, Exh. RLE-1CT at 6:5.
200 Earle, Exh. RLE-1CT at 4:10-5:2.
201 Earle, Exh. RLE-1CT at 27:8-28:17.
202 Earle, Exh. RLE-1CT at 28:18-29:13.
20' Earle, Exh. RLE-1CT at 29:14-16.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 35
ORDER 08
128 Earle also recommends that the Commission reject Avista's use of the 2017 E3 study to
support the Company's forecast of EIM benefits since the study is outdated, using prices
and results that are listed in 2017 dollars.204
129 To counter Avista's estimate, Earle points to CAISO's estimated benefits for Avista's
Balancing Authority Area(BAA). Earle claims that CAISO estimates $25.3 million in
benefits annually for the Company's BAA'20' and states that the Company earned $24.1
million in 2022 and$20.1 million in 2023 from WEIM participation.206 Earle also claims
that E3 previously endorsed the CAISO WEIM benefits methodology as an accurate
measure for benefits Puget Sound Energy received from its participation in the WEIM.207
130 Earle provides an alternative "bootstrapping analysis"to calculate the benefits that Avista
receives from EIM participation and recommends that the Commission order Avista to
develop a new forecasting methodology using either this methodology or a different
approach such as Monte Carlo modeling or scenario-based forecasting. The new
methodology should align with CAISO's WEIM benefit estimates.20' Earle also
recommends that the Commission order the adoption of an annual WEIM benefits forecast
of$20.7 million, based on the bootstrapping analysis.209
The Energy Project's Response Testimony
131 The Energy Project argues that the Commission should reject Avista's ERM proposal for
two reasons:
• Individual customers do not understand regional energy market structures, nor can
they make a significant impact on the Company's power costs, and
• In SB 5295 the Legislature directed the UTC to establish and maintain regulatory
processes that measure and incent utility performance.zio
204 Earle, Exh. RLE-1CT at 29:17-6. Earle estimates that the value of EIM benefits from the 2017
E3 study, converted to 2025 dollars,would be$7.4 million instead of$5.5 million.
205 Earle, Exh. RLE-1CT at 30:7-14.
206 Earle, Exh. RLE-1CT at 31:4-6. In Public Counsel's cross testimony, Earle provides the
updated data and does not significantly change the recommendation.
207 Earle, Exh. RLE-1CT at 35:9-11.
20'Earle, Exh. RLE-1CT at 35:12-36:7.
209 Earle, Exh. RLE-1CT at 33:5-9.
210 Stokes, Exh. SNS-1T at 40:5-8,10-11.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 36
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132 Since customers have such little ability to impact power costs, Stokes argues that it is
inappropriate to change the ERM to place nearly all the costs on customers.211
Additionally, TEP argues that moving from a deadband that gives shareholders a $4
million incentive to contain energy costs to one in which shareholders only have a 5
percent incentive runs counter to the Legislature's direction in SB 5295.212
AWECs Response Testimony
133 AVWEC testifies that the ERM is functioning as the Commission intended, and that the
Commission has repeatedly rejected arguments to eliminate deadbands from cost sharing
mechanisms.As such,AWEC recommends that the Commission reject Avista's
proposal.213
134 Mullins argues that none of the issues Avista raises have any relevance to the ERM.214 He
asserts that power costs have always been volatile—that is why the ERM exists.215
Mullins further contends that even if one were to assume that power costs are more
volatile today than they were in the past,Avista's risk is no greater because the deadbands
and sharing bands have remained the same since 2006.216 He argues that the ERM does
not create power cost risk for Avista, it insulates it from this risk by allowing for a true up
of amounts that exceed the deadbands.217
135 Additionally,AWEC contends that like PacifiCorp in its 2023 GRC,Avista argues that
customers have been harmed by the current ERM structure relative to Avista's proposed
95/5 sharing structure. Mullins states that the Commission rejected this argument, noting
that the deadbands have insulated both customers and PacifiCorp from unreasonable risk
and appropriately assign power cost risk.zls
136 Mullins further testifies that the concerns related to policy changes are speculative at
best.219 Mullins states that beyond the CCA,Avista merely references the Energy
21 Stokes, Exh. SNS-IT at 40:8-9.
212 Stokes, Exh. SNS-IT at 40:13-16.
211 Mullins,Exh. BGM-IT at 59:10-13.
214 Mullins,Exh. BGM-1T at 60:1, 61:1.
215 Mullins,Exh. BGM-1T at 61:1-2.
216 Mullins,Exh. BGM-IT at 61:2-5.
217 Mullins,Exh. BGM-IT at 61:5-7.
211 Mullins,Exh. BGM-IT at 61:16-20.
211 Mullins,Exh. BGM-1T at 62:7.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 37
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Independence Act and CETA, stating that"[m]any unknowns exist on the path to
decarbonization that likely are not reflected in our normalized NPE modeling and
forecast. ,220 As such,AWEC contends that deviating from Commission policy and
precedent to the detriment of ratepayers based on speculation is unreasonable.221
137 AWEC asserts that Avista's arguments about organized markets reducing the Company's
ability to affect costs were expressly rejected in PacifiCorp's most recent rate case, with
the Commission finding them to be "unsettling."222
Forecast Error Adjustment
138 Mullins recommends that the Commission reject Avista's proposed Forecast Error
Adjustment, which would reduce the revenue requirement for electric service in RY1 by
$45.2 million.223 Mullins argues that the mark-to-market calculations Avista performed to
generate the Forecast Error Adjustment do not represent a cost to Avista since power
supply expenses are influenced by many other factors.224 Mullins also claims that Avista's
back-casting analysis is best used as a model validation exercise, not a method of
remedying a model that was shown to be invalid.225 Mullins asserts that Avista's
backwards-looking calculation simply demonstrates that there was major market volatility
between 2018 and 2022, the period over which the Company calculated the Forecast Error
Adjustment.226
California-Oregon-Border Sales
139 Regarding California-Oregon-Border (COB) sales, Mullins recommends an adjustment to
NPE to account for COB margins, resulting in a reduction to revenue requirement for
electric services of$142,054 for RY1.227 Mullins notes that Avista has previously included
a line item in Forecast NPE to account for sales at the COB market hub since Avista holds
221 Mullins,Exh. BGM-IT at 62:10-12.
221 Mullins,Exh. BGM-IT at 62:12-14.
222 Mullins,Exh. BGM-IT at 62:17-20.
223 Mullins,Exh. BGM-IT at 44:8-13.
224 Mullins,Exh. BGM-1T at 41:19-42:20.
221 Mullins,Exh. BGM-IT at 43:8-22.
226 Mullins,Exh. BGM-1T at 43:1-7.
227 Mullins,Exh. BGM-IT at 46:8-12.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 38
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a contract with Portland General Electric (PGE) for 100 MW of transmission capacity at
COB.22s
Colstrip
140 Regarding Colstrip's NPE impact, Mullins objects to Avista's use of a mark-to-market
calculation to determine this impact. Mullins claims that since the removal of Colstrip
Units 3 and 4 from rates is the principal driver of the RY2 revenue requirement increase, it
would be inappropriate to determine its rate impact using only a mark-to-market
calculation performed in 2024. Mullins recommends that the Commission require Avista
to perform a full update to NPE for RY2 through a PCORC or a limited update.229 If the
Commission opts for a limited update, Mullins recommends that it be submitted in August
2025 with an update to forward market prices effective November 1, 2025. Mullins'
recommendation includes no modeling updates, only prices, contracts, and resources.230
Mullins also recommends the removal of wheeling costs associated with Colstrip as a part
of the RY2 NPE update, since they will no longer be used to benefit ratepayers once
Colstrip Units 3 and 4 are removed from rates.231
141 Finally, Mullins also recommends the transfer of plant balances associated with Colstrip's
transmission assets to being classified as "plant held for future use" and excluded from the
revenue requirement, while removing associated expenses from the revenue requirement
for RY2. Mullins justifies this recommendation by noting that Avista is transferring all
ownership interest in Colstrip Units 3 and 4 to Northwestern and claims that the Company
has shown no evidence that it will utilize the transmission assets.232
EIMBenefits
142 Mullins claims that Avista's WEIM benefit forecasting does not capture the benefits of
market settlements, such as neutrality charges, flex awards, and greenhouse gas revenues
resulting in an understatement of net power expense.233 Mullins also states that the
Company does not include revenues received for providing carbon free resources into the
221 Mullins,Exh. BGM-1T at 44:14-45:11.
zzg Mullins,Exh. BGM-IT at 55:1-56:2.
231 Mullins,Exh. BGM-IT at 56:3-19.
211 Mullins,Exh. BGM-1 T at 57:1-19.
232 Mullins,Exh. BGM-IT at 57:20-58:21.
211 Mullins,Exh. BGM-1T at 47:6-12; 53:7-14.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 39
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WEIM in its benefits forecast, compared to peer utilities Puget Sound Energy, PacifiCorp,
and Portland General Electric.234
143 To account for the omission of these WEIM benefits, Mullins recommends an increase of
$3.0 million to Avista's WEIM benefits calculation. This recommendation would reduce
revenue requirement by$2.1 million.235
Avistas Rebuttal Testimony
ERM
144 While Avista initially proposed a 95/5 sharing mechanism for the ERM, upon review of
Staff's testimony, the Company is willing to accept a 90/10 sharing of costs and benefits,
but with a slightly modified"deadband."236 The Company supports an asymmetric
deadband, so that when power supply costs are higher than authorized, the Company
would absorb $2.5 million before the 90/10 sharing.231 When actual power supply costs
are lower than authorized, the Company would only retain $2 million, before sharing
90/10 with customers.238
145 Avista contends that the proposed asymmetrical deadbands of$2.5 and $2.0 million are
justified based on the relative size metrics of Avista and PacifiCorp and the Company's
corresponding ability to absorb the "deadband" in a way that would still be meaningful
without being punitive.239
146 The Company also agrees with Staff to eliminate the second asymmetrical sharing band
that currently refunds 75 percent of surplus dollars to customers or equally splits surcharge
dollars.240
234 Mullins,Exh. BGM-IT at 53:15-54:5.
231 Mullins,Exh. BGM-IT at 54:6-15.
236 Christie,Exh. KJC-4T at 13:21-22, 14:1-2.
23' Christie,Exh. KJC-4T at 14:2-4.
231 Christie,Exh. KJC-4T at 14:4-6.
239 Christie,Exh. KJC-4T at 14:15-18. Relative to NPE,Avista's sharing of deviations from
authorized bands is approximately two times that of either PacifiCorp or PSE,which demonstrates
the fairness of moving to a lower sharing band. Kinney,Exh. SJK-17T at 17:16-19, 18:6-8.
240 Kinney,Exh. SJK-17T at 16:13-14.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 40
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147 Avista disagrees with AWEC and Public Counsel's contention that the PacifiCorp order
precludes ERM modifications for Avista.241 Kinney argues that the risk inherent in Avista's
deadbands is more impactful to it given the Company's relative size, which alone should
warrant ERM modification.242 He further argues that the Company's modified proposal
retains the "guardrails" desired by the Commission and keeps the customer-focused intent
of the asymmetry in the second-band, while adjusting the deadband size to a risk level
more in line with Avista's regulated peers.243
148 Avista argues that by retaining customer-favored asymmetry in the deadband, the
Company believes its modified ERM proposal addresses the concerns voiced by Witness
Mullins.244
149 Avista argues that while it is not possible to address CCA fully in this proceeding, because
so many unknowns still exist with CCA, it is prudent, however, to recognize the risk that
may be borne by the Company for these costs in the pro forma period, and to address them
as much as reasonably possible in this proceeding with tools available —namely,by
recognizing recent under-collection of costs by including a forecast error adjustment and
modifying the ERM.241
ISO Regarding Performance Based Ratemaking requirement in ESSB 5295,Avista testifies
that the ERM has not been separately identified by the Commission as an area to apply
performance measures geared towards evaluating how a utility performs. The incentive to
perform is already part of the sharing mechanism.246
151 Avista suggests that Public Counsel misunderstood the forecast error adjustment to include
only market variability associated with generation assets, when in fact the proposed
forecast error represents components of actual costs.247 The Company argues that Public
Counsel's broader argument, that over the life of the ERM the average forecast error was
small, is gravely mistaken.248 Kalich emphasizes that the 20-year average error to which
24' Kinney,Exh. SJK-17T at 19:7-9.
242 Kinney,Exh. SJK-17T at 19:9-11.
243 Kinney,Exh. SJK-17T at 19:24-26, 20:1-2.
244 Kinney,Exh. SJK-17T at 21:4-6.
245 Kinney,Exh. SJK-17T at 22:10-15.
246 Kinney,Exh. SJK-17T at 23:15-18.
247 Kalich, Exh. CGK-7T at 8:9-10, 8:13-14.
241 Kalich, Exh. CGK-7T at 8:14-15.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 41
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Earle cites incorrectly masks very large forecast errors occurring year-to-year and over
contiguous years.249
152 In response to Public Counsel, Kalich states that the market for electricity has
fundamentally changed and opportunities to make forward electricity purchases and
provide beneficial sale transactions on behalf of customers and the Company do not exist
today as they did in the past.250
153 Avista currently defines CCA costs as NPE and these costs flow through the ERM. Kalich
argues that it has no way to lower NPE through actions under the CCA, but that it is only a
question of what the unknown costs will be.251 Kalich argues that Avista should not be
responsible for a large share of CCA costs, claiming that CCA wasn't intended to increase
utility costs for electric utilities.212 However, Kalich notes that CCA costs will almost
certainly increase NPE, and argues that modifying the ERM will help mitigate the issue by
reducing the Company's unreasonable exposure to CCA costs through the ERM.Zss
154 The Company argues that it should not provide a comprehensive report on its hedging
practices and policies before any modification of the ERM is made because it already
provides this information to the Commission.zsa Further,Avista contends that issues
presented in this case will not be solved by modifying hedging policies and practices.255
Kalich states that Earle presents no evidence to refute the primary reason hedging has
become less relevant in today's marketplace, as the market liquidity for forward hedging
has diminished.256
General Forecast NPE
155 Kinney states that the Company has rerun its Power Supply Model, updating wholesale
gas and electricity prices, new and incremental contracts, non-gas fuel prices, and
24'Kalich, Exh. CGK-7T at 8:15-17.
250 Kalich, Exh. CGK-7T at 11:16-20.
25i Kalich, Exh. CGK-7T at 12:15-16.
252 Kalich, Exh. CGK-7T at 12:16-18.
2" Kalich, Exh. CGK-7T at 12:19-20.
254 Kalich, Exh. CGK-7T at 13:6-10.
255 Kalich, Exh. CGK-7T at 13:11-12.
256 Kalich, Exh. CGK-7T at 13:12-16.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 42
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adopting certain positions shared by other parties.As a result, the forecast NPE is reduced
from $175.1 million to $119.0 million.257
156 Kalich testifies that Avista updated wholesale electricity and gas prices to a three-month
average of forward prices for the period ending July 15, 2024. Kalich also states that
suggestions from Staff for the forecast NPE were incorporated, including startup fuel
costs, corrected long-term wholesale power contract revenues, updated marginal dispatch
pricing for Colstrip, increased expected Rattlesnake Flat Wind generation levels, and new
tariff rates associated with BPA transmission and gas transport contracts.258
157 Kinney asks that the Commission make explicit findings of fact with respect to multiple
items, including changing market fundamentals, a large forward premium in the implied
market heat rate (IMHR), the increased value and risk associated with Avista's thermal
fleet, diminished market liquidity that precipitates forecast error, the increased difficulty of
hedging, and the difficulty of the Company to properly forecast NPE.219
158 Kalich suggests convening a new workshop series after the conclusion of the rate case to
revisit power supply modeling methodology, address new changes in the energy space,
inform the new representatives of the intervening parties, and consider alternatives to
AURORA model.261
Forecast Error Adjustment
159 Kinney states that Avista reduced the Forecast Error Adjustment from $65.8 million to
$29.7 million.26i Kinney offers a change to the Forecast Error Adjustment calculation
methodology; using three historical years instead of five, and simply averaging the annual
average of actual ERM variances instead of the average annual difference between the
calculated Forecast Value and Actual Value of NPE.262 Kinney claims that this
methodology consists of actual costs, addressing Public Counsel's concern that the
Forecast Error Adjustment does not consist of costs that Avista has incurred in the past.
Kinney also claims that the new methodology incorporates feedback from AWEC
257 Kinney,Exh. SJK-17T at 3:7-11, 3:18-3:22.
251 Kalich, Exh. CGK-7T at 5:18-6:20.
259 Kinney,Exh. SJK-17T at 5:5-6:17.
260 Kalich, Exh. CGK-7T at 7:10-23.AURORA or Aurora is an energy forecasting and analysis
software.
261 Kinney,Exh. SJK-17T at 3:12-14.
262 Kinney,Exh. SJK-17T at 10:19-11:12.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 43
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criticizing the futility of using a model validation technique for recalibrating results,263 and
that the new methodology for the Forecast Error Adjustment addresses all concerns held
by Staff in Order 07 with which the Commission agreed.264
160 Kinney argues that AURORA modeling methodology, to which all stakeholders previously
agreed, cannot reflect all the changes to input assumptions happening now in the
regulatory and market environments.261 In response to Public Counsel witness Earle's
claim that Avista is providing new modeling changes that have not been vetted by the
Commission, Kalich contends that Avista is not claiming to change its modeling
methodology but is instead listing the Forecast Error Adjustment as a line-item
adjustment, instead of burying it within the AURORA model.266 Further, Kalich rejects
Staff and AWEC's characterization of the Forecast Error Adjustment as simply a mark-to-
market valuation of the Company's generation portfolio , arguing instead that it captures
the entire portfolio since the calculation is based on metrics that capture the entire
portfolio.267
161 Kinney further states that the Forecast Error Adjustment is known and measurable, and
captures underlying offsets because it is based on previously approved values and captures
all power supply expenses.268 Kalich contends that forecast error is neither less nor more
known than other assumptions already making up the forecast NPE value, and that if the
Forecast Error Adjustment is rejected, so too should other NPE pro forma adjustments
used in prior rate cases.269 Kalich also rejects Staff witness Wilson's claim that forecast
error difference is not an expense, calling it a cost"by definition"because it is driven by
differences between authorized and actual expenses.270 He rejects Wilson's assertion that
including the Forecast Error Adjustment is "unprecedented," saying that recovering known
and measurable costs is not unprecedented.271
263 Kinney,Exh. SJK-17T at 12:11-20.
264 Kinney,Exh. SJK-17T at 13:5-15:10.
265 Kinney,Exh. SJK-17T at 10:8-19.
266 Kalich, Exh. CGK-7T at 21:8-22:2.
267 Kalich, Exh. CGK-7T at 15:13-16:13.
268 Kinney,Exh. SJK-17T at 13:5-15:10.
269 Kalich, Exh. CGK-7T at 39:5-41:20.
270 Kalich, Exh. CGK-7T at 24:2-16.
271 Kalich, Exh. CGK-7T at 25:15-26:2.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 44
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162 Kalich also contests Wilson's categorizations of factors as within Avista's control. Kalich
describes hedging costs, physical depreciation, fuel procurement practices, and bilateral
transactions outside of the EIM as outside of utility control.272
163 To support the inclusion of a Forecast Error Adjustment, Kalich claims that the calculated
value of the implied market heat rate (IMHR) --the price of power on the market divided
by the price of natural gas -- has been higher than its realized value in the spot market.
According to Kalich, this discrepancy prevents Avista from being able to realize the
potential economic value that underpins forecasted NPE benefits. Kalich further argues
that including the Forecast Error Adjustment would help to adjust the differences between
forward prices and actuals, and that if it results in an overcorrection, the following rate
case's Forecast Error Adjustment would account for that miss.273
164 Kinney rejects the arguments made by Staff,AWEC, and Public Counsel that the ERM
captures forecast error instead of allocating the results through sharing bands.274
165 Kalich clarifies that in some years, the Forecast Error Adjustment could be a negative
value, such times as when natural gas prices are falling.275
Colstrip
166 Avista witness Kinney states that Colstrip expenses are removed from the 2026 NPE based
on its 2025 net value (market value minus fuel), and that no further power supply updates
to 2026 are necessary.276 Company witness Andrews states that the Company has updated
the value of Colstrip to match the value from the most current power supply baseline for
RY1.As a result, forecast NPE increases by $54.2 million in RY2, partially offset by a
$24.4 million reduction in expenses to Washington customers through Colstrip Tariff
Schedule 99.277
167 Avista rejects AWEC's recommendation that the Colstrip Transmission Assets be removed
from rates. Kinney testifies that Avista still plans to use its Montana and BPA point-to-
point transmission rights to take advantage of Montana wind resources, which the
Company identified as part of its Preferred Resource Strategy in its 2025 IRR Avista also
272 Kalich, Exh. CGK-7T at 26:3-32:9.
27' Kalich, Exh. CGK-7T at 34:3-36:3.
274 Kinney,Exh. SJK-17T at 9:12-21.
271 Kalich, Exh. CGK-7T at 23:8-24:3, 25:4-14.
276 Kinney,Exh. SJK-17T at 3:15-17.
277 Andrews, Exh. EMA-6T at 78:1-80:4.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 45
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plans to maintain transmission rights the Company expects it will need in the future. If the
transmission assets are underutilized,Avista can sell access in short-term contracts to
recover costs. In general,Avista takes the position that the Colstrip transmission assets still
provide value to Avista and its customers.278 Kinney also notes that if Avista were to stop
paying its share of system upgrades and annual maintenance costs for Colstrip
transmission assets, it would be in contract breach.279
California-Oregon-Border Adjustment
168 Kinney rejects AWEC's COB adjustment. Kinney claims that an adjustment for COB
transmission was not included in previous cases and is not included in the power supply
modeling methodology because the Company models an aggregated wholesale electric
market comprised of all markets used by the Company.280
EIMBenefits
169 Company witness Kalich generally defends Avista's methodology for forecasting WEIM
benefits.281 Kalich notes that the Company uses the same methodology that PSE used in a
previously approved general rate case, UE-200980.212 After reviewing response testimony
and consulting with PSE, Kalich states that Avista is adjusting its WEIM benefits forecast
from $5.5 million to $6.6 million due to changes in the baseline model used to calculate
incremental WEIM benefits.283
170 Regarding Public Counsel's recommendation that the Commission order Avista to develop
a valid WEIM benefits forecast methodology, Kalich replies that the Company does not
object to the Commission establishing a specific methodology in its order. However,
Kalich states that a change in methodology would not be available in a timeline suitable
for the current rate case.284
278 Kinney,Exh. SJK-17T at 25:9-30:6.
279 Kinney,Exh. SJK-17T at 28:23-29:3.
280 Kinney,Exh. SJK-17T at 30:7-18.AWEC argues that Avista witness Kinney accepted the
adjustment during the hearing, despite Avista's arguments against AWEC's proposal to continue
modeling sales transactions at the COB market hub.AWEC's Post-Hearing Brief, at¶52(citing,
Hearing Tr. Vol. III at 221:7-23).
281 Kalich, Exh. CGK-7T at 48:19-53:22.
282 Kalich, Exh. CGK-7T at 48:13-18.
283 Kalich, Exh. CGK-7T at 45:18-46:5.
214 Kalich, Exh. CGK-7T at 48:13-18.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 46
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171 Kalich recommends that the Commission reject Public Counsel's recommendation that the
Company use of CAISO's estimates of WEIM benefits instead of its own. Kalich argues
that the CAISO calculation overstates the WEIM benefits that Avista receives,285 and that
the historic data detailing revenues from the WEIM do not factor in the loss of revenue the
Company would have earned in bilateral markets.286 Kalich also argues that the reported
benefit data from CAISO contains only 25 months, a small dataset that occurred under low
hydro conditions.287
172 Regarding AWEC witness Mullins recommendation that Avista include greenhouse gas
revenues, neutrality charges, and Flex Ramp revenues, Kalich states that the Company no
longer receives greenhouse gas revenues since the CCA was passed and that Flex Ramp
revenues are immaterial.As a result, the value of increased WEIM benefits resulting from
Mullins'recommendation should be reduced to $0.9 million.288
173 In response to Staff witness Wilson's recommendation that WEIM benefits be increased
$1.4 million following an analysis of EIM "cost codes," Kalich testifies that cost codes
provided by CAISO are not granular enough to determine whether benefits included in
those cost codes are already being captured in AURORA. Upon review of the cost code
data, Kalich found that an analysis utilizing cost code data would indicate that NPE should
increase by $0.3 million.Avista does not recommend an increase to NPE based on WEIM
cost codes.289
Staff's Cross-Answering Testimony
174 Staff witness Wilson recommends that the system NPE forecast be increased from$175.1
million to $175.7 million, as adjustments to account for CCA costs and removing the
Forecast Error Adjustment nearly balance each other out.29'Regardless of the
Commission's treatment of CCA costs, Staff recommends removing Avista's Forecast
Error Adjustment. Staff further recommends including CCA allowance prices in dispatch
and market purchases.291 Staff's estimate of Washington NPE revenue requirement is
211 Kalich, Exh. CGK-7T at 46:6-47:6.
216 Kalich, Exh. CGK-7T at 44:1-19.
287 Kalich, Exh. CGK-7T at 53:23-54:21.
288 Kalich, Exh. CGK-7T at 43:12-21, 47:7-16. Kalich does not comment on whether the
Commission should accept the resulting$0.9 million increase to EIM benefits.
219 Kalich, Exh. CGK-7T at 47:17-48:5.
290 Wilson,Exh. JDW-24CTr at 19:1-5.
291 Wilson,Exh. JDW-24CTr at 20:4-9.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 47
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increased from $112.8 million to $113.0 million.292 Wilson claims that the $71.15 per CCA
allowance estimate is not reasonable and details the forecasting assumptions that go into
Staff's estimate of CCA costs.293 However, if the Commission determines that the cost of
CCA allowances associated with forecast wholesale market sales should not be included in
NPE as recommended by Staff, Staff's forecast system NPE recommendation would
decrease to $132.4 million with a corresponding reduction to Washington NPE.294
175 Wilson also points out potential errors in Avista's AURORA modeling of unit commitment
when including CCA allowance prices. Wilson does not believe that this is a material
problem requiring immediate action but recommends that the Company investigate this for
future filings.291 In the event the Commission accepts AWEC's position on COB market
sales, Wilson provides minor adjustments to Staff's recommended values for System
Account 447, System Total Revenue, System Total Net Expense, and Washington NPE
Revenue Requirement.296
EIMBenefits
176 In cross testimony,Wilson notes that WEIM benefits are not included in Avista's
calculation of NPE forecast. Wilson further testifies that it is not necessary for Avista to
include WEIM benefits in the NPE forecast, as AURORA does not differentiate between
market platforms. Wilson did not investigate Public Counsel witness Earle's benefits
calculation and does not take a position on whether the Company's or Public Counsel's
WEIM benefits calculations are more accurate, assuming that they are immaterial to an
NPE forecast.297
177 Wilson disagrees with Public Counsel witness Mullins'recommendation to include
greenhouse gas revenues in the EIM benefits forecast. Wilson reaches this conclusion
based on Kalich's testimony that the Company does not participate in California's
greenhouse gas cap and trade program, which would be the source of greenhouse gas
revenue.298
292 Wilson,Exh. JDW-24CTr at 20:1-2.
293 Wilson,Exh. JDW-24CTr at 22:14-26:19.
294 Wilson,Exh. JDW-24CTr at 19:6-9.
295 Wilson,Exh. JDW-24CTr at 21:7-22:12.
296 Wilson,Exh. JDW-24CTr at 27:1-7.
297 Wilson,Exh. JDW-24CTr at 2:21-4:4.
298 Wilson,Exh. JDW-24CTr at 4:15-18.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 48
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178 However, Wilson does agree with Mullins that some WEIM settlement charges are
inappropriately omitted from Avista's forecast of EIM benefits. Wilson's estimate of those
non-energy benefits to be $1.4 million annually.299
179 After reviewing Avista's data request responses providing more detailed WEIM settlement
charge information, Wilson finds reasonable the resulting increased $.5 million adjustment
in forecast NPE.
Public Counsel's Cross-Answering Testimony
ERM
180 In cross-answering testimony, Public Counsel witness Earle reiterates arguments that the
Commission should reject both Avista's and Staff's proposed changes to the sharing bands
because they would make the dead and sharing band mechanism less effective.300
181 Witness Earle contends that Staff's comparison of Avista to PacifiCorp's deadband fail in
two primary ways:
• Staff does not consider that even if Avista's dead band is relatively large
compared to PacifiCorp's, this could mean PacifiCorp's is too small, and
• Staff provides no reason why the width of the dead band should be based
on proposed power costs alone.311
182 As such, Public Counsel argues that the Commission should reject both Avista and Staff's
proposals as unwarranted and unsupported by the factual record and maintain the current
ERM deadband and sharing bands.301
183 Earle supports AWEC's recommendation for an update to Avista's forecast NPE in August
2025, with an additional update of forward market prices effective November 1, 2025.
This would reduce forecast lag from 14 months to two months.303
299 Wilson,Exh. JDW-24CTr at 5:1-7.
300 Earle, Exh. RLE-17T at 3:12-14.
30' Earle. Exh. RLE-17T at 3:19-20,4:1-7.
302 Earle. Exh. RLE-17T at 4:11-13.
303 Earle, Exh. RLE-17T at 6:16-7:18.

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184 Based on CAISO's newly released estimate of 2024 WEIM benefits, Earle makes a minor
adjustment to Public Counsel's previous recommendation, and recommends the
Commission order an adoption of an annual WEIM benefits forecast of$20.1 million.304
AWECs Cross-Answering Testimony
185 In cross-answering testimony, Mullins continues to argue that the Commission should
reject Avista's ERM proposal, assert:305
• The ERM is functioning as intended,
• Avista's arguments are irrelevant and unconvincing, and
• The Commission rejected similar arguments in PacifiCorp's 2023 GRC.
186 He states that Staff's conclusion that a 90/10 split is equitable is at odds with the
Commission's decision in the PacifiCorp GRC,306 and that Staff provides no evidence to
support its contrary conclusion.307
187 Mullins argues that Staff's rationale for a reduction to the deadband does not consider the
rapid growth and higher volatility experienced and noted by the Commission with respect
to PacifiCorp's power costs.308
188 Mullins argues that Avista's forecast power costs are at a similar level to when
PacifiCorp's PCAM was first established ($112 million in the current case compared to
$108 million when PacifiCorp's PCAM was established).309 As a result, Mullins
emphasizes that the Commission's PacifiCorp order supports maintaining the ERM
structure as is.
NPE
189 Mullins recommends the Commission not direct Avista to alter its modeling of CCA costs
in its NPE forecast, given the uncertainty of Avista's ability to monetize its no-cost
304 Earle, Exh. RLE-17T at 8:1-15. Earle's previous recommendation was an annual EIM benefits
forecast of$20.7 million in response testimony.
30'Mullins,Exh. BGM-8T at 2:29-30, 3:1-2.
306 Mullins,Exh. BGM-8T at 3:10-14.
307 Mullins,Exh. BGM-8T at 3:14-15.
301 Mullins,Exh. BGM-8T at 3:15-19.
309 Mullins,Exh. BGM-8T at 5:7-11.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 50
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allowances and the fact that the relevant Ecology rulemakings have not yet occurred.310
Mullins states that Staff's recommendation of handling the removal of Colstrip from rates
is consistent with AWEC's. Mullins would support Staff's recommendation provided that
AWEC's recommendations for wheeling costs, transmission assets, and scheduling and
modeling parameters are met.311 Mullins also provides backup options to remove Colstrip
from rates if the Commission rejects the MYRP,Avista files a new rate case in 2025, and
the effective date of that rate case is after December 31, 2025.312
Decision
Restructuring the ERM
190 The Commission has previously addressed the purpose of risk sharing through
mechanisms like the ERM, most recently in Dockets UE-230172 and UE-210852. There
we reiterated that power cost risk sharing mechanisms are intended"to encourage
effective management and reduction of power costs."313
191 The sharing mechanisms provide guardrails to ensure a utility manages fuel price
volatility and does not engage in overly risky behavior because the guardrails ensure the
utility will share in cost overruns with customers.314
192 Like PacifiCorp,Avista points to several factors that it claims necessitate changes to the
ERM, including "nearly impossible to predict"variables,315 such as the implied market
heat rate,316 rising market volatility,317 falling market liquidity,318 the CCA,319 and the
increasing value of Avista's thermal generation fleet.320
311 Mullins,Exh. BGM-8T at 12:18-13:8.
31 Mullins,Exh. BGM-8T at 18:1-19.
312 Mullins,Exh. BGM-8T at 18:20-19:9.
313 WUTC a PacifiCorp, Dockets UE-230172&UE-210852¶389 (Mar. 19, 2024).
314 See, WUTC a PacifiCorp, Dockets UE-230172&UE-210852¶390(Mar. 19, 2024).
315 Kinney,Exh. SJK-1T at 54:2-9.
316 Kinney,Exh. SJK-IT at 58:6-60:3.
317 Kinney,Exh. SJK-1T at 60:14-62:8.
318 Kinney,Exh. SJK-1T at 62:9-63:2.
319 Kinney,Exh. SJK-1T at 64:3-65:9.
320 Kinney,Exh. SJK-1T at 69:15-71:14.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 51
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193 We recognize that during the past three to four years, energy markets have looked
somewhat different for Avista, as they have for all utilities. However, the evidence in this
case shows that the ERM is working as it should for now.321
194 AWEC and Public Counsel correctly argue that fuel prices have been volatile since the
ERM was implemented in 2006.322 During that time fracking was just starting and natural
gas was becoming more available and at a lower cost. The ERM functioned through a
Great Recession and then through record low interest rates and a booming stock market.
The ERM is intended to share risks in good times and in bad, to ensure that the utility
retains a certain level of risk even when external pressures increase, because ultimately the
utility has control, or at least some level of control, over the resources it procures and the
contracts it enters for fuel and power. There is inherently informational asymmetry, where
the utility knows far more about its operations and choices than intervenors and certainly
than customers.
195 To ensure that rates remain just and reasonable, the utility should carry a certain level of
risk through the ERM or a similar mechanism.
196 We are not convinced here that comparisons to the relative size of the risk that other
utilities face means Avista's ERM should be modified.As Avista points out, each utility is
different.Avista's resource position is different than from PacifiCorp's or Puget Sound
Energy's.12' Because of this, a simple comparison of relative risk through the dead and
sharing bands is unconvincing and as Public Counsel and AWEC point out, perhaps raises
the question of whether instead of decreasing the bands for Avista, the bands should not be
increased for other utilities.
197 Accordingly, the Commission denies Avista's and Staff's proposals to modify the ERM at
this time. This is not to say that the Commission simply will not modify the ERM under
any circumstances. We are open to entertaining changes to the ERM, however, as AWEC
and Public Counsel rightfully point out, there is a modeling issue present, as evidenced by
Avista's admissions in relation to the Forecast Error Adjustment. The Commission finds
that the parties should address the modeling errors, and only then might the Commission
revisit the issue, if necessary, to assess whether further adjustments are needed.
Forecast Error Adjustment
321 See, Kalich,Exh. CGK-7T at 23:1-7; see also Mullins, BGM-1 T at 60:14-61:6; BGM-8T at
2:29-30.
322 See,Avista Corp.,Docket UE-060181, Order 3¶3 (June 16, 2006).
323 Avista's Post-Hearing Brief, at¶¶74-81.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 52
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198 We next address Avista's proposal to add a forecast error adjustment to their baseline NPE.
On direct, the Company proposed a forecast error of$65.8 million, which it reduced on
rebuttal to $29.7 million.Avista argues the Commission should approve the new forecast
error,using a new methodology, as the new forecast error is known, measurable, considers
any indirect offsets, and is generally supported in the record by contracts, receipts, ledgers,
and other proof as are other approved adjustments like median hydro, averages for
outages, and forward market prices.324 No other party supports this adjustment.
199 Staff argues the Commission should reject the forecast error adjustment "as arbitrary, and
thus as unfair, unjust, or unreasonable."325 Staff argues the revised forecast error
adjustment (1) is untested and only offered on rebuttal, (2) unfairly shifts power cost risks
away from Avista, and(3) is unknown,unmeasurable, and normalized on a biased
sample.326
200 Public Counsel argues the proposal lacks analytical rigor, does not meet the known and
measurable standard, and fails to match with offsets.327 Further, Public Counsel argues that
the events and costs represented in 2021, 2022, and 2023, represent a small sample in
time, which was impacted by a series of unfortunate events, all of which make basing an
adjustment for 2025 and 2026 on events during that time extremely problematic.328
Finally, Public Counsel notes the adjustment only improves Avista's results and provides
Avista a windfall.329
201 We largely agree with Staff and Public Counsel. While we do find the issues Avista is
facing to be problematic, we find that as with the ERM, the methodology Avista uses to
forecast power expenses needs to be re-examined, and that a large adjustment, which
Avista would collect from customers to account for modeling errors, is not just or
reasonable.
324 Avista's Post-Hearing Brief, at¶¶56-59, 61.
325 Staff's Post-Hearing Brief, at¶66.
326 Staff's Post-Hearing Brief, at¶¶67-87 (Oct. 28, 2024) (citing, Wash. Utils. & Transp. Comm'n
v Harbor Water Co., Inc., Docket U-87-1054-T, 1988 Wash. UTC Lexis 68, * 37(May 7, 1988);
Kalich, Exh. CGK-7T at 19:14-20; Wash. Utils& Transp. Comm'n a PacifiCorp, Docket UE-
100749, Order 06, 11-12¶ 14 (Mar. 25,2011);Avista Corp.,Dockets UE-090134,UG-090135 &
UG-060518, Order 10, at 21 ¶45).
327 Public Counsel's Post-Hearing Brief, at¶¶62-63.
328 Public Counsel's Post-Hearing Brief, at¶¶64-65.
329 Public Counsel's Post-Hearing Brief, at¶68.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 53
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202 The Commission expressed some concerns with the forecast error adjustment in Order 07
of this docket,but ultimately decided that the record needed to be further developed on the
$65.8 million adjustment.As Staff points out, that record was not developed because
Avista revised the error amount and changed the methodology on rebuttal.
203 While the Commission understands Avista's change in methodology and adjustment on
rebuttal, the Commission has held"at some point, the company's positions must be made
clear in order for the other parties to respond to those positions. That point is prior to
rebuttal. The parties in a rate case should not have to constantly respond to a moving
target.5�330
204 Here, the record is not well developed on Avista's updated proposal, in part because the
proposal changed on rebuttal. For an adjustment of this magnitude, the Commission
encourages companies to vet such proposals with parties ahead of time and allow
reasonable time and opportunity for response.
205 Further, as Staff, Public Counsel, and AWEC point out, the original and revised proposal
do not meet the known and measurable standard. "Washington uses a hybrid test year
approach that allows pro forma adjustments only for known and measurable changes—not
budgeted or projected changes—that occur, generally within a reasonable time after the end
of the test year."331 Further, "[a]n event is `known' if it occurred during or shortly after the
historical test year and it is `measurable' if it is not an estimate, projection, or product of a
budget forecast.',332
206 Moreover, as Public Counsel states,Avista's proposal "does not help predict future gas or
electricity prices, the implied market heat rate, or how forward prices are inadequate
inputs because they collapse as they reach real time."333
207 We agree with Public Counsel and note that Public Counsel's criticism gets to the
underlying problem with the forecast error adjustment. Rather than identifying known and
measurable causes of the error, and recommending modeling adjustments to account for
those errors, the Company notes the error is and remains present. The Company averages
"0 Wash. Utils. & Transp. Comm'n a Harbor Water Co., Inc., Docket U-87-1054-T, 1988 Wash.
UTC Lexis 68, * 37 (May 7, 1988).
331 Pac. Power&Light Co., Dockets UE-140762,UE-140617,UE-131384 &UE-140094, Order
08, 3¶8.
332 Public Counsel's Post-Hearing Brief, at¶55 (Oct. 28, 2024) (citing, Wash. Utils. & Transp.
Comm'n v Avista Corp., Dockets UE-090134&UG 090135 (consol.) Final Order 10¶43 (Dec.
22, 2009)).
333 Public Counsel's Post-Hearing Brief, at¶62.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 54
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recent unfavorable amounts to calculate a solution which might cover the error but does
not solve the underlying condition. In fact, the exact cause of the error appears to remain
elusive and is not known.
208 Because the Company does not persuasively support the proposed forecast error
adjustment, and because the proposal fails to meet the known and measurable standard,
the Commission rejects inclusion of the forecast error adjustment.
209 However, we agree with Avista that further discussions by all parties should take place in
relation to the ERM and forecast error. Witness Kalich suggested convening a new
workshop series after the conclusion of the rate case to revisit power supply modeling
methodology, address new changes in the energy space, inform the new representatives of
the intervening parties, and consider alternatives to or modifications to the AURORA
model.ssa We agree with this suggestion and find, following the close of this proceeding,
that Avista shall convene a workshop series with interested parties to address modeling
inputs, power supply modeling methodology, use of AURORA, and a changing energy
landscape. These conversations should include discussions regarding inclusion of CCA
costs and address the forecast error as well as other issues raised by the parties in this
proceeding.
Western Energy Imbalance Market (WEIM)Benefits
210 Avista justifies their WEIM benefits methodology by claiming it is the same as that PSE
used and the Commission approved in their rate case in Docket UE-200980.33' However,
Staff, Public Counsel, and AWEC each suggest adjustments to Avista's WEIM benefits
calculation methodology.
211 AWEC proposes to include greenhouse gas (GHG)revenues in the evaluation of WEIM
benefits. However,Avista argues that those revenues are no longer available after passage
of the CCA.336 In its post-hearing brief,AWEC argues that despite Avista's arguments that
GHG revenues are no longer received, there must be exceptions and the Commission
should at least adopt Avista's own recalculation of$0.9 million."'
334 Kalich, Exh. CGK-7T at 7:10-23.
331 Kalich, Exh. CGK-7T at 48:13-18.
336 Kalich, Exh. CGK-7T at 43:12-21, 47:7-16.
337 AWEC's Post-Hearing Brief, at¶51 (citing,Hearing Tr.Vol. III at 221:7-23).

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 55
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212 We disagree.Avista asserts and the record shows that Avista is not receiving GHG
revenues.338 Despite AWEC's assertion that there are exceptions, pointing to the testimony
of witness Kalich, the Commission finds such exceptions to be speculative and generally
unsupported by the record. For clarity,AWEC argues Avista received some GHG revenues
in 2022 and 2023.Avista admits this in Exhibit CGK-7T.339 However, as Kalich testifies
and the record shows, the revenues that AWEC asserts should be included are based on
transactions in 2022. The transactions through 2022 decreased to a negligible amount in
the test year of 2023 before ceasing in the later part of 2023.340 To adopt an adjustment
based on an assertion of exceptions—or revenue which the record shows is no longer
being received—would violate the known and measurable standard. Therefore, we find
that AWEC's proposed adjustment should be rejected.
213 AWEC and Staff propose to include other non-energy benefits in the evaluation of
benefits.341 Specifically,AWEC proposes the Commission should order Avista to adjust
for WEIM settlement transactions. Staff witness Wilson agrees some WEIM settlement
charges are inappropriately omitted from Avista's forecast of WEIM benefits. Wilson's
estimate of those non-energy benefits is $1.4 million annually.342 However,Avista uses an
approved methodology to calculate those benefits, which does not produce surplus
revenues that need to be redistributed.Accordingly, we reject the adjustments proposed by
AWEC and supported by Staff for including additional non-energy benefits.
214 Finally, Public Counsel proposes adopting CAISO's estimate of WEIM benefits, which
would result in $20.1 million in benefits. On rebuttal,Avista witness Kalich argues that the
CAISO calculation overstates the WEIM benefits that Avista receives and does not factor
in the loss of revenue that would have been earned by the Company in bilateral markets.
Kalich also argues that the reported benefit data from CAISO contains only 25 months, a
small dataset that occurred under low hydro conditions.On this, we agree with Avista.
215 The CAISO estimate does not account for the opportunity cost of leaving the bilateral
market, thus it should not be used to calculate WEIM benefits for Avista at this time as the
evidence suggests its adoption would likely result in an overestimation of benefits not
likely to be realized.Accordingly, the Commission finds the WEIM benefits calculation
methodology proposed by Avista, resulting in $6.6 million in benefits,reasonable and
33a Kalich, CGK-7T at 47:14-15; fil. 53.
339 Kalich, CGK-7T at 47:14-15; fn. 53.
340 Kalich, CGK-7T at 47:14-15; fil. 53.
341 See,Wilson, Exh. JDW-24CTr at 5:1-7.
342 Wilson,Exh. JDW-24CTr at 5:1-7.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 56
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rejects the proposals to adjust WEIM benefits put forward by Staff, Public Counsel and
AWEC.
Colstrip
216 AWEC also requests the Commission order Avista to remove Colstrip transmission assets
from rates and to file a Power Cost Only Rate Case (PCORC) or other limited update to
rates to improve Avista's mark-to-market valuation of Colstrip in RY2 before the costs of
Colstrip Units 3 and 4 are removed from rates.
217 We reject both proposals at this time. First,Avista has identified as part of its Preferred
Resource Strategy in its 2025 IRP the use of the assets for transmission of Montana wind
resources. Further, as Avista points out, if underutilized,Avista will sell access through
short-term contracts to recover costs. Either use would provide value to Avista and its
customers. Indeed, if Avista stopped paying its share of transmission upgrades and annual
maintenance, it would be in breach of contract. We find that as of today,Avista's
transmission assets are used and useful and the Company has provided evidence and
testimony showing that they will remain so.Accordingly, we find that the Colstrip
transmission assets should remain in rates at this time. However, if the assets cease to be
used and useful, we will revisit the issue in the next GRC.
218 Second,Avista argues, and we agree, that a further power supply update to update the
mark-to-market valuation of Colstrip in 2026 is not necessary.As Avista provides, the
Company updated the value to match that from the most current power supply baseline for
Rate Year 1. While AWEC argues that valuation may not account for offsetting benefits
from dispatching other resources, there is no evidence supporting the need for an update
and the Commission does not find that the benefits would outweigh the costs of such a
proceeding.Accordingly, we reject AWEC's proposals.
California-Oregon-Border Adjustment
219 AWEC recommends "an adjustment to NPE to account for COB margins,resulting in a
reduction to revenue requirement for electric services of$142,054 for RY I."343
220 In its post-hearing brief,AWEC argues that Avista witness Kinney accepted the adjustment
during the hearing.344 While Avista does not directly address the COB adjustment in its
post-hearing brief, the Company notes in a footnote the following:
343 Mullins,Exh. BGM-IT at 46:8-12.
344 AWEC's Post-Hearing Brief, at¶52 (citing,Hearing Tr.Vol. III at 221:7-23).

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 57
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An adjustment for COB transmission was not included in previous cases and is not
included in the agreed power supply modeling methodology. One primary goal of
the Workshops on power supply modeling was to simplify inputs. The parties
agreed to a balanced modeling approach that included a single wholesale electric
market and a single wholesale natural gas market, instead of representing all
markets used by the Company. The parties agreed this simplification was fair and
no further adder for COB transmission was included in the power supply
methodology.345
221 From reviewing the hearing transcript, however, it does appear Avista accepted the
adjustment.346 Accordingly, the Commission finds that the adjustment AWEC proposes to
account for COB margins should be made.
Capital Projects and Timing/Classification of Provisional Plant
Avista's Direct Testimony
222 Avista witness Benjamin provides testimony regarding the Company's overall approach
for the inclusion and classification of capital projects (plant or plant additions) and the
Company's proposal to continue the existing provisional plant review methodology.
Witnesses Alexander, DiLuciano, Manuel, Howell, and Hydzik provide the business cases
related to the capital projects included in the Company's MYRP proposal.147
223 Benjamin testifies that the Company uses a test period ending on June 30, 2023, includes
pro forma adjustments for July 2023 (actuals), and expected additions through December
2023. Further, Benjamin asserts that plant additions through 2024 are classified as "pro
forma" on an End of Period(EOP) basis as the Commission already approved that rate
base in its 2022 GRC. Therefore, only capital projects for 2025 and 2026 are classified as
provisional and are included on an Average of Monthly Averages (AMA) basis.348
Benjamin testifies that provisional plant is categorized according to the Commission's
Used and Useful Policy Statement.349
345 Avista's Post-Hearing Brief, at fn. 121.
346 Hearing Tr. Vol. III at 221:7-23
347 Benjamin, Exh. TCB-3.
34'Benjamin, Exh. TCB-1T at 8:12-9:3, 10:19-11:2.
349 Benjamin, Exh. TCB-1T at 12:11-17. The Commission notes that Avista does not utilize the
exact categories specified in the Used and Useful Policy Statement(specific, programmatic, and
projected)but rather four categories (large or distinct,programmatic,mandatory and compliance,

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 58
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224 Regarding the pro forma classification of 2023 and 2024 plant additions, Benjamin
appears to contemplate that the 2023/2024 plant additions remain subject to the
Provisional Capital Reporting process as ordered in the 2022 GRC, despite the change in
terminology.350 Benjamin proposes that the 2025 and 2026 plant additions be subject to
the same provisional reporting and review requirements as ordered in the 2022 GRC.
Further, the Company intends to update the actual capital additions through 2023 and any
changes to the expected additions through 2026.351
225 Benjamin's testimony incorporates the "Pro Forma Studies"provided by Company
witness Schultz which results in an approximate increase to net plant of$305 million for
electric and $72.5 million for natural gas over the course of the MYRP.352 Benjamin
testifies these balances include all direct Operations & Maintenance (O&M) offsets, a 2
percent O&M efficiency adjustment for those business cases without direct offsets,
offsetting revenues attributed to growth, incremental reductions to depreciation expense,
and net impact to net plant when including retirements occurring over the rate plan.353
Staff's Response Testimony
226 Staff witness Erdahl makes two recommendations related to provisional plant. First,
Erdahl disagrees with the Company's reclassification of provisional plant from its 2022
GRC to traditional pro forma for the plant additions in 2023 and 2024.314 Erdahl states that
"[p]ro forma plant is not refundable," arguing customers should retain the benefits of the
review process including potential ref inds.355 Further, Erdahl contends reclassifying plant
between MYRPs creates duplicative work for Staff and other parties as the same plant
would be evaluated at three separate points in time (past GRC, retrospective plant review,
and short-lived). However, this is consistent with the way the Company classified provisional plant
in its 2022 GRC. See In re Commission Inquiry into the Valuation of Public Service Company
Property that Becomes Used and Useful After Rate Effective Period, Docket U-190531,Policy
Statement on Property that Becomes Used and Useful After the Rate Effective Date(Jan. 31,
2020). Herein referenced as the Used and Useful Policy Statement.
350 Benjamin, Exh. TCB-lT at 28:15-29:1.
35' Benjamin, Exh. TCB-IT at 29:2-30:17. Benjamin also provides testimony that reiterates that
provision plant review process as established in the 2022 GRC at Exh.TCB-1T at 30:18-32:32
352 Benjamin, Exh. TCB-IT at 26:24-27:13.
353 Benjamin, Exh. TCB-IT at 18:9-21.
354 Erdahl, Exh. BAE-1 T at 9:1-3. 2023 Provisional Plant was under review at the time response
testimony was due. The Provisional Plant for 2024 would not be under review until April 2025.
355 Erdahl, Exh. BAE-1T at 9:3-5.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 59
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and current GRC). Erdahl also argues that these evaluation points create the possibility of
inconsistent prudency findings by the Commission.356
227 Second, Erdahl proposes that Avista be required to establish separate tariff schedules for
plant that is provisionally approved in rates, like those created in PSE's 2022 GRC.357
Erdahl argues this process provides clear delineation between plant that is approved into
rate base and that rate base which is subject to refund. However, citing "administrative
efficiency," Staff proposes these tariffs for Avista's next GRC, not in this proceeding."3 58
228 Erdahl also provides Staff's opinion that the methodology employed to develop the rate
case should prevent double counting of rate base from a company's prior GRC.
Specifically, Erdahl testifies that Avista employed a new modified historical test year
rather than building incrementally from the prior proceeding.359
229 Staff witness Sofya Shafran Atitsogbe Golo (Atitsogbe) provides testimony expressing
concern about Avista's distribution system planning and the initial prudency of associated
investments. While Staff does not request a prudency determination now, they recommend
the provisional distribution plant be included in rates, subject to refund, and comply with
two proposed conditions during the annual provisional plant review process, which are
discussed below.360 Staff argues the Commission should allow these investments on a
provisional basis to avoid immediate negative financial impacts and provide "balance[ ]for
regulatory compliance with the practical necessity of maintaining a stable and reliable
distribution system for customers."361
230 Atitsogbe expresses specific concerns about Avista's lack of planning for distributed
energy resources (DERs) and evaluation of non-wire alternatives (NWAs).Atitsogbe
emphasizes that distribution planning exists in various utility filings (e.g., IRPs, Clean
Energy Action Plans CEAPs, and CEIPs)that Staff rely upon when evaluating investments
356 Erdahl, Exh. BAE-1T at 9:17-22.Alternatively, Erdahl recognizes that the Commission could,
in this proceeding, order refunds subject to review for"pro forma"plant if the Commission does
not accept Staff's position of retaining the provisional plant status. Erdahl,BAE-lT at 10:3-10.
357 Wash. Utils. & Transp. Conan n a Puget Sound Energy, Dockets UE-220066 and UG-220067
(consolidated), Settlement Agreement Joint Testimony,Exh. JAP-SEF-JJJ-UT at 20:5-22:10.The
concept for a separate tariff was proposed by PSE in its direct testimony(SEF-lTr) and then
incorporated into the settlement agreement.
358 Erdahl, Exh. BAE-1T at 10:13-21.
35'Erdahl, Exh. BAE-1T at 8:12-18.
360Atitsogbe,Exh. SSAG-lT at 30:13-19.
361 Atitsogbe,Exh. SSAG-lT at 30:20-21.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 60
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in a GRC.362 Further,Atitsogbe points to various statutory requirements and Commission
rules that require specific utility actions within utility distribution planning efforts.363
231 Staff's analysis finds five distinct deficiencies with the Company's distributed energy
resources (DER) integration efforts. These include: (1) non-compliance with the DER
rules; (2) an incomplete DER potential study; (3) failure to meet conservation and demand
response goals; (4) unclear project coordination; and (5) delayed implementation of its
Advanced Distribution Management System(ADMS).Atitsogbe contends these issues
demonstrate the Company's failure to meet its obligations in distribution planning.364
Further,Atitsogbe contends that distribution investments account for the majority of total
plant investment during 2025, and nearly half in 2026, leading to Staff's concern that the
Company continues to undertake costly distribution investments that reinforce the
traditional grid structure rather than transitioning to a modern grid.365
232 Regarding NWAs,Atitsogbe contends that an evaluation of investment alternatives must
be considered in determining prudency.366 Atitsogbe testifies that only one project made
mention of NWAs, and that the Company failed to provide any details of the analysis
conducted.367 Further,Atitsogbe argues the Company failed to follow its own internal
"playbook"to evaluate NWAs.368
233 Staff recommends Avista comply with two conditions during the provisional plant review
process; otherwise, the provisional distribution plant should be refunded to customers.
First,Atitsogbe proposes requiring additional data for the past five years that includes:
financial data related to distribution system investments for the preceding five years;
interconnection charges; information about routine operational activities by category for
362 Atitsogbe,Exh. S SAG-1T at 13:12-14:10.
363 Witness Atitsogbe includes references to: RCW 19.405.010(1); WAC 480-100-610(4); RCW
19.280;WAC 480-100-620;WAC 480-100-640; Laws of 2023, Chapter 200, sec. 1;Avista's 2022-
2023 Electric Biennial Conservation Plan,Docket U-210826; RCW 19.285;Northwest Power Act
in 16 USC Chapter 12H;Avista's 2021 CEIP, Docket UE-210628, Order 01 (June 23, 2022).
364 Atitsogbe,Exh. SSAG-1T at 19:8-20:14.Witness Atitsogbe acknowledges the Company
proposed three projects that may assist in accommodating DERs but maintains it is not sufficient
to meet their planning obligations.
365 Atitsogbe,Exh. SSAG-1T at 7:1-5, 8:2-6, 16:14-18.
366 Atitsogbe,Exh. SSAG-1T at 21:12-14.Atitsogbe references footnote 34 in the Commission's
Used and Useful Policy Statement interpreting the property valuation provision of RCW
80.04.250.
367 Atitsogbe,Exh. SSAG-1T at 22:14-17.
368 Atitsogbe,Exh. SSAG-1T at 22:1-6. The playbook is provided in Atitsogbe Exh. SSAG-2.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 61
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projects exceeding $2 million; data and narrative for distribution system O&M costs; and
a five-year forecast for both distribution plant and O&M expenses.369
234 Second,Atitsogbe recommends conditions be placed on Avista's 2025 electric IRP to
ensure the Company "conducts a comprehensive, transparent, and forward-looking
distribution planning [process]."370 These requirements include information about DERs
in Avista's distribution system, compliance with RCW 19.280.100(2)(e), and specific
requirements for its grid development scenarios.371
AWECs Response Testimony
235 AWEC witness Mullins testifies that the MYRPs and provisional plant review process
have resulted in greater administrative burden, created capital spending budgets that are
difficult to challenge, and which shift risk to ratepayers. He notes that they are not
permitted but not required under R CW 80.28.425 (MYRP Statute). Mullins calls for the
Commission to limit the forecasted capital allowed in rates and revise the provisional plant
review process from a portfolio approach to a project-by-project review.372
236 Mullins argues the statutory changes that shift determination of a utility's revenue
requirement away from the modified historical test year and limited pro forma adjustments
have not curbed the frequency of rate cases, reduced t administrative burden, or provided
appropriate protections against utility cost escalations. Mullins contends that instead, rate
cases have become more complicated, contain aggressive forecasting assumptions,
provide no incentive for utility cost containment, and provide for a review period that is
irrelevant so long as the utility spends within the approved budget. Further, Mullins takes
issue with Avista including capital expenditures for business cases not included in its 2022
GRC during the provisional plant review process.373
237 For these reasons, Mullins recommends a `course correction'to limit capital project costs
to plant in service on or before the rate effective date for each rate year within the MYRR
Mullins argues that not only is the statutory language allowing MYRPs permissive, but
369 Atitsogbe,Exh. SSAG-1T at 26.
370 Atitsogbe,Exh. SSAG-1T at 27:18-19.
371 Atitsogbe,Exh. SSAG-1T at 27:21-29:14. RCW 19.280.100 requires a ten-year plan for
distribution system investments and analysis ofNWAs.
372 Mullins,Exh. BGM-1 T at 12:3-13:2.
373 Mullins,Exh. BGM-1T at 5:15-7:3, 7:17-8:10.

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that the Commission's Used and Useful Policy Statement also affirms the Commission's
intent for the continued use of the modified historical test year approach.374
238 For RY1, this recommendation would limit capital expenditures to those in service on or
before December 21, 2024. However, Mullins recognizes this approach still requires
projected costs and therefore recommends that Avista submit a compliance filing with an
attestation confirming that all estimated plant through December 21, 2024, was placed in
service.Additionally, Mullins proposes the Commission require this attestation on a
project-by-project basis with a refund for any underspent project with costs exceeding $1
million. Further, if the Commission does not accept AWEC's recommendation to limit
capital additions or the attestation process, Mullins argues that the Commission should
still adopt a project-by-project methodology for the provisional plant review filing.375
239 For RY2, Mullins testifies that due to the complexities of removing Colstrip from rates, it
may be more efficient to limit this GRC to a single year. However, if the Commission
authorizes a two-year rate plan, Mullins recommends the same limitations and attestation
process occur for the second year(calendar year 2025).376
240 Mullins contends this approach would eliminate the need for the after-the-fact capital
review process, thus mitigating the administrative burden of MYRPs.AWEC's
recommendations would reduce electric total rate base by $25.8 million for RY1 and$9.0
million for RY2. For natural gas,AWEC would reduce total rate base by$3.2 million in
RY1, with an increase of$5.9 million for RY2.377
Avista's Rebuttal of Staff
241 Company witness Andrews responds to Staff witness Erdahl's testimony regarding the
classification of pro forma and provisional plant, the request for an extended review
period, and Staff's proposal for separate tariffs to track provisional plant.Avista is
"amenable"to Staff's classification of plant, and supportive of the extended review period,
but disagrees with creating separate tariff schedules for provisional plant.378
374 Mullins,Exh. BGM-1T at 9:9-11:10, referencing the MYRP Statue RCW 80.04.250 and
paragraph 20 of the Commission's Used and Useful Policy Statement.
375 Mullins,Exh. BGM-1T at 11:13-12:6.
376 Mullins,Exh. BGM-IT at 13:5-18.
377 Mullins,Exh. BGM-IT at 13:20-14:3.
371 Andrews, Exh. EMA-6T at 3:18-4:11.

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242 While Avista does not oppose Staff's position regarding the classification of projected
plant,Andrews testifies that the Company's classification of provisional plant for 2023
and 2024 (included in the 2022 GRC) was not intended to circumvent the established
review process.Andrews agrees to maintain the classification of provisional plant for any
projected plant beyond the test year.379
243 However,Andrews disagrees with Staff's perspective that changing the label of
provisional plant creates duplicative review and the possibility of inconsistent prudency
determinations.Andrews argues that the existing provisional plant review process would
remain intact despite the naming convention and that many of Avista's projects are
ongoing, as demonstrated in other Company witnesses'testimony and supporting business
cases.Andrews argues that these business cases are not changing,just the project funding
levels. Combined with an extended review timeframe from four to six months,Andrews
submits that the fact that business cases remain unchanged further alleviates pressures for
Staff and other parties to complete review of these filings.380
244 The Company also disagrees with Staff's proposal for separate tariffs to track provisional
plant.Andrews argues the utilization of separate tariffs introduces complexity and
additional burden by requiring: (1) the review of revenue requirement through both base
rate and individual trackers, (2) the Company to adjust its accounting system and
processes, and (3)management of additional tariffs which could lead to errors with more
complicated rate structure.Andrews also points to the Commission's Used and Useful
Policy Statement that allows for either process. Finally, she contends that the deferral
process for any required refunds is reasonable, especially given that no refunds have yet
been required through the provisional plant review for 2022 or 2023.311
245 Avista witness DiLuciano responds to Staff witness Atitsogbe's testimony related to the
Company's electric distribution system planning. DiLuciano wholly disagrees with Staff's
assessment of the Company's distribution system planning, its determination that Avista
has not met the prudency standard, and its claims that the Company has not complied with
various RCWs, WACs, and Commission orders.382
246 First, DiLuciano states the Company has already demonstrated through direct testimony
and exhibits that it has met the prudence standard with a"robust planning standard that
sets the foundation,"for its distribution planning and investments. DiLuciano testifies the
171 Andrews, Exh. EMA-6T at 11:4-12:12.
"0 Andrews, Exh. EMA-6T at 13:3-14:17.
"'Andrews, Exh. EMA-6T at 15:2-16:16.
382 DiLuciano,Exh. JDD-3T at 3:4-4:1.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 64
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business cases in this proceeding contain the necessary documentation, including
consideration of alternatives,that Staff claims is lacking.383
247 Second, DiLuciano takes issue with Staff's assertions that the Company has not changed
its planning process related to an increased focus on DERs as required by RCW 19.280,
and that it is not making progress to modernize its distribution grid. He cites the
Company's refinements in its distribution planning and subsequent collaboration with
Modern Grid Solutions (MGS) to integrate new approaches including NWAs.384 Further,
DiLuciano testifies that the Company has also engaged with interested parties through its
Distribution Planning Advisory Group (DPAG) and its transmission planning process.385
DiLuciano argues that Avista has made progress in meeting RCW 19.280.100 as
evidenced by: (1) deployment of grid-monitoring capable smart devices, (2)utilization of
Advanced Metering Infrastructure data, (3)publication of its ten-year plan, (4) and
inclusion its 2023 electric IRP of a chapter related to DERs and data specific to Avista's
territory.386
248 Next, DiLuciano provides examples of projects that help inform the Company in its
interconnection process, hosting capacity assessment, DER behavior, or document Avista's
consideration of DERs in its grid modernization efforts. These projects included a
collaboration to refine microgrid designs, battery installation to reduce load on a
substation transformer, considerations of rooftop solar to mitigate capacity constraints, and
consideration of batteries for part of the North Spokane transmission system.387
249 While DiLuciano argues that although the Company did not meet its 2022-2023
conservation targets, it employed adaptive management efforts in an attempt to reach the
targets but was hampered by circumstances that were both unforeseen and extraordinary in
nature. DiLuciano references the continued COVID-19 emergency and lasting impacts
such as supply chain issues, labor shortages, and high interest rates and inflation.Also,
DiLuciano testifies that notwithstanding those efforts and impacts, there was no material
strain placed on the distribution system from the missed targets.388
383 DiLuciano,Exh. JDD-3T at 4:4-21.
384 DiLuciano,Exh. JDD-3T at 5:1-6:19. MGS is the consulting firm that assisted Avista with its
NWA/DER Playbook referenced by Staff and Sierra Club.
385 DiLuciano,Exh. JDD-3T at 9:5-10:12.
386 DiLuciano,Exh. JDD-3T at 14:1-11.
387 DiLuciano,Exh. JDD-3T at 10:14-11:7, 11:18-12:10.See JDD-7, JDD-8, and JDD-9 for the
referenced business cases.
38.DiLuciano,Exh. JDD-3T at 16:14-17:14.

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250 To refute Staff's claim that it failed to comply with the Commission's order in Avista's
2021 CEIP filing,389DiLuciano testifies that the Company's DER Potential Assessment
was published on June 17, 2024, and provides the report in Exh. JDD-IOt.
251 Finally, DiLuciano responds to Staff's proposal to require two conditions for the annual
review process to determine the recovery of distribution provisional plant. First,
DiLuciano argues that the financial information and data that Staff requests in Condition 1
are already provided to the Commission as part of the business cases filed in GRCs.
Requiring further reporting, he says, would create a burden for the Company. Further,
DiLuciano references Staff compliance letters from Avista's 2023 provisional plant review
that finds the documentation provided in the filing to be in compliance and sufficient.390
252 Regarding Staff's second condition requiring additional analysis in Avista's 2025 IRP,
DiLuciano testifies the draft IRP will be filed in September 2024 with a final draft due on
January 2, 2025. Therefore, DiLuciano argues that with a rate effective date of December
21, 2024, in this proceeding, the Company does not have adequate time to complete the
extensive analysis required for compliance with such a condition.391
Avista's Rebuttal ofAWEC
253 Company witness Andrews disagrees with AWEC's position and recommendations related
to capital projects. First, she identifies a modeling error in RY2 capital adjustment; namely
that Mullins fails to adjust Accumulated Deferred Federal Income Taxes (ADFIT)when
moving from an AMA basis to an EOP basis, resulting in an overstated reduction in
revenue requirement of$859,000 and$96,000 for electric and natural gas, respectively.
Andrews contends the capital investments excluded by AWEC contain projects needed to
maintain energy reliability for customers.392
254 Next,Andrews argues that AWEC's position "upsets the new regulatory paradigm...."393
Andrews contends that the Legislature and Commission, respectively, acknowledge the
3s9 DiLuciano,Exh. JDD-3T at 12:13-14. The DER Potential Assessment was published on June
17, 2024,with response testimony due in this case on July 3, 2024. It does not appear this
assessment was filed with the Commission in either Docket UE-210628 (2021 CEIP)or the 2022
GRC docket.
390 DiLuciano,Exh. JDD-3T at 20:24-22:13.
391 DiLuciano,Exh. JDD-3T at 22:15-3. DiLuciano provides additional testimony as to why
incorporating Condition 2 into the 2027 IRP is also inappropriate. See, DiLuciano, Exh. JDD-3T at
23:6-25:12.
392 Andrews, Exh. EMA-6T at 18:11-12.
"'Andrews, Exh. EMA-6T at 18:18.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 66
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need for a more flexible regulatory rate setting process, as evidenced by the passage of
ESSB 5295 and the Commission's subsequent Used and Useful Policy Statement.
Andrews argues that the statute and policy guidance provides for that flexibility while
continuing certain regulatory principles.394
255 Andrews also takes issue with Mullins' claim that utilities lack incentive to limit the
amount of capital investment and to subsequently ensure they spend to approved budgets.
To the contrary,Andrews contends that the Company's capital planning process neither
results in funding every request nor provides automatic funding at the level of funding
requested.Additionally,Andrews opines that the time to prepare for and complete the
adjudication process together with the subsequent period of the proposed MYRP requires
estimates months and years in advance. Therefore,AWEC's proposal would penalize a
utility by"freezing" funding for specifically identified projects so far in advance given
that operational needs change over time.395
256 Finally,Andrews claims that the Company experienced earnings erosion despite the rate
plan authorized in the 2022 GRC.Andrews references testimony of other Company
witnesses to support this statement.396
Public Counsel's Cross-Answering Testimony
257 In cross-answering, Public Counsel witness Garrett supports AWEC's position limiting the
capital investments allowed for recovery in a MYRP as it better aligns with the used and
useful standard and provides rate protections to customers. Garrett also references the
treatment in Nevada which aligns with AWECs proposal.391
AWEC's Cross-Answering Testimony
258 In cross-answering,AWEC witness Mullins opposes Staff's proposal to create separate
provisional plant tariffs.AWEC's specific concern is regarding the potential design of the
schedules which may negatively impact Schedule 25 (Extra Large General Service) and
references a particular Schedule 25i customer that receives a discount under Schedule
25 398
394 Andrews, Exh. EMA-6T at 18:18-22:4.
39s Andrews, Exh. EMA-6T at 23:6-26:2.
396 Andrews, Exh. EMA-6T at 27:5-15.
197 M. Garrett, Exh. MEG-9T at 5:1-6:13. While Garrett appears to agree with AWEC, it does not
appear that Public Counsel formally adopted those adjustments to Public Counsel's proposed
revenue requirement on cross-answering.
39a Mullins,Exh. BGM-lT at 16:17-17:18.

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Decision
259 The Commission declines to adopt AWEC's proposed project-by-project review process
and proposal to limit the level of authorized plant to that in service at the time of filing.
When CETA was enacted, the legislature amended RCW 80.04.240, mandating the
Commission"establish an appropriate process to identify, review, and approve public
service company property that becomes used and useful for service in this state after the
rate effective date."399
260 On January 31, 2020, in establishing a process as mandated by the legislature, the
Commission issued a Policy Statement in Docket U-190531, which establishes "a process
for the provisional recovery in rates of rate-effective period property, subject to refund,
where the property, investment or project in question does not meet the current standards
for inclusion in rates prior to rates becoming effective."400 The Policy Statement was
clearly intended to provide flexibility and not be overly prescriptive.401
261 We agree with AWEC that Commission policy mandates that rate-effective period
investment recovery is subject to and dependent on the request meeting longstanding
ratemaking practices and standards.402 We also recognize and agree with Staff,AWEC,
and TEP that the process can and should be improved. However, we do not agree with
AWEC that the solution should be to review provisional capital on a project-by-project
basis. Rather, we agree with Staff, as supported by TEP and agreed to by Avista, that to
allow for additional evaluation, the review process should be extended to six months.
262 Further, while not specifically addressed in post-hearing briefs, we agree with Staff
regarding the classification of plant and naming conventions as addressed by Staff witness
Erdahl.403 Avista accepted Staff's position on classification in testimony prior to the
evidentiary hearing,but opposed Staff's position that renaming of plant could cause
double counting.404 We do not agree. If during its review process, Staff encounters
potential double counting, it would in turn raise concerns for the Commission. The
potential risk of double counting outweighs any arguments to the contrary.
399 RCW 80.04.250(3).
400 Docket No. U-190531,Policy Statement¶20 (Jan. 31,2020).
401 See, Docket No. U-190531,Policy Statement¶¶30-31 (Jan. 31, 2020)
402 See, Docket No. U-190531,Policy Statement¶¶28-29 (Jan. 31, 2020).
403 Erdahl, Exh. BAE-1 T at 9:1-5, 17-22.
404 Andrews, Exh. EMA-6T at 11:4-12:12.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 68
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263 Staff also requests the Commission require Avista to use a separate tariff for provisional
plant filings. The Commission declines to adopt Staff's request at this time. The
Commission agrees with Avista that requiring a separate tariff now would add additional
complexity and administrative burden to the process.As the Commission has noted, the
intent of the Commission's policy following the changes to RCW 80.04.250 are to
maintain adherence to longstanding ratemaking principles, while also maintaining
flexibility and supporting a streamlined process.40' Implementing a separate tariff sheet at
this time would reduce flexibility and streamlining within the process. However, if review
of provisional plant continues to be problematic, the Commission may revisit Staff's
proposal.
264 We believe this approach is consistent with the intent of the legislature and Commission
policy and that extending the review period will address several the concerns raised by
Staff and TEE
265 TEP raises two additional points: the first is to disallow new business cases from being
included in the review, and the second is to enter a final order following conclusion of the
review. First, we decline to disallow new business cases at this time.Allowing new
business cases is consistent with the Commission's Policy Statement to allow flexibility
and further the reduction of regulatory lag. However, the decision is non-precedential on
this point and the Commission will continue to monitor the number and cost of new
business cases in the future and may disallow their addition in the future if circumstances
warrant doing so.
266 Second, we concur with TEP that there is a need for greater formality and transparency in
the Provisional Plant review process. Despite our desire to maintain flexibility, and not be
overly prescriptive, we provide further clarification on the Commission's expectations for
Provisional Plant filings. Specifically, the Commission requires Avista, and will require
other companies, to conform to the following when submitting Provision Plant filings:
1) Identify whether a business case is identified in the Clean Energy
Implementation Plan(CEIP);
2) Identify whether a business case is required for CETA and/or CCA
compliance;
3) Identify each new business case and provide a narrative for business need;
4) Provide information on an annual and cumulative rate-effective period
basis;
5) Provide a narrative that explains the filing structure and how worksheets fit
together; and
405 Docket No. U-190531,Policy Statement¶28 (Jan. 31,2020).

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 69
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6) Maintain consistent naming conventions.
267 These requirements should allow for greater transparency and clarity for parties reviewing
the filing.Additionally, in recognition of TEP's concerns, and our own concerns in this
case and following consideration of provisional plant filings at a recent open meeting,406
the Commission will require more formality in the review process. We require Avista and
other utilities to present their future provisional plant filings for discussion and
consideration at Open Meetings.
268 The Commission's intent in providing this additional guidance and requiring Provisional
Plant filings to be presented through the Open Meeting process is to maintain flexibility,
further streamline the process, and to adhere to the intent of the changed statutes, but also
ensure transparency and clarity, to ensure confidence in the process, and to address the
concerns of Staff, TEP, and others in the process. The Commission will continue to
monitor this process moving forward and assess whether further changes are needed at a
later time.
Decarbonization —Line Extension Allowances, Non-Pipe Alternatives, Customer
Reporting, and Planning
269 Avista witness Jason R. Thackston references the Company's 2023 Natural Gas IRP401 and
summarizes the Company's approach to decarbonizing its natural gas system.
The Company's clean energy future also encompasses natural gas resources, as
natural gas is one of the cleanest burning fossil fuels, and plays a key role in
reducing carbon emissions, particularly when used directly by customers in their
homes rather than electricity generation to meet the same need. The Company's
strategy includes diversifying and transitioning from conventional fossil fuel
natural gas to RNG, hydrogen, other renewable fuels, and reducing consumption
via conservation and energy efficiency. The Company will purchase carbon offsets
as necessary to meet the CCA compliance obligations."
270 Both NWEC and the Sierra Club take issue with this approach, and in particular criticize
the Company's practices regarding line extension allowances (LEAs), residential gas
equipment incentives, and analysis of non-pipe alternatives (NPAs).
406 See, Dockets UE-240779 and UG-240780.These dockets were discussed during the regularly
scheduled November 7, 2024, Open Meeting, at which time TEP and the Commission expressed
concerns over how the provisional plant process had been handled during the compliance period in
June and July of 2024,see also Docket UE-220053.
407 See, Docket UG-220244.
40'Thackston,Exh. JRT-1T at 9:2-9.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 70
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Line extension Allowances
271 NWEC witness Gehrke testifies that in the 2022 General Rate Case (GRC), the
Commission accepted and approved a stipulation that requires Avista to phase out natural
gas line extension allowances (LEAs) by 2025. To ensure a glidepath to phasing out
LEAs, NWEC recommends that the Commission require Avista to discontinue offering
LEAs for Schedules 131, 132, and 146 on January 1, 2025. NWEC also recommends that
the Commission require Avista to cease offering service under the Company's Rural Gas
Service Connection (Schedule 154).409
272 According to NWEC, the 2022 GRC agreement outlined Avista's plan to gradually phase
out natural gas LEAs over three years. Under the settlement, for 2023, LEAs would be
determined using a net present value method based on a two-year timeframe. In 2024, the
calculation would be based on a one-year timeframe. Finally, in 2025, the Company
would not offer any allowance for natural gas line extensions.410 The Coalition continues
to support the agreement from the 2022 GRC.411
273 NWEC contends that Avista has only partially implemented the agreed-upon changes.412
On December 14, 2022, the Company requested a revision of Schedule 151. In this tariff
revision, the Company implemented the proposed reduction of the LEA for tariff
Schedules 101, 102, 111, 112, and 116.413 For Schedules 131, 132, and 146, the tariff
states that Avista will calculate LEAs on a case-by-case basis.414
274 Sierra Club witness Dennison also notes that Avista still provides a subsidy for new
buildings that rely on gas in the form of its electric LEA, which is available to both all-
electric and mixed-fuel new construction projects.411 Since Avista can still offer LEAs for
mixed-fuel buildings, he says, new gas infrastructure may be built that could be
considered a stranded asset in the near future. To close this "loophole," Dennison
recommends the Commission direct Avista to only offer line extension allowances for
401 Gherke, Exh.WG-1 T at 10:14-15.
410 Gehrke, Exh.WG-1 T at 11:3-7.
411 Gehrke, Exh.WG-1 T at 11:9.
412 Gehrke, Exh.WG-1 T at 11:12.
41' Gehrke, Exh.WG-1 T at 11:12-14.
414 Gehrke, Exh.WG-1 T at 11:15-16.
411 See e.g.,Avista Schedule 51, Line Extension, Conversion, and Relocation Schedule:
Washington.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 71
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new buildings that are fully electrified as this is in alignment with statewide
decarbonization goals and mandates.
275 Sierra Club witness Dennison also notes that Avista still provides a subsidy for new
buildings that rely on gas in the form of its electric LEA, which is available to both all-
electric and mixed-fuel new construction projects.416 Since Avista can still offer LEAs for
mixed-fuel buildings, he says, new gas infrastructure may be built that could be
considered a stranded asset in the near future. To close this "loophole," Dennison
recommends the Commission direct Avista to only offer line extension allowances for
new buildings that are fully electrified as this is in alignment with statewide
decarbonization goals and mandates.
276 In its post-hearing brief, Avista reiterates that it does not oppose NWEC's proposal related
to the line extension allowances for non-residential customers. However, it opposes Sierra
Club's proposal to prohibit electric LEAs for customers installing natural gas or propane.
Avista suggests that if such a policy matter were to be considered, that it should not be in
this proceeding.417
277 AWEC also asks the Commission to reject this proposal. Witness Kaufman suggests that
Sierra Club's recommendation may be at odds with RCW 80.28.090411 and RCW
80.28.100.419 AWEC says Sierra Club's recommendation may result in"an unreasonable
preference for electric-only service under RCW 80.28.090, despite the fact that Avista
maintains an obligation to provide natural gas service."420 Moreover, Kaufman argues that
the proposal would be inequitable because only a portion of customers would be eligible
for the line-extension allowance, and in some cases customers not eligible for the
extension could be double charged.421
Gas Equipment Incentives
278 Sierra Club witness Dennison recommends that Avista phase out mid-stream incentives
for residential gas appliances like furnaces and water heaters that may prompt builders to
416 See e.g.,Avista Schedule 51, Line Extension, Conversion, and Relocation Schedule:
Washington.
417 Avista's Post-Hearing Brief, at¶ 169.
41'RCW 80.28.090(Unreasonable Preference).
419 RCW 80.28.100(Rate Discrimination).
420 Kaufman, LDK-6T at 6:20-7:1.
421 Kaufman, LDK-6T at 7:20-8:2. AWEC offers a secondary recommendation that if the
Commission accepts Sierra Club's recommendation,that the Commission exempt large non-
residential customers under Electric Schedule 25 customers from this process.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 72
ORDER 08
install new gas infrastructure to serve these appliances.422 For natural gas equipment
appliances, Dennison recommends the Company re-appropriate 20 percent of the budgeted
residential gas incentives in its current Biennial Conservation Plan (BCP)421 to incentives
for residential building envelope and electrification readiness measures as well as require
the Company to offer information related to electrification for customers who inquire
about natural gas rebates or incentives.
279 Avista opposes this proposal. Witness Bonfield states that under RCW 80.28.380 the
Company must demonstrate that"the target will result in the acquisition of all resources
identified as available and cost-effective. "424 He interprets "all to indeed mean all,"
thereby allowing Avista the ability to cast a wide net when it examines resources and
conservation measures required by law. He states that if the Company were to accept
Sierra Club's recommendation on this topic, it would be in violation of existing applicable
decarbonization laws and rules.425
280 Moreover, Bonfield states that accepting this proposal would arbitrarily increase rates for
electric customers. He notes that the Company has already dedicated $2 million(on an
annual basis) from its CEIP to address electric customers' energy endeavors, many of
which include building envelope upgrades to replace natural gas equipment with efficient
electric equipment.426
281 NWEC also disagrees with Sierra Club's recommendation, noting that the 2024-2025
Biennial Conservation Plans (BCP) were just approved in January 2024.427 Any
substantive changes to these offerings, it says, should be made in the next BCP.
Non-Pipes Alternatives
282 Sierra Club witness Dennison argues that NPAs can decrease the need for expansion of
any current gas infrastructure, which he argues represents substantial avoided costs.428
Dennison says the 2022 GRC Settlement requires Avista to consider NPAs in its gas
system distribution planning process in future IRPs, and requires the EEAG to weigh in on
422 Dennison,Exh. JAD-IT at 15:17-20.
423 See Docket UG-230898.
424 Bonfield, Exh. SJB-5T at 46:8-9 (emphasis in original).
425 Bonfield, Exh. SJB-5T at 46:20-47:2.
426 Bonfield, Exh. SJB-5T at 48:8-16.
427 See Docket UG-230898.
428 Dennison,Exh. JAD-1 T at 20:10-12.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 73
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how Demand Side Management(DSM)programs can be used as NPAs.121
283 Although Avista is required to examine NPAs with the Energy Efficiency Advisory Group
(EEAG), in a data request to the Company, Avista confirmed"it has not performed an
analysis of non-pipe alternatives in WA."430 Dennison concludes that Avista failed to
evaluate the possibility of NPAs for specific projects and failed to engage with the EEAG
in the 2023 IRP process on this very topic. When pressed for more information on the
extent of Avista's analysis on potential NPAs, the Company informed Dennison that
NPAs are "relatively new and the Company has little experience with NPAs to date.""'
Dennison argues Avista should have some familiarity with analyzing NPAs because the
Oregon PUC ordered the Company to essentially do the same thing in its Order
acknowledging Avista's 2023 Natural Gas IRP in Oregon.112
284 Dennison then recommends that Washington adopt Oregon's NPA framework which is
more prescriptive than what the 2022 GRC Settlement Agreement requires, and which he
believes addresses many of the concerns Avista raised in previous data responses.433 He
recommends that for the 2025 IRP, the Commission require Avista to perform analyses
using this framework on at least five projects (even if they exceed $500,000) to gain
experience with NPA analyses.
285 On rebuttal, Avista witness DiLuciano states that the 2022 Settlement agreement does not
explicitly require any type of NPA analysis, but rather only to consider NPAs when
conducting gas system planning. Therefore, he says, Avista has complied with the
settlement agreement and has evaluated NPAs when considering reinforcement
alternatives not related to safety, compliance, or road moves that exceed $500,000.434 He
says "[t]his process and methodology was presented to the Company's EEAG at its Fall
2023 meeting. At that time, no advisory group members expressed concern or offered
suggestions on altering the proposed methodology."435
429 See Final Order 10/04,No. UE-220053,UG-220054,Appendix A, at 11-12.
430 Dennison,Exh. JAD-IT at 24:14-15.
431 Exh. JAD-9,Avista Response to Sierra Club Data Request SC-017.
432 Exh, JAD-4, Oregon PUC, Order No. 24-156,No. LC 81 at Appendix A, P. 71.
433 Dennison,JAD-IT at 28:5-16. The language included in the brackets within the quotation
reflect Washington specific thresholds and requirements.
434 DiLuciano,Exh. JDD-3T at 26:18-23.
43'DiLuciano,Exh. JDD-3T at 26:20-23.

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286 The Company does accept Sierra Club's recommendation to adopt the OPUC framework
for NPA analyses but declines to do so in the 2025 IRP. Avista notes that the next IRP is
due by April 1, 2025, leaving little time to complete such an analysis. Furthermore, the
Company believes conducting these analyses for"practice" is not the best use of Avista's
time and resources, which are ultimately paid by customers.436
287 Kaufman also addresses Sierra Club's recommendation to adopt the Oregon PUC
framework to analyze NPAs. AWEC agrees that Avista should adopt the framework,but
disagrees that the Commission should be overly prescriptive based on an entirely different
proceeding that unfolded in a different state. AWEC recommends allowing Avista to
maintain the ability to exercise discretion when it comes to conducting NPA analyses for
Washington customers.437
Decarbonization Planning
288 Dennison highlights the settlement stipulations from the 2022 GRC discussed above and
asserts that Avista has "continued on a business-as-usual trajectory" and"has not
adequately begun making the transformative changes that will be needed to meet its
decarbonization obligations..."43s Dennison asserts this continued lack of attention to
CCA obligations is reflected in Avista's 2023 IRP, as the Company indicates it intends to
comply with the CCA by primarily relying on"CCA allowance purchases, with some
synthetic methane in later years, a very small amount of energy efficiency, and no
electrification. 13' Dennison believes that this approach will create significant financial
risks for customers, and that Washington will exceed the CCA statewide emissions caps,
especially as other utilities pursue similar strategies.44o Dennison points to the most recent
Cascade Natural Gas (CNG) IRP441 that similarly relies on allowance purchases, and notes
that although the Commission has not acknowledged Avista's IRP, it declined to
acknowledge CNG's IRP for over-reliance on CCA allowance purchases.
289 To address this alleged deficiency, Dennison recommends the Commission direct Avista
to complete a decarbonization plan by March 2027, with the following elements:
436 DiLuciano,Exh. JDD-3T at 30:23-28.
437 Kaufinan, Exh. LDK-6T at 10:2-13.
438 Dennison,Exh. JAD-7:18-8:2.
439 Dennison,Exh. JAD-IT at 8:5-7.
440 Dennison,Exh. JAD-IT at 8:9-12.
441 See Docket UG-220131.

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1) Incorporate findings from the Company's Targeted Electrification Pilot,
2) Evaluate a range of decarbonization and CCA compliance measures
including evaluation of building electrification as a proactive resource
strategy,
3) Address opportunities to coordinate Avista's efficiency and electrification
measures with available funds and programs including IRA and
Washington's HEAR program,442
4) Analyze at least one scenario in which Avista's annual gas system emissions
are no greater than its share of the statewide CCA emissions cap, without
relying on additional allowances and estimate the percentage reduction in
gas system throughput by 2030 and identify strategies that would decrease
natural gas rate base by the same percentage by 2030.443
290 Dennison further recommends that, in alignment with the 2021 State Energy Strategy, the
Commission require Avista to conduct a Targeted Electrification Pilot with targets to
engage 5,000 customers through electrification assessments and for Avista to provide at
least 1,000 rebates for electrification equipment and include provisions to conduct
engagement and outreach to low-income customers or customers within Named
Communities.
291 Avista responds that it believes the Preferred Resource Strategy selected in the 2023
Natural Gas IRP is a decarbonization plan, and provides one with the lowest reasonable
cost while complying with all known laws, rules, and environmental policies. Because that
plan is within the IRP,Avista believes any concerns with the Company's decarbonization
efforts should occur within the context of the IRP.
292 AWEC also disagrees and believes Sierra Club relied on an erroneous interpretation of the
CCA's requirements and reliance on the OPUC's criticism of Avista in their IRP
proceeding.As such,AWEC asserts that Sierra Club `s recommendation essentially
renders decarbonization a"planning goal. ,444 AWEC says Avista's goal should be to meet
CCA requirements in a cost-effective manner.445 If the Commission mandates a plan,
AWEC recommends a decarbonization study similar to that undertaken by Puget Sound
Energy to identify cost-effective decarbonization measures.446
442 See Home Electrification and Appliance Rebates Program.
am.
443 Dennison,Exh. JAD-1 T at 45:11-46:2.
444 Kauftnan, Exh. LDK-6T at 10:20-11:3
441 Kauftnan, Exh. LDK-6T at 12:8-17.
446 AWEC's Post-Hearing Brief, at¶ 111.

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293 NWEC largely supports Sierra Club's recommendations. With regard to the Targeted
Electrification Pilot, it recommends that the Pilot target 40 percent of its customers from
low-income or Named Communities, which aligns with the federal Justice40 initiative and
is a ,similar in construct to PSE's Targeted Electrification Pilot which has a 30 percent
requirement.447 NWEC also recommends that Avista be required to install a minimum of
25 no-cost, electric-only heat pumps during the pilot period.448 Alternatively, if the
Commission does not accept this recommendation,NWEC recommends the Commission
require Avista to work with the EAAG and Conservation Resources Advisory Group
(CRAG) to address low-income electrification efforts.449
Decision
294 Washington voters approved Initiative Measure No. 2066 in the recent General Election.
In pertinent part, the initiative adds limits to the Commission's authority to approve, or
approve with conditions, multiyear rate plans. Specifically, section 4 of the initiative
amends RCW 80.28.425, adding the following limitations:
(12) The commission shall not approve, or approve with conditions, a
multiyear rate plan that requires or incentivizes a gas company or large
combination utility to terminate natural gas service to customers.
(13) The commission shall not approve, or approve with conditions, a
multiyear rate plan that authorizes a gas company or large combination utility
to require a customer to involuntarily switch fuel use either by restricting
access to natural gas service or by implementing planning requirements that
would make access to natural gas service cost-prohibitive.450
295 While the election occurred and its results were certified following the parties' submission
of briefs in this proceeding, the initiative has the force of law, and the Commission must
follow the initiative's directives, unless and until the effect of initiative is stayed or
reversed by a court of law.
447 Gehrke, Exh.WG-8T at 4:7-12.
44' Gerhke, Exh.WG-8T at 4:14-16.
449 Gehrke, Exh.WG-8T at 5:4-12.
411 Initiative Measure No. 2066, approved Nov. 5, 2024.

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296 Sierra Club and NWEC propose a number of programs and changes to Avista's natural gas
service both in response to Avista's 2023 Natural Gas IRP and provisions in the 2022 GRC
Settlement, including natural gas decarbonization plans, changes to line extension
allowances, or LEAs, non-pipe alternatives, or NPAs, and equipment incentives, many of
which appear to run counter to the initiative's directives. We address each in turn.
Decarbonization Plan
297 Avista's strategy for natural gas decarbonization to comply with its CCA obligations is set
forth in its 2023 Natural Gas IRP. This strategy includes diversifying and transitioning
from conventional fossil fuel natural gas to RNG, hydrogen, other renewable fuels, and
reducing consumption via conservation and energy efficiency. The Company will
purchase carbon offsets as necessary to meet the CCA compliance obligations.451 The
Company's approach to decarbonization to meet its CCA compliance obligations was
proposed in its 2023 Natural Gas IRP, and as it is not proposed in this proceeding for
approval, we decline to address it.
298 Sierra Club's witness Dennison requests the Commission direct Avista to adopt a
Decarbonization Plan, that among other elements,would "identify strategies that would
decrease natural gas rate base by the same percentage by 2030,"which we interpret to
mean the removal of gas assets from its system, and the possible termination of customer
usage of natural gas.452 This element of the proposed plan would appear to be explicitly
prohibited by the initiative. Without further briefing or legal analysis of the effect of the
initiative on the Commission's authority and how companies may pursue decarbonization
of their energy systems to meet CCA and CETA requirements while complying with the
provisions of the initiative,we find it inappropriate to adopt Sierra Club's decarbonization
proposal.
Line Extension Allowances
299 NWEC proposes the Commission require Avista to discontinue offering LEAS for
Schedules 131, 132, and 146 on January 1, 2025, in keeping with the provisions of the
2022 GRC Settlement. NWEC also recommends that the Commission require Avista to no
longer offer service under the Company's Rural Gas Service Connection (Schedule
154).453 Sierra Club supports NWEC's proposals and recommends the Commission direct
"' Thackston,Exh. JRT-1T at 9:2-9.
452 Dennison,Exh. JAD-1 T at 45:11-46:2.
451 Gherke, Exh.WG-1 T at 10:14-15.

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Avista to only offer LEAS for new buildings that are fully electrified, and no longer allow
Avista to offer LEAS for mixed-fuel new construction projects.454
300 While Avista does not oppose NWEC's proposal relating to LEAS for non-residential
customers, it opposes Sierra Club's proposal to prohibit electric LEAs for customers
installing natural gas or propane. Avista suggests that the Commission should not
determine such a policy decision in this proceeding.455 AWEC is silent on NWEC's
proposal but does not support Sierra Club's, arguing that limiting LEAS to electric-only
customers to incentivize the curtailment of gas would be inequitable and possibly
discriminatory.456
301 The elimination of LEAs for non-residential customers was originally agreed to in the
20222 GRC Settlement and neither Avista nor AWEC oppose this treatment. However,
both Avista and AWEC object to the limitation of electric LEAS to electric-only
customers. This proposal goes beyond what the parties appear to have agreed to in the
2022 GRC Settlement, and appears to be contrary to the prohibition in Initiative 2066 for
the Commission to "approve, or approve with conditions, a multiyear rate plan that
authorizes a gas company or large combination utility to require a customer to
involuntarily switch fuel use either by restricting access to natural gas service or by
implementing planning requirements that would make access to natural gas service cost-
prohibitive."For these reasons, we reject Sierra Club's proposal.
Gas Equipment Incentives
302 Sierra Club recommends that Avista phase out mid-stream incentives for residential gas
appliances like furnaces and water heaters that may prompt builders to install new gas
infrastructure to serve these appliances.45' Specifically, Sierra Club recommends Avista
use 20 percent of the budgeted residential gas incentives for natural gas appliances in its
current BCP and use this amount for incentives for residential building envelope and
electrification readiness measures.45' Sierra Club also recommends the funds be used for
the Company to offer information related to electrification for customers who inquire
about natural gas rebates or incentives.
414 See e.g.,Avista Schedule 51, Line Extension, Conversion, and Relocation Schedule:
Washington.
455 Avista's Post-Hearing Brief, at¶ 169.
456 AWEC's Post-Hearing Brief, at¶¶ 105-7.
457 Dennison,Exh. JAD-1T at 15:17-20.
458 See Docket UG-230898.

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303 NWEC opposes Sierra Club's recommendation to reappropriate funds for natural gas
appliance incentives, noting that the 2024-2025 BCPs were just approved in January 2024,
and any substantive changes to these offerings should be made in the next BCP.419
304 Avista opposes Sierra Club's proposal, arguing that pursuing the proposal would put the
Company in violation of existing applicable decarbonization laws and rules.460 The
Company also argues that adopting the proposal would result in arbitrarily increasing rates
for electric customers, and that the Company has already dedicated $2 million(on an
annual basis) from its CEIP to address electric customers' energy endeavors.461
305 We reject Sierra Club's proposal as contrary to the BCPs that the Commission approved
earlier this year. We do not reach the question of whether approving Sierra Club's
proposal would be inconsistent with Initiative I-2066.
Non-Pipeline Alternatives
306 Turning to Non-Pipeline Alternatives(NPA), Sierra Club recommends that the
Commission adopt the Oregon Public Utility Commission's (OPUC)NPA framework,
which is more prescriptive than what is required in the 2022 GRC Settlement.462 Sierra
Club further recommends the Commission require Avista in its 2025 IRP, to perform NPA
analyses using the Oregon framework on at least five projects (even if they exceed
$500,000) to gain experience with NPA analyses.
307 Avista supports adopting the Oregon NPA analysis, and including NPA analysis in
situations where an NPA is not selected, and where the project is unrelated to safety,
compliance, or road moves and which exceeds a threshold of$500,000 for individual
projects or groups of geographically related projects.463
308 The Commission acknowledges Avista's agreement to adopt the OPUC NPA framework,
as well as Initiative I-2066.464 The Commission has a statutory obligation to ensure fair
459 See Docket UG-230898.
460 Bonfield, Exh. SJB-5T at 46:20-47:2.
461 Bonfield, Exh. SJB-5T at 48:8-16.
462 Dennison,JAD-IT at 28:5-16. The language included in the brackets within the quotation
reflect Washington specific thresholds and requirements.
463 Avista's Post-Hearing Brief, at¶ 157.
464 The implications of the passage of Initiative I-2066 remains uncertain. The initiative is
currently being litigated and the parties were not asked to specifically brief I-2066 in this case.
Despite this,the Commission expects Avista to evaluate NPAs within the law.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 80
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and reasonable rates for customers while promoting energy conservation all while
balancing the will of Washington voters. We do not find that applying the Oregon NPA
analysis runs counter to the provisions of the initiative that prohibit the Commission from
authorizing "a gas company or large combination utility to require a customer to
involuntarily switch fuel use either by restricting access to natural gas service or by
implementing planning requirements that would make access to natural gas service cost-
prohibitive."NPAs are planning tools to assist the utility in making cost-effective
decisions and do not mandate fuel switching, restricting access to natural gas, or making
gas service cost-prohibitive.
309 As such, the Commission understands the value of NPA analyses, as well as how demand
response programs and energy efficiency programs result in conservation and by
extension, lower costs for customers through avoided capital expenses. On balance, the
Commission approves Avista's adoption of the OPUC framework on NPAs, with the
following exceptions:
• Avista must examine the relationship between any NPA and the Climate
Commitment Act (CCA), but may not assume that all CCA allowances will be
purchased at the ceiling price.
• Avista must provide an explanation of the resulting investment selection (either the
NPA or a traditional investment) that compares the costs of both projects, but
Avista is not required to rank or score any NPA in its evaluation process.
310 Although the Company indicates it has completed a cursory NPA analysis in Oregon, the
Company has not performed any such analysis in Washington. As the Commission
foresees NPA analyses becoming more commonplace in the future, it is imperative that
Avista gain familiarity with these types of analyses.
311 As such, the Commission orders Avista to conduct two NPA analyses on natural gas
distribution projects related to customer growth for any potential projects that exceed
$500,000 using the criteria otherwise adopted above. The Commission orders the
Company to submit these analyses in a compliance filing for this docket no later than
December 31, 2025.
Equity—Low-Income Assistance and Disconnections, Language Access Plan, and
Energy Burden Analysis/Reporting
Equity

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312 In the final order resolving the Company's 2022 GRC,465 the Commission approved a
Settlement Stipulation to include certain equity provisions and required Avista to
demonstrate its progress towards incorporating the four tenets of equity466 into its capital
planning process. The Commission agrees with Avista that the Compliance Filing due
December 31, 2024, is the correct venue to evaluate compliance with Settlement
Stipulations from the 2022 GRC.Accordingly, as indicated in Avista's direct testimony,
we expect the filing to: (1) "identify and prioritize the needs of Named Communities in
capital planning;" (2)weigh"the distributional impacts the Company's business decisions
and processes"467 by addressing equity through its Customer Benefit Indicators (CBI),461
Customer Experience Journey;469 wildfire equity plan;470 and (3) interconnect it to existing
business policies, practices, and procedures.471
Low-Income Assistance Disconnections
313 In 2001 the Commission approved Avista's Low-Income Rate Assistance Program
(LIRAP) to collect funding through"electric and natural gas tariff surcharges on Schedule
92 and 192,,,472 disburse funding to low-income households pursuant to WAC 194-40-
030,473 provide financial assistance to households unable to afford their energy bills and
avert disconnection of utility services.
314 Avista provided extensive testimony regarding the benefits customers received in response
to the implementation of its enhanced customer and bill assistance programs. In October
2023,Avista implemented My Energy Discount(MED), as part of its portfolio of
461 See Dockets UE-220053, et. al., Order 10/04,pgs. 24-28 IT 71-78.
466 The four tenets of equity are distributional justice,procedural justice,recognition justice, and
restorative justice.
467 Thackston,Exh. JR-1 T at 15:1-3.
468 CBI metrics represent"equity areas identify by Avista's EAG that are most at risk to
disproportional outcome"in conjunction with the Company's 2021 CEIP to monitor and track
progress towards clean energy goals."Thackston, Exh,JRT-1T at 17:2-10.
46'The Customer Experience Journey is a cross-functional team of employees that collaborate with
customers to design a"human-centered Experience Design methodology"to focus on customer
needs from the outside in rather the inside out. Thackston, Exh, JRT-1T at 17:12-20.
47o Thackston,Exh,JRT-IT at 17:22-29.The equity wildfire equity plan will prioritize customer
and community input for those living in rural and high-fire risk areas.
471 Thackston,Exh. JRT-1T at 19:3-6.
472 Dockets UE-240006&UG-240007 (consolidated),Bonfield, Exh. SJB-1T at 16: 3-5.
473 "`Low-income'means household incomes that do not exceed the higher of eighty percent of
area median income or two hundred percent of federal poverty level, adjusted for household size."
WAC 194-40-030.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 82
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assistance options under its LIRAP. MED's automatic enrollment mechanism eliminates
critical barriers for customers that historically limited participation in providing aid to
those in need. With these barriers reduced, Avista maintains that within the first three
months of the program, customer saturation in the overall LIRAP increased by 10
percent;474 and the Company provided more than $3.1 million to 26,306 customers'475
which resulted in more customers being served in the first three months of MED's rollout
than an entire program year.476
Decision
315 No party provided response testimony opposing Avista's enhanced customer and bill
assistance programs. Thus, the Commission finds that the data Avista presented on MED's
impacts over the ten-month period of October 2023 to July 2024 to be persuasive. During
this period, Avista distributed approximately $14.9 million dollars in bill credits to
approximately 4 1,110 active participants and the Company's saturation rates for its overall
LIRAP programs rose to 29 percent.477
Disconnection Policies
316 Regarding Avista's existing disconnection policies, TEP testifies that Avista's use of
credit codes as a determinant for service disconnections violates the equity tenets
established by the Commission by inordinately burdening marginalized and vulnerable
populations, including communities of color, low-income customers, customers without
college degrees and more.478 TEP explains that Avista relies on criteria, such as the
number of times a customer has been past-due over the previous 12 months, and the
number of months since the customer was last eligible for disconnection, as part of its
calculation to determine a customer's credit code. This in turn sets a timeline for a
customer's disconnection based on a past-due threshold amount that triggers the
collections process.479 TEP maintains that this approach results in customers with lower
credit codes having lower disconnection thresholds and shortened timelines compared to
customers with higher credit codes. TEP argues that any credit coding criteria related to a
474 Bonfield, Exh. SJB-1T at 23:20-24:1.
475 Bonfield, Exh. SJB-IT at 19:11-17.
476 Bonfield, Exh. SJB-IT at 19:2-6.
47 Bonfield, Exh. SJB-5T at 7:12-13.
471 Stokes, Exh. SNS-IT at 3:10-20.
479 Stokes, Exh. SNS-IT at 9:15-10-7. See also Table 1, Exh. SNS-3,Avista Response to TEP DR
012.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 83
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customer's disconnection or arrearage history should be removed.480 Instead, TEP
recommends that the credit coding criteria be based only on two factors: (1) a customer's
current arrearage amount; and(2) duration of time in arrears. TEP also recommends that
Avista conduct a robust review of its existing credit codes with the (EAAG and Equity
Advisory Group (EAG).481
317 On rebuttal, Avista rejects TEP's recommendation on the basis that its disconnection
policies are sound and use of its credit codes "aim to reduce or eliminate potential
disconnections through early intervention and collaborative solutions,"which includes
connecting customers to various assistance programs, outreach and translation efforts if
necessary.482 Avista highlights the effectiveness of its enhanced assistance programs and
notes that 35,000 of the 41,000 customers enrolled in the MED have seen their credit score
improve which has reduced both past-due notices and disconnections for customers.
Avista further argues that TEP's viewpoint of distributional equity is "inconsistent with
the holistic picture of the current conditions faced in those communities," and
demonstrates a"fundamental misunderstanding of its credit code scoring methodology.483
However, because Avista acknowledges that the term"credit code"may imply the use of a
credit-scoring methodology, the Company agrees to revise its terminology with the EAAG
and EAG to prevent confusion and better align with the approach it is taking"to analyze
payment probability on all customer accounts."484
Decision regarding Avista's Disconnection Policies
318 As we noted in Dockets UE-220066 and U220067 (Consolidated) Order 32 and Docket
UE-210918 Order 18, when there is a clear increase in arrearages overtime and a marginal
impact in collecting such arrearages, a phased dunning approach is warranted,485 but only
after customers receive targeted outreach informing them of the Company's "bill
assistance, arrearage management, and other programs for which they may be eligible."486
Accordingly, we reaffirm the effectiveness of the dunning process as in the public interest
because it motivates customers to obtain assistance, take prompt action on past-due
480 Stokes, Exh. SNS-IT at 3:10-13.
481 Stokes, Exh. SNS-IT at 14:11-18.
482 Bonfield, Exh. SJB-5T at 12:7-8.
483Bonfield,Exh. SJB-5T at 11:1-3.
484 Bonfield, Exh. SJB-5T at 13:22-23 and 15:1.
485 YVUTC a Puget Sound Energy, Dockets UE-220066 and UG-220067 (Consolidated) Order 32,
Docket UG-210918 Order 18, at(May 16,2024) at 15 149.
486 WUTC a Puget Sound Energy, Dockets UE-220066 and UG-220067 (Consolidated) Order 32,
Docket UG-210918 Order 18, at 17¶56.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 84
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balances, and avert service disconnection. For this reason, we reject TEP's proposal to
prioritize customers for disconnection based on the current arrearage amount and the
duration of current arrears.
319 While the Commission acknowledges Avista's acceptance of TEP's recommendation487 to
review its disconnection policies with EAAG and EAG, we are not ordering Avista to
comply with any specific timelines as recommended in TEP's testimony.488 However, we
do require Avista to submit evidence documenting its collaboration with six months of the
date of this order.
Low-Income Needs Assessment and Energy Burden Data Analysis
320 In direct testimony, both TEP and NWEC recommend that Avista update and refine its
metrics to better understand the needs of its underserved customer base,489 and conduct a
new Low-Income Needs Assessment(LINA) requiring the Company to identify low-
income customers by fuel type at the household level.49' TEP explains this would result in
Avista gaining a better understanding of energy burden by fuel type and allow it to tailor
its outreach. NWEC also recommends that Avista conduct a new LINA that: (1)updates
customer income data; (2) assesses energy burden for newly enrolled LIRAP customers;
and (3)provides data for customers with fewer than 12 months of usage data in its Energy
Burden Analysis (EBA) to simulate energy burden over time as a function of factors that
increase customer bills.491
321 To further assess the extent of energy burden within Avista's service territory, TEP
provides a"hyper-granular" analysis of un-affordability facing Avista's customers in light
of the proposed rate increases in this MYRP. This analysis uses a stratified approach for
multiple variables to isolate specific customer needs by breaking down geographic data to
the Census Tract level, and then breaking down income levels in each Census Tract for
quintiles492 to identify the scope of affordability and assistance needs for mostly
487 Bonfield, Exh. SJB-5T at 18:30 - 19:6.
481 Stokes, Exh. SNS-1T at 15:3-11.
419 Stokes, Exh SNS-1T at 29:17-21.
490 Stokes, Exh. SNS-IT at 29:17-21.
491 Thompson, Exh. CT-IT at 20:6-16.
492 The Census Bureau rank orders incomes from the highest to lowest in each geographical area. It
then divides the rank ordering into five equal parts, each part of which is referred to as a
"quintile".A quintile represents 20 percent of population for a given area. It should be noted that
quintile ranges can change for each Census Tract. The lowest quintile of income in one Census

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 85
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homogenous populations within specific Census Tracts. This analysis is then overlaid with
the Department of Health Environmental Health Disparities Map493 to denote Highly
Impacted Communities (HIC) and Vulnerable Populations.494 TEP relies on this data to
show that Avista's current rates are unaffordable and that further proposed increases for
2025 and 2026 will only exacerbate unaffordability and increase the energy burden within
Avista's service territory.495 TEP further argues that this ultimately will result in increased
disconnections that disproportionately impact customers with the lowest incomes496 that
reside in HICs.497
Decision on Low Income Needs Assessment and Energy Burden Data
322 TEP's analysis skillfully articulates the "breadth and depth"498 of existing un-affordability
by segmenting the population by income quintiles and fuel type.499 While the insights
gained from this robust analysis have immense value for the Commission, Avista, and
external parties,500 the evaluation lacks information on the other half of the energy burden
equation. Namely, the evaluation does not incorporate any data related to the enhanced
energy assistance programs that Avista rolled out in October 2023. For this reason, the
Commission rejects TEPs recommendations to require Avista to use the stratification
framework for an Energy Burden Analysis and Performance Based Ratemaking (PBR) for
2022 metrics 12, 13, 14, and 15 and 2024 metrics 7, 8, and 9.501 However, we believe that
the insights provided from the stratification framework are invaluable and should be
explored with input from Avista, Staff, and other interested parties so that a holistic
assessment of the scale of energy burden can be further evaluated in the current
Commission-led rulemakings in Docket(s) U-210800 (for arrearage and assistance data)
and U-210590 (for PBR metrics).
Tract may be $20,000 on average,whereas in a more affluent Census Tract,the lowest quintile
may be $60,000 on average. Colton, Exh RDC-1T at 7-8.
493 Information by Location I Washington Tracking Network(WTN)
494 Colton,Exh RDC-1T at 7-8.
495 Colton,Exh RDC-IT at 10-11.
496 Colton,Exh. RDC-1 T at 8:1-9.
497 Colton,Exh RDC-1T at 8:20-30.
498 Colton,Exh. RDC-1T at 12:3.
499 Colton,Exh. RDC-IT at 52:3-17.
500 Colton,Exh. RDC-1T at 48.
501 See Appendix A,Docket Nos. UE-240006 and UG-240007,Commission Ordered Performance
Metrics, at 9-10.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 86
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323 Further, because Avista agreed in its rebuttal testimony to maintain current reporting
requirements for the annual Disconnection Reduction Reports and COVID-19 Arrearage
and Assistance reporting in U-210800, and to expand the annual LIRAP reports, we agree
that a new LINA and EBA are unnecessary at this time. It is important for the Commission
and all interested parties to examine the full effects of Avista's Bill Discount Rate and
Arrearage Management Plan, which will not be fully realized until October 2025. Only at
that time will we have a comprehensive understanding of the full impacts and benefits
these programs have on customers.
324 Accordingly, as set forth in Avista's rebuttal testimony, we expect the revisions in the
Company's annual LIRAP reports to include:
1) An assessment of Energy Burden for customers participating in the MED
program,502 and an analysis of the revised program structure that became effective
October 1, 2023.503
2) Updated saturation rates for low-income customers by fuel type, (beginning in
early 2026);504
3) Updated reporting metrics that identify arrearage and disconnection
demographics,505 customer participation geography, demographics, data and
trends, including impacts to named communities;506 and
4) An analysis of the revised program structure that became effective October 1,
2023.511
325 On balance, we find that the above revisions and expanded reporting are sufficient at this
time and would like to acknowledge the on-going work that investor-owned utilities are
conducting in coordination with the Department of Commerce as required by RCW
502 Bonfield, Exh. SJB-5T at 26:8-12.
503 Bonfield, Exh. SJB-5T at 27:28-38.
504 Bonfield, Exh. SJB-5T at 27:44-28:5
505 Bonfield, Exh. SJB-5T at 27:11-15.
sob Bonfield, Exh. SJB-5T at 27:20-24.
507 Bonfield, Exh. SJB-5T at 27:28-38.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 87
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19.405.120 to fully evaluate energy burden and assistance offerings.sos
326 Additionally, to further refine data specific to investor-owned-utilities, the Commission
directs Staff, investor-owned utilities, and other interested parties to collaborate and assess
the potential use of the stratification methodology in the rulemakings in Dockets U-
210800 and U-210590, and to explore various avenues to promote data accessibility.
327 The Commission also retains the current reporting requirements and cadence for the
COVID-19 data in Docket U-210800 moving forward and will require Avista and other
regulated energy utilities to continue providing Disconnection Reduction Reports,
COVID-19 Data Reports, and PBR metrics until the conclusion of the two rulemakings in
Dockets U-210800 and U-210590.
328 While the Commission wishes to promote accessibility, data security is paramount to
ensuring trust as more customers use Avista's programs. The Commission acknowledges
the value demographic data can have for utilities as they seek to identify and address
disparities, inform program design and improvements, and measure the impacts across
different groups.509 Accordingly, the Commission requires Avista to work with the EAAG
and EAG to establish a framework to collect and transmit customer demographic data
(similar to the demographic data collected in the LIRAP510) for those enrolling in
Distributed Energy Resource (DER) programs. However, given privacy concerns that
impact the collection of demographic data, customer participation will not be required but
instead will be optional and only collected after customer consent is provided.
Language Access Plan
329 Next, although TEP and NWEC recommend that Avista create a Language Access Plan
(LAP) in coordination with the EAAG and EAG to increase participation in its LIRAP
programs'5l1 we find that Avista continues to make progress with its Multi-Language
Strategy(MLS), that examines the needs of multilingual customers. This is evidenced by
Avista's online web platform,which translate account, energy, safety and outage
information in Spanish and ongoing efforts the Company is exploring to provide these
same services online in other languages and in its mobile application and Interactive Voice
Response systems. Avista is also layering its MLS with the Public Participation Plan
508 See Energy assistance for low-income households—Washington State Department of
Commerce
509 Thompson, Exh. CT-IT at 16:20-17:5.
510 Thompson, Exh. CT-IT at 17:8-23.
51 Stokes, Exh SNS-IT at 37:13-23 and 38:1-5.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 88
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(PPP) within the CEIP and is working with the EEAG and EAG to develop and prioritize
other language access projects.'12
330 While we recognize that Avista has not adopted a separate LAP, we believe its MLS
achieves the same underlying goals given the on-going collaboration between Avista and
relevant advisory groups. As such, we do not find any value in duplicating this work,
especially since the effort related to language access is iterative. Therefore, we reject TEP
and NWEC's recommendation that Avista develop a separate LAP but expect Avista to
continue working towards addressing language access needs and meeting customers where
they are.
The Multi-Year Rate Plan
331 Pursuant to RCW 80.28.425,Avista submits an MYRP that would begin with new base
rates effective December 2024 (RY1) and December 2025 (RY2). For RY1, the proposed
increases reflect an electric base rate relief of$79.3 million or 13.1 percent and natural gas
base rate relief of$17.3 million or 13.6 percent effective December 2024. For RY2 of the
rate plan, the proposed increases reflect an electric net request of$53.7 million or 11.7
percent and natural gas base rate relief of approximately $4.6 million or 3.2 percent
effective December 2025.1
Table 1: Proposed Rate Increases for MYRP2
Fuel p Ry13 RYI Increase RY2 RY2 lncrea&-.�
Electric $79.3 Million 13.1 Percent $53.7 Million 11.7 Percent
Natural Gas $17.3 Million 13.6 Percent $4.6 Million 3.2 Percent
Combined Total $96.6 Million 26.6 Percent $58.3 Million 14.9 Percent
Avista's Direct Testimony
332 This is the Company's second MYRP proposal since SB 5295 was enacted in 2021.
Company witness Vermillion posits that"for the most part"the first MYRPs13 worked as
intended with respect to recovery of capital investments, although the Company has not
been able to fully recover its authorized rate of return under the MYRP format. Vermillion
sit Bonfield, Exh. SJB-5T at 33:1-6.
5"Avista 2022 General Rate Case UE-220053 and UG-220054.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 89
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further testifies that although the MYRP construct allows for more timely cost recovery
for capital additions, recovery of expenses continues to lag.514
333 Witness Vermillion acknowledges the larger increases proposed in RY1 by stating this
request represents an attempt to "close the regulatory lag in Year 1 and set a proper base
for a MYRR"Avista argues that it is extremely important that the Commission approve a
revenue requirement that"gets the first year right." The Company opines that if the
revenue requirement for RY1 is insufficient for the recovery of capital investment and/or
expenses, even after inclusion of revenues expected in the first year of a rate plan, the
utility would underearn in the first year having a"carry-over" effect in every subsequent
rate years 15
Staff's Response Testimony
334 Staff witness Erdahl recommends the Commission reject Avista's proposed two-year
MYRP.516 Staff notes that RCW 80.28.425(9) requires the Commission to align, to the
extent practical, the timing of approval of a MYRP of an electrical company with its CEIP
filed pursuant to RCW 19.405.060. Under WAC 480-100-640(1),Avista is required to file
its next CEIP by October 1, 2025, and Staff believes approval of this filing as a traditional
rate case will allow Avista to develop its next rate case in conjunction with finalization of
its CEIP.511
335 Staff asserts that MYRPs are intended to eliminate regulatory burden, yet 2024 is the
second cycle in a row in which both Avista and Puget Sound Energy have simultaneously
filed rate cases. This clustering of rate cases results in additional filings that create
unnecessary burdens on the Commission, Staff, and intervenors.As such, Staff
recommends denying Avista's proposed MYRP in order to offset the simultaneous rate
cases and allow for more time and resources to be dedicated to individual rate cases which
is in the public's interest. Further, Staff states that Avista is the natural candidate for
moving the filing cycle given that it must file its CEIP in 2025, and PSE will not do so
given the recent legislation in ESHB 1589.518
AWEC's Response Testimony
514 Vermillion, Exh. DPV-IT at 5:4-7.
515 Exh. DPV-1T at 24:7-16.
516 Erdahl, Exh. BAE-1 T at 6:22.
517 Erdahl, Exh. BAE-1 T at 7:3-9.
518 Erdahl, Exh. BAE-IT at 7:19-8:2.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 90
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336 Witness Mullins testifies that the MYRP construct may disincentivize the Company to rein
in expenses. Mullins explains that:
"... if a utility has an approved budget in a rate case, it will have an
incentive to spend up to that budget to avoid needing to issue a refund to
customers in an after-the-fact capital review...setting rates based on
budgetary forecasts provides little assurance that those rates are just and
reasonable because there is no objective way of determining the
reasonableness of a budget. Thus, the utility has an incentive to inflate its
budget in a rate case which, if approved, gives it a corresponding incentive
to invest more capital than it otherwise would under an [sic] historical test
year approach."519
337 Mullins substantiates this claim by noting that during the ratemaking process, neither the
parties nor the Commission have the opportunity to objectively determine the
reasonableness of a utility's capital spending. Mullins explains that in the spending
reported in a compliance filing520 to the 2022 GRC,521 the actual spending does not match
up with the capital forecasts provided by Avista in the beginning of the GRC. Mullins
notes that although the initial forecasts and actual expenses are wildly different,Avista still
claims these capital expenses were reasonable.
338 Mullins states that"setting utility rates based on budgets is problematic because there is
no objective way to assess the reasonableness of a budget . . . .»122 As such, Mullins
recommends the Commission only include capital that is "demonstrated to be used and
useful on or before the rate effective date of the respective rate years to be considered in
the revenue requirement."523
339 AWEC's primary recommendation is to limit the capital investment allowed into rates for
each year of the MYRR However, witness Mullins recommends that approving a single
year revenue requirement might be appropriate "given deficiencies in how Avista
519 Mullins,Exh. BGM-1T at 7:17-8:1.
520 See e.g. Docket No. UE-220053 &UG-220054,Avista Compliance Filing(Provisional Capital
for 2023),Attachment A, (March 29,2024)(The absolute error in capital spending was 73.8%, yet
Avista claims that it spent more than its forecast,warranting no adjustment to provisional capital
included in rates in the 2022 GRC.)
521 2022 Avista GRC UE-220053 and UG-220054.
122 Mullins,Exh. BGM-IT at 9:5-6.
121 Mullins,Exh. BGM-1T at 9:21-22.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 91
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evaluated the removal of Colstrip 1 and 2 from rates."524 Mullins acknowledges a single
year revenue requirement may be more efficient given that the removal of Colstrip from
rates is the single greatest factor in this proceeding.525
Avistas Rebuttal Testimony
340 Avista witness Christie rejects Staff's recommendation to only accept one year of the two-
year rate proposal. Christie states that Staff justifies this recommendation by citing
regulatory burden and alignment with the CEIP filing due next year. Christie argues that
rejection of the MYRP would result in additional administrative burden requiring another
filing to accomplish what the Company is attempting in this filing.526
341 Christie acknowledges the burden of simultaneous rate cases from multiple utilities but
opines "[w]hile a staggering of major rate filings by utilities would relieve some of the
administrative burden on Staff and the parties, it does not override the Commission's
ultimate responsibility to provide timely rate relief where warranted. ,121 Christie provides
further argument in opposition of Staff's recommendation:
• Decreased credit ratings would impact customers through further absorption of lost
return on equity of approximately 70 basis points;
• The Company does not have the means to file another rate case immediately
following this filing;
• Rejecting the Company's MYRP is contrary to the intention of the MYRP statute,
which is to provide certainty to the Company and its customers; and
• There are no meaningful investments or costs of compliance related to the CEIP
included in this GRC (other than what was contemplated in the previous CEIP).528
AWEC's Cross Answering Testimony
342 AWEC witness Mullins acknowledges Staff's recommendation to reject the second year of
the MYRR While AWEC does not take a position,with witness Mullins noting that the
majority of the revenue requirement in RY2 is driven by the removal of Colstrip from
rates.AWEC states that if the Commission rejects RY2, it will still need to address the
costs related to the removal of Colstrip at some point. Even in light of RCW 80.28.425(9),
AWEC does not believe there is any practical benefit to aligning a MYRP with a CEIP and
524 Mullins,Exh. BGM-IT at 13:5-7.
525 Mullins,Exh. BGM-IT at 13:5-10.
121 Christie,Exh. KJC-4T at 23:12-14.
52' Christie,Exh,KJC-4T at 24:7-9.
121 Christie,Exh. KJC-4T at 25:17-20.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 92
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asserts that simultaneous rate cases will likely occur in the future even if the Commission
rejects RY2.129
Parties'Briefs
Avista's Brief
343 Avista disagrees with the proposals submitted in response to its multiyear
rate plan(MYRP). To that point, Avista observes that "what sets this case apart are the
dramatic changes in the landscape against which Avista operates" including, among other
things, "proposals that would undermine the multiyear rate plan(MYRP) legislation,
striking at its very core, i.e., rejection of more than a one year plan (Staff) or disruption of
the "portfolio"approach to subsequent "provisional" capital review (AWEC)."sso
344 The Company disagrees with Staff's argument that there is a burden associated with
processing a two-year rate plan.Avista claims that"Staff's proposal to ignore Rate Year 2
(RY2) overlooks the fact that $54.2M of the $69.3M RY2 request on rebuttal is simply
removal of Colstrip. The remaining $15M is mostly a continuation of capital and expense
items already reviewed in Rate Year 1 (RY 1)." 'Avista goes on to claim a one-year plan
would cause Avista to lose 9 to 12 months of additional rate relief that would be covered
in RY2, and such a result would be, in effect, the Commission ordering zero rate relief for
Rate Year 2.532
Staffs Brief
345 Staff reiterates its arguments that: 1) the Commission should deny Avista's MYRP and
approve the filing as a traditional one-year rate case so that the Company's subsequent
MYRP can align with its CEIP due October 1, 2025, ; and 2)the Commission should deny
Avista's MYRP in order to ease the administrative crush on the Commission and interested
parties, making for a better ratemaking process.533 On brief, Staff introduces a third
argument for rejecting Avista's MYRR Specifically, Staff asserts that rejection of the
529 Mullins,Exh. BGM-8T at 15:8-12.
530 Avista Post-Hearing Brief, at¶2. The issue of the"portfolio"with regard to "provisional"
capital review will be addressed elsewhere in this order. However,we note that in AWEC's
testimony it also opposed the Company's MYRP. See Mullins, Exh. BGM-1T at 7:17-8:1.
531 Avista's Post-Hearing Brief, at¶ 11.
532 Avista's Post-Hearing Brief, at¶ 11.
533 Staff's Post-Hearing Brief, at¶6.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 93
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MYRP would allow the Commission to evaluate Avista's next MYRP in light of the equity
report it will make in two months.534
346 With regard to the equity report, Staff states that"if the Commission approves a two-year
rate plan, it will go four years between meaningful looks at equity in Avista's operations in
the company's rate cases. Given the Legislature's incorporation of equity into
ratemaking535 and the Commission's directive that equity take center stage in utility
operations,536 the Commission should not accept that kind of a suspension in reviewing
Avista's equity practices."537 Staff concludes that the Commission"should treat this case
as a traditional rate filing and review Avista's practices in light of its equity compliance
filing in the company's next rate plan filing next year."538
AWEC's Brief
347 AWEC continues to contest the Company's MYRP based on the Company forecasting its
expenses for its budget in a rate case versus recovering the actual expenses.539 AWEC
continues its argument that the MYRP disincentivizes the Company from reigning in
expense, expanding its argument that the process incentivizes Avista to spend up to its
capital forecast developed in its internal capital investment process.54'Although Avista
witness Andrews states, "The Company's long-standing practice has been to constrain the
level of capital investment each year,"AWEC is not convinced.541 In fact,AWEC argues
that the Commission's reliance on Avista's internal capital investment process "has the
effect of making the regulated the regulator and bases the reasonableness of the
Company's investments on its own internal recommendations."542 AWEC raises similar
concerns about Avista's forecasted budget expense versus actual incurred expense in its
discussion of the Company's Miscellaneous O&M expense.543
Decision
534 Staff's Post-Hearing Brief, at¶6.
535 Staff's Post-Hearing Brief, at¶18 (citing,RCW 19.405.010(6);RCW 80.28.425(1)).
536 Staff's Post-Hearing Brief, at¶ 18 (citing,Cascade at 19-20¶59).
537 Staff's Post-Hearing Brief, at¶ 18.
538 Staff's Post-Hearing Brief, at¶ 18.
539 AWEC's Post-Hearing Brief, at¶10; See also,Mullins, Exh. BGM-1T at 7:17-8:1.
541 AWEC's Brief,¶10.
541 AWEC's Brief,¶10 referencing Andrews, EMA-6T at 23:6-7.
542 AWEC's Brief,¶10.
543 AWEC's Brief,¶¶85-88.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 94
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348 In determining whether to approve the Company's MYRP, it is helpful to review the
language of RCW 80.28.425, the Multi-Year Rate Plan statute. The pertinent language of
RCW 80.28.425(1)provides:
...[E]very general rate case filing of a gas or electrical company must
include a proposal for a multiyear rate plan as provided in this chapter. The
commission may, by order after an adjudicative proceeding as provided by
chapter 34.05 RCW, approve, approve with conditions, or reject, a
multiyear rate plan proposal made by a gas or electrical company or an
alternative proposal made by one or more parties, or any combination
thereof. The commission's consideration of a proposal for a multiyear rate
plan is subject to the same standards applicable to other rate filings made
under this title, including the public interest and fair,just, reasonable, and
sufficient rates. In determining the public interest,the commission may
consider such factors including,but not limited to, environmental health
and greenhouse gas emissions reductions, health and safety concerns,
economic development, and equity, to the extent such factors affect the
rates, services, and practices of a gas or electrical company regulated by the
commisslon.544
349 Additionally, and previous to the Multi-Year Rate Plan statute, RCW 80.28.020 conferred
broad powers upon the Commission to establish just, reasonable, or sufficient rates for
regulated utility companies, when the Commission determines that rates are insufficient to
yield a reasonable compensation for the service rendered.14' RCW 80.01.040(3)
empowered the Commission to regulate in the public interest before RCW 80.28.425
further expanded those powers.546
350 As was stated previously,Avista filed its MYRP with effective dates of December 2024
for RY 1 and December 2025 for RY2 seeking: 1)proposed increases reflecting an electric
base rate relief of$79.3 million or 13.1 percent and natural gas base rate relief of$17.3
million or 13.6 percent in RY1; and 2) proposed increases reflecting an electric net request
of$53.7 million or 11.7 percent and natural gas base rate relief of approximately $4.6
million or 3.2 percent in RY2.547
544 RCW 80.28.425(1).
545 RCW 80.28.020.
546 RCW 80.01.040(3).
547 Vermillion, Exh. DPV-1T at 3:1-10.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 95
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351 Staff opposes the Company's MYRP and wants the Commission to approve Avista's filing
as a traditional rate case in conjunction with finalization of its CEIP in October 2025.141
Staff also believes that an Avista MYRP filed in 2025 would relieve and reduce regulatory
burden upon the Commission, as well as reduce the burden upon Staff and intervening
parties, as Avista and Puget Sound Energy(PSE)have simultaneously filed MYRPs. In
short, Staff argues that staggering the MYRPs of Avista and PSE would be in the public
interest.549
352 AWEC also opposes Avista's MYRR AWEC argues that approval of Avista's forecasted
budget related to its MYRP removes the incentive for the Company to limit expenses, and
would encourage the Company to spend up to that approved budget. Moreover,AWEC
believes that this would negatively impact ratepayers as rates would be based on
forecasted budgets, and that the Company could subject ratepayers to inflated rates, as
there is no incentive to control expenses.550 AWEC opines that during the MYRP process,
neither the parties nor the Commission have the opportunity to objectively determine the
reasonableness of a utility's capital spending. AWEC adds "setting utility rates based on
budgets is problematic because there is no objective way to assess the reasonableness of a
budget . . . .99551
353 For the above reasons, Staff and AWEC recommend denial of the Company's MYRP, and
both recommend treating Avista's filing as a traditional rate case for the Commission to
approve only a single year of the Company's proposed rates.
354 Upon review of the evidence and testimony, we find Avista's arguments to be more
persuasive. We are reminded that the purpose and intention of the MYRP statute is to
provide stability and assurance to the Company and the ratepayer. To that point, we are
persuaded that adopting Staff's proposal would result in the loss of up to a year of rate
relief that is covered in RY2552 as well as the effect of the removal of Colstrip in rates in
RY2 sss
355 Given that the parties and the Commission have fully litigated this case, restricting rate
recovery to the first year would result in a waste of all of our resources, and would likely
be considered credit negative by credit rating agencies. Contrary to Staff's and AWEC's
54' Erdahl, Exh. BAE-1T at 7:3-9.
549 Staff's Brief,¶6;Erdahl, Exh. BAE-1T at 7:19-8:2.
551 Mullins,Exh. BGM-1T at 7:17-8:1.
551 Mullins,Exh. BGM-IT at 9:5-6.
552 Avista's Brief,¶11.
553 Avista's Brief,¶11.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 96
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assertions, holding a full proceeding and ruling on Avista's current filing and directing the
Company to make a subsequent filing in 2025, does not provide the Commission with
regulatory relief,but actually compounds regulatory burden with back-to-back Avista rate
cases.As such, we do not see alignment with Avista's CEIP as practical in this case, in
accordance with RCW 80.28.425(9), given the regulatory burden.
356 We also believe that not only would there be a tremendous regulatory burden placed upon
the Commission, but requiring a subsequent filing would also have a negative impact on
the Company. Given the time, expense, and resources it would take to file another rate
case on the heels of this one may unduly burden the Company financially.Again, we must
also consider what the impact may be on the credit rating of the Company if we remove
the certainty of the MYRP and instead approve a single year of rates. Ultimately, relieving
the Commission and intervening parties of the regulatory burden on one hand may result
in adverse impact on the ratepayers in the form of rates on the other hand if they have to
absorb lost return on equity.
357 In light of the foregoing, and to ensure just, reasonable, or sufficient rates, we reject
Staff's and AWEC's recommendation to deny the Company's MYRP and reject their
recommendation to treat Avista's filing as a traditional rate case. We remind the parties
that regulating in the public interest is not a one-sided proposition; we must consider the
interests of Staff, the intervenors, the Company, and the ratepayers.554 In this instance we
believe that the adverse impact of denying the two-year MYRP on the Company would
have also negatively impacted its customers as well. In addition, denying the MYRP
would likely negatively impact the Company's financial ability to provide safe and
reliable service. Therefore,we conclude that it is in the public interest to leave intact and
accept a two-year MYRP for Avista.
Performance Measures and Other Reporting
Direct Testimony—Avista
Performance Metrics
358 The Company proposes to reduce the number of performance measures agreed to in the
2022 GRC Settlement. In that settlement, the Company agreed to report on 92 initial
metrics and develop three additional metrics related to reliability.555 In this proceeding, the
Company proposes to edit several metrics to better align with how the data is presented
554 Fed. Power Comm'n a Hope Nat. Gas Co., 320 U.S. 591, 603, 64 S. Ct. 281, 288, 88 L. Ed.
333, 345(1944).
555 Bonfield, Exh. SJB-IT at 2:26—3:24.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 97
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and recommends eliminating metrics that: do not align with the regulatory goals,
outcomes, and principles outlined in the Commission's Interim Policy Statement
Addressing Performance Measures and Goals, Targets, Performance Incentives, and
Penalty Mechanisms (Interim Policy Statement) in Docket U-210590; are similar to
certain financial metrics ordered by the Commission in its 2022 GRC; and those that are
reported elsewhere. This results in a total of 48 proposed metrics.556
359 Additionally, for the nine Commission-ordered metrics from the 2022 GRC,Avista
proposes to adjust the reporting date to February 15 for publicly available data and then
May 1 for the remaining date to coincide with the quarterly data.557
360 Finally,Avista recommends the Commission not establish any performance incentive
mechanisms (PIM) within this proceeding. In the alternative, if the Commission finds a
PIM is required by RCW 80.28.452(7) [sic], the Company proposes the same customer
service PIM from its 2022 GRC.ssa
Recurring Reporting
361 As part of the 2022 GRC Settlement, the Company agreed to provide recommendations
regarding the streamlining of existing reporting requirements.Avista proposes to eliminate
the following reports:
• WA Distributed Generation Annual Report
• WA Electric and Natural Gas Decoupling Mechanism Report
• Energy&Emissions Intensity Metrics Report
• 1-937 Report
• Critical Infrastructure Report
• Essential Utilities Services Contacts Report
• Annual Disconnection Reduction Report
• Monthly Credit & Collections COVID-19 Report
• Quarterly Credit& Collections COVID-19 Report
556 Bonfield, Exh. SJB-1T at 7:13 —8:10.
557 Bonfield, Exh. SJB-IT at 11:1-11. The Company was originally required to file twice in
February and once in April until confidentiality due to FERC filings was an issue.
558 Bonfield, Exh. SJB-IT at 11:14-18. The alternative PIM consists of six measures, a$500,000
incentive or penalty given certain performance, and approval for a Deferred Accounting
Mechanism to address any incentive or penalty in the Company's next rate proceeding. Bonfield,
Exh. SJB-IT at 11-15.We assume the statutory reference is for RCW is 80.28.425(7). No other
party proposed establishing a PIM in this proceeding.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 98
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362 Witness Bonfield provides rationale for eliminating each report which includes duplicative
information available elsewhere, consolidating information within another filing,
uncertainty of the value of report, and that certain information can be made available by
request.559
363 Further,Avista proposes to modify the reporting of the following three reports:
• Energy Recovery Mechanism Review Filing (annual and quarterly report rather
than annual and monthly)
• Purchased Gas Adjustment Activity Reporting (quarterly instead of monthly)
• Natural Gas IRP and Workplan(aligning frequency with electric IRP with a
progress report due two years after the IRP is filed).560
Staffs Response Testimony
364 Staff witness Erdahl recommends the Commission require Avista to maintain three of the
metrics that the Company proposes to eliminate as the metrics were ordered by the
Commission in the PacifiCorp 2023 GRC in Docket UE-230172.16' Staff also proposes a
new metric related to connection timelines for new service requests.162 Erdahl argues the
new metric is in the public interest to both ensure utility responsiveness during the current
housing crisis and to support new state building codes related to Electric Vehicle Charging
Infrastructure.563
365 Finally, Staff requests the Commission order Avista to continue filing its Critical
Infrastructure Report. Erdahl testifies the Company proposed to eliminate this report in
Docket U-210151 related to the Commission's Inquiry into Reducing the Administrative
Burden, however, Erdahl notes the Commission did not relieve the Company of that filing
requirement in that proceeding and should not do so here.161
NWEC's Response Testimony
366 As part of its effort to advance equity,NWEC witness Thompson proposes that Avista
maintain two performance metrics related to non-pipe alternatives (NPAs). Thompson
559 Bonfield, Exh. SJB-IT at 27:12—28:20. See also Bonfield, Exh. SJB-4. Bonfield recognizes
that a legislative change may be required related to the I-937 reporting requirement.
560 Bonfield, Exh. SJB-IT at 28:23—29:14.
56' Erdahl, Exh. BAE-1 T at 12:3-16.
162 Erdahl, Exh. BAE-1 T at 13:5-14.
163 Erdahl, Exh. BAE-1T at 13:17— 14:11.
164 Erdahl, Exh. BAE-1 T at 12:17— 13:2.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 99
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argues the clean energy targets mandated by CETA and the necessary balance between
utility and customer-level resources that more directly benefit Named Communities
supports NWEC's position. While NWEC proposes to maintain the metric that separately
tracks emissions avoided by NPAs, it is amenable to eliminating this metric conditioned
on Avista continuing to report the carbon intensity metric.s65
367 Additionally, while not formally requesting a new metric, Thompson recommends the
Commission require Avista to collect customer demographic data for all current and future
DER program offerings like the data collected through its bill discount program. While
Thompson provides that a customer may opt out of providing such information, the
Company should not require such information to determine program enrollment eligibility.
Finally, Thompson recommends Avista maintain its practice of de-identification and data
aggregation to protect individual customer demographics.566
368 NWEC also responds to Avista witness Bonfield's proposal to eliminate the Annual
Disconnection Reduction Report. Thompson does not agree with Bonfield's claim that the
information is available in other reports. Rather, Thompson argues the same level of
granularity does not exist in the COVID reporting,the CEIP, or PBR metrics and parties
would lose useful information regarding the demographics of the disconnections.567
TEP' Response Testimony
369 TEP witness Stokes argues that Avista should maintain seven metrics that were proposed
for elimination and provides edits for three of those metrics, modifies three metrics
retained by Avista, requests a draft metric from the Interim Policy Statement be amended
and required for Avista, and proposes one new metric.
370 Witness Colton provides analysis that crosses both equity issues and performance
measures related to the affordability metrics, arrears and disconnections, and energy
burden. Colton makes several recommendations including: (1) continuing to require
certain affordability and energy burden metrics be reported by census tract and zip code;
(2)using the stratification methodology proposed for the energy burden assessment for
related PBR metrics; and(3) revising the arrears metric to include the accounts and dollars
that were paid on time.561
565 Thompson, Exh. CT-IT at 14:13 — 16:17.
566 Thompson, Exh. CT-IT at 16:20— 18:11.
567 Thompson, Exh. CT-IT at 19:4-18.
568 Colton,Exh. RDC-IT at 51:13—52:29, 60:28—61:16.The impacted metrics include: Metric
12, 13, 14, and 15 for stratification, and Metric 4 related to arrears.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 100
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371 Colton argues that requiring both census tract and zip code reporting allows for"cross-
tabulation of data.',569 For example, census data may be compared to the American
Community Survey, while zip code data may be compared to the Census Bureau's Zip
Code Tabulation Areas, providing the ability for more robust analysis.570 Alternatively, if
the Commission retains only census tract data, TEP recommends the Company be required
to maintain"crosswalk files"that indicate the allocation of census tracts over zip codes.571
Summary of TEP metric recommendations
372 Metric for Clarification
TEP recommends that Avista explicitly include natural gas in its reporting for residential
disconnections.572
373 Interim Policy Statement Metric to Amend and Require for Avista
TEP recommends the Commission amend its interim metric regarding the average
residential bill by including low-income customers as a separate subset for the data
reporting. Stokes argues this provides a better level of granularity about rate impacts to
specific communities.573
374 Metrics to Maintain
TEP disagrees with Avista's proposal to eliminate the Operations and Maintenance (O&M)
metric. Stokes argues that this metric provides insight into the utility's financial
management and may be helpful in comparing against other utilities'performance.171
375 TEP proposes the Commission require Avista to maintain two metrics related to energy
burden and modify a third. Relying on Colton's analysis and testimony, Stokes argues that
the two metrics that calculate high-energy burden should be maintained,"' with the
569 Colton,Exh. RDC-1T at 57:17.
570 Colton,Exh. RDC-IT at 55:9-19, 57:5—58:2.
571 Colton,Exh. RDC-IT at 58:5-7.
572 Stokes, Exh. SNS-IT at 18:19— 19:5.
571 Stokes, Exh. SNS-IT at 18:4-17.
574 Stokes, Exh. SNS-1T at 25:1 —26:6. Stokes provides a simple comparison of Avista and PSE
data with no conclusions about the trend or underlying cause for the differences.
575 Stokes, Exh. SNS-IT at 19:7-12.These metrics (originally designation as Metrics 13 and 14)
were maintained by Avista on direct(Metrics 7 and 8)and combined into a single metric on
rebuttal(Metric 8).

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 101
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additional requirement of reporting by stratification provided by Colton.576 Stokes then
adopts TEP's proposal in the PBR docket to designate single-fuel energy burden at 2
percent for natural gas and 4 percent for electric.577 Further, Colton recommends the
Commission modify the arrearage metric to include the number of accounts and dollars
that were paid on-time allowing interested persons to understand the substantiality of the
arrears.578
376 Next, TEP addresses three Equitable Service metrics that it proposes to maintain and/or
edit. First, witness Stokes recommends the Commission require Avista to continue
reporting its metric related to low-income participation in DR, DER, and renewable
energy programs. Stokes testifies the limited data available indicates little participation by
low-income customers in these programs. However, with that limited data, Stokes testifies
that conclusions about trends are not possible and believes this information is important to
evaluate performance of these programs as part of the clean energy transition. Further,
TEP recommends the Commission edit the language of this metric to replace the
participation language with measuring by those directly benefitting from the program.579
377 The other two Equitable Service metrics are related to electric vehicle programs. Stokes
provides the same rationale from the above metric to maintain the low-income
participation in electric vehicle programs metric. Further, Stokes argues the language
should be changed from electric vehicle to electric transportation programs as proposed in
the PBR docket. Stokes testifies this change better reflects and strengthens the business
case for utility investment in these technologies. TEP also proposes to modify this metric
to replace the participation language with measuring those directly benefitting from the
program.580 Additionally, TEP argues the metric related to electric vehicle supply
equipment be maintained. Stokes testifies this data is necessary to ensure Named
Communities have equitable access to electric vehicle ownership and "contextualizes
Avista's measurement of electric transportation spending. ,511
378 Finally, TEP proposes the Commission require Avista to maintain the metric related to
NPAs and the metric related to incremental spending in Named Communities.512 Stokes
576 Colton,Exh. RDC-1 T at 60:1-4.
57 Stokes, Exh. SNS-IT at 20:10-20.
578 Colton,Exh. RDC-1T at 61:1-16.
579 Stokes, Exh. SNS-1T at 21:12—22:9, 24:1-2.
580 Stokes, Exh. SNS-1T at 22:12—24:7.
581 Stokes, Exh. SNS-IT at 26:9-20.
512 Stokes, Exh. SNS-1T at 27:8-11.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 102
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argues these metrics, "show[ ] whether Avista is equitably deploying financial resources
that aid the transition away from gas service," and"measuring overall incremental
spending in Named Communities shows whether Avista is making consistent, yearly
investment that promote equity in its operations and support underserved customers."583
379 New Metric
TEP proposes a new metric to report the net plant in service per customer for electric and
natural gas. Stokes argues this metric would provide insight into capital investment trends
and an indication of how a utility chooses to replace aging assets.584
Recurring Reporting Recommendations
380 TEP opposes Avista's elimination of the decoupling, disconnection, and COVID reports.
Additionally, Colton contends that reported data is not easily accessible for the PBR
metrics, disconnection and arrearage reports, or the energy burden analysis. Colton argues
this information is useful to those outside the usual GRC parties, for example those groups
working on affordable housing issues or agencies responsible for distributing federal
funds. Therefore, TEP recommends the Commission require Avista to post these data sets
and reports to their website rather than providing solely through various dockets with the
Commission.585
381 Further, Colton makes a general recommendation that the affordability and energy burden
related PBR metrics and reports discussed in their testimony be provided at a monthly data
level. Colton testifies this granularity is necessary to understand the relationship of the
data for the different seasons of the year. However, Colton does not necessarily propose
the metric and reports be filed monthly but believes it reasonable to file the monthly data
sets at a greater interval such as quarterly, semi-annually, or annually.586
382 Responding specifically to the COVID report, Colton contends that Avista witness
Bonfield inaccurately represents the COVID information as duplicative of information
provided in other reports. Colton testifies the following components are not otherwise
available: (1) length of disconnection, number of disconnection notices, number of
accounts, but for the moratorium that would have been disconnected; (2) information
related to various fees charged in relation to disconnection or reconnection; (3)
information about long-term payment arrangements; (4) information on medical payment
583 Stokes, Exh. SNS-IT at 27:14-16.
584 Stokes, Exh. SNS-IT at 28:3-8.
585 Colton,Exh. RDC-1T at 28:7—29:6.
586 Colton,Exh. RDC-IT at 55:22—56:12.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 103
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arrangements; (5) information about customer deposits; (6) number of premises receiving
bill assistance; and (7) past due balances by zip code.587
383 TEP also proposes three modifications to the COVID report. First, for the arrearage
metric, Colton recommends including not only the dollar amount in arrears but also the
number and dollar amount that were paid on time.588 Second, in additional to reporting
total arrears and age of the arrears, Colton proposes to require reporting by the number of
accounts for both total and age of the arrears. Finally, Colton asserts that the name of the
report should be changed to "Arrearage Report" or to "Arrearage and Disconnection
Report"noting that the information is no longer only relevant due to the COVID
pandemic and resulting economic state of emergency.589
384 Addressing the Disconnection Reduction Report, again Colton argues that Avista witness
Bonfield incorrectly argues the information is duplicative. While Colton acknowledges
one data point(total disconnections for nonpayment) is available through either the PBR
metrics or COVID report, the remainder of the reporting requirements per the 2019 GRC
settlement in Dockets UE-190334, UG-190335, and UE-190222, are not provided
elsewhere.590 Colton argues eliminating this required data will hinder the Commission and
others in evaluating the affordability of Avista rates.591
385 Finally, Colton recommends that Avista include the number of disconnections for
nonpayment, number of accounts in arrears, and the dollars of the arrears, and provide the
data per their energy burden stratification recommendation contained in earlier sections of
their testimony.592
386 Stokes proposes the Company maintain the Quarterly Decoupling Report arguing not all
information contained in this report is available during the annual adjustment filing. The
data not available in the annual filing includes the number of new customers excluded
from decoupling, separately identifying the electric and gas weather components, and a
workpaper that provides the native formula-based calculations supporting the annual
adjustment.Alternatively, if the Commission discontinues this report, TEP proposes the
587 Colton,Exh. RDC-IT at 58:10—59:18.
588 This same information was recommended in response to Metric 4 by witness Colton.
589 Colton,Exh. RDC-1T at 60:28—62:3.
590 Colton,Exh. RDC-IT at 62:8—63:10. See Table 17 at page 62 for the none required data points
in the COVID report.
591 Colton,Exh. RDC-IT at 63:12-18.
592 Colton,Exh. RDC-IT at 64:5-8.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 104
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Company be required to include the information described above and the docket numbers,
both electric and gas, for the annual decoupling reports filed within the past five years.593
Avistas Rebuttal Testimony
Performance Metrics
387 On rebuttal, witness Bonfield wholly changes the Company's position on performance
metrics. The Company now proposes that the Commission should only require Avista to
report on the performance metrics included in its August 2, 2024,Alternative Forms of
Regulation Policy Statement for Initial Reported Metrics (Metrics Policy Statement).
Further, the Company also adopts the timing for filing PBR metrics (annually with the
Commission Basis Report).594 Avista argues the Commission has now determined the
appropriate metrics to evaluate utility performance during a WRP, and that the annual
filing significantly reduces administrative burden. Finally,Avista argues the Metrics
Policy Statement renders both its direct case proposal and all other parties'proposals
moot, and argues that because those parties also participated in the PBR docket, they had
the opportunity for input on utility performance metrics.595
388 Avista also responds to NWEC's proposal to collect the demographic data for all existing
and future DER programs. Bonfield contends the Company is unable to collect this
information for two reasons. First, Bonfield testifies that many of Avista's DER programs
are administered in partnership with community partners or at the distributor level,
therefore, the Company does not have direct access to such data. If the Commission were
to require the collection of this data, Bonfield contends the workload would be placed on
those already resource constrained partners. Second, Bonfield argues the data that is
available to the Company is distributed across multiple systems with inadequate security
to protect customer information when sharing cross-departmentally. Finally, Bonfield
asserts requiring this data collection would take time and financial resources to create a
platform and require changes to partner processes as well.596
Recurring Reporting
s9s Stokes, Exh. SNS-1T at 40:20—42:4.
594 Commission Basis Reports(CBA) are required within four months of the end of a utility's
fiscal year by WAC 480-100-257.All Washington regulated utilities follow a fiscal calendar year
therefore CBA's must be filed no later than May 1 each year.
595 Bonfield, Exh. SJB-5T at 38:14—39:17.
596 Bonfield, Exh. SJB-5T at 28:10—30:13.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 105
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389 Bonfield both clarifies and revises the recurring reporting obligation discussed in direct
testimony and acknowledges the Company's intent for each report was not entirely clear.
Avista clarifies it proposed to eliminate the following reports:
• WA Distributed Generation Annual Report;
• Energy &Emissions Intensity Metrics Report [requires waiver from WAC 480-
109-300(1)];
• Critical Infrastructure Report;
• Essential Utility Services Contracts Report [requires waiver from WACs 480-100-
268 and 480-90-268];
• Equity Report;
• Monthly Credit & Collections COVID-19 Report; and
• Quarterly Credit& Collections
390 Further, Bonfield clarifies that direct testimony intended to modify the following reports:
• Commission Basis Report [remove wood pole reporting];
• PGA Activity Reporting [changed frequency which requires waiver from WAC
480-90-233(5)];
• MYRP Metrics [changed filing timeline]59'
391 Critical Infrastructure Report-Response to Staff
Avista disagrees with Staff's proposal to maintain the Critical Infrastructure Report,
arguing it is unsure of the value of the information as much of the data remains static, and
that Staff did not provide testimony establishing the need for the report. Further, simply
combining the report with the reliability report as Staff recommends does not alleviate the
burden of providing the information. Finally, Bonfield testifies that no action has been
taken because of this report, but that the information can be made available upon
request.598
392 Disconnection Reduction Report—Response to NWEC and TEP
Witness Bonfield agrees with NWEC and TEP, that not all information contained in the
Disconnection Reduction Report is duplicative, therefore,Avista agrees to maintain the
report until such time as a decision is made in the Commission's Customer Notice and
Fees Rulemaking in Docket U-210800. However,Avista does not agree with TEP's
recommended additions to the report or applying the stratification analysis. Bonfield
597 Bonfield, Exh. SJB-5T at 40:18—41:25. The decoupling report was not contained in this
revised list. However,Bonfield provides later testimony explaining that omission when rebutting
TEP's response position.
598 Bonfield, Exh. SJB-5T at 42:10-17.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 106
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testifies that the additional information requested in this report is already provided either
within the report or other reporting by the Company. Further, Bonfield argues the
company has not previously performed the calculations using stratified energy burden and
is uncertain of the additional value gained.59'
393 COVID Reporting (monthly and quarterly) —Response to TEP
The Company also agrees to maintain the COVID Reporting until the Commission makes
determinations in rulemaking docket U-210800, as with the Disconnection Report.Again,
witness Bonfield does not agree with TEP's recommended modifications to the reports.
First, Bonfield questions the value or use gained by adding the number of accounts and
dollars that paid on time. However, Bonfield provides the rulemaking docket referenced
above is a more appropriate setting to discuss this issue. Second, Bonfield contends the
additional information requested(arrears by number of accounts and dollar amounts) is
already available in either the COVID Reporting or within the Customer Benefit
Indicators of its CEIR Finally,Avista takes no position on the title of the report but
believes the issue of potentially consolidating arrears and disconnection data is also more
appropriate in the rulemaking proceeding.600
394 Decoupling Report—Response to TEP
Bonfield testifies the Quarterly Decoupling Report was already discontinued by the
Commission in Order 01 of Docket U-210151. However, as requested by TEP, the
Company will continue to include the information in all future decoupling annual
adjustment filings.611
NWEC' Cross Answer
395 In cross-answering testimony, Thompson supports many of TEP's recommendations
regarding performance measures, including five measures to maintain,602 six measures to
maintain and edit,603 and includes TEP's proposed metric related to net plant per customer.
Thompson argues that many of TEP's recommendations are easy to integrate, directly
599 Bonfield, Exh. SJB-5T at 42:20—43:11.
600 Bonfield, Exh. SJB-5T at 43:14—44:9.
601 Bonfield, Exh. SJB-5T at 44:12-21.
602 One of the proposed metrics to maintain was not eliminated by Avista nor a recommendation
from TEP to maintain(Metric 1)and another the Company agrees to maintain on rebuttal(Metric
26).
603 The Company retains but consolidates two of the metrics being proposed to maintain and edit
(Metrics 13 and 14).

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 107
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align with the Commission's Interim Policy Statement, and provide a more robust
reporting to better evaluate the deployment of clean energy in Named Communities.604
Parties'Briefs
Avista
396 In briefing,Avista proposes to modify two of its reporting metrics related to affordability
and energy burden to align with the Commission's recent policy statement on reported
performance metrics in Docket U-210590.60s Avista further recommends that the
Commission require the Company to report the metrics contained in the Commission's
Initial Reported Performance Metrics contained in its August 2, 2024, policy statement.606
Avista also argues that performance incentive mechanisms are unnecessary for the purpose
of this rate case.607 Finally,Avista agrees to maintain its Annual Disconnection Reduction
and COVID-19 Arrearage reporting, but disagrees with Staff's position that it should
maintain its Critical Infrastructure Report.608
Staff
397 Staff generally agrees with Avista's proposal to reduce the metrics it reports from 92 to 48
metrics, but it recommends that the Commission require Avista to retain four metrics and
add one additional metric.619 Staff argues that the Commission should require Avista to
retain three metrics that the Commission recently required PacifiCorp to report, to
facilitate comparison of utility performance, and another metric that is necessary to assess
utility security.610 Staff also requests that the Commission direct Avista to report a new
metric related to connection timelines for new services requests for newly constructed
dwellings.611 Staff also urges the Commission to reject Avista's arguments that the
Commission should limit reportable metrics to those metrics contained in the recent policy
604 Thompson, Exh. CT-4T at 6:9—7:12.
605 Avista's Post-Hearing Brief, at¶ 158.
606 Avista's Post-Hearing Brief, at¶ 158.
607 Avista's Post-Hearing Brief, at¶ 158.
608 Avista's Post-Hearing Brief, at¶ 158.
609 Staff's Post-Hearing Brief, at¶ 19.
610 Staff's Post-Hearing Brief, at¶ 19.
61 Staff's Post-Hearing Brief, at¶ 19.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 108
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statement on metrics, because the policy statement reflects a minimum, as opposed to a
maximum, level of reporting.612
TEP
398 In briefing, TEP requests that the Commission order Avista to adopt a metric regarding
low-income customer saturation rates by household and fuel type, as well as TEP's
proposed affordability and equity metrics.613
Sierra Club
399 Sierra Club requests that if the Commission approves a performance incentive mechanism
for Avista, that the Commission establish customer engagement targets of 5,000 home
electrification assessments and 1,000 electrification rebates over an 18-month period
related to Sierra Club's proposed targeted electrification pilot for Avista.614
NWEC
400 NWEC supports the inclusion of 51 performance metrics suggested by Avista in the event
that the Commission declines to limit required metrics to those metrics contained in the
August 2, 2024, Policy Statement.615 Regarding collection of customer demographic
information for current and future DER programs,NWEC agrees with Avista's proposal to
raise this issue with the Company's applicable advisory groups.616 NWEC further notes
and appreciates Avista's agreement to maintain its annual customer Disconnection
Reduction Report.611
401 Turning to Avista's energy burden analysis,NWEC discusses four points. First,NWEC
argues that the Commission should require Avista to include updates to customer income
and usage data as a basis for reporting saturation rate and other metrics in its annual
LIRAP reports.618 Second, NWEC agrees with Avista's decision to assess energy burden
for customers enrolled in the LIRAP MED and include this information in its annual
612 Staff's Post-Hearing Brief, at¶20.
6" The Energy Project's Post-Hearing Brief,at¶¶39, 58(citing, Stokes, Exh. SNS-10).
614 Sierra Club's Post-Hearing Brief, at¶41.
615 NWEC's Post-Hearing Brief, at¶54 (citing,Bonfield,Exh. SJB-2; Bonfield,Exh. SJB-6).
616 NWEC's Post-Hearing Brief, at¶55.
617 NWEC's Post-Hearing Brief, at¶56.
618 NWEC's Post-Hearing Brief, at¶57.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 109
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LIRAP report.619 Third, NWEC states that it is reasonable for Avista to include normalized
household service data for customers with less than 12 months of usage data as part of its
PBR reporting.620 Lastly, NWEC indicates that Avista's proposal to discuss simulating
energy burden over time as a function of factors that increase bills with its Energy
Assistance Advisory Group to determine feasibility and value is reasonable.621
402 Finally,NWEC voices support for TEP witness Stokes'recommendations regarding
Avista's disconnection policy, PBR metric reporting, low-income customer identification,
language access, and the Company's quarterly decoupling report and incorporates the
arguments made in its Cross-Answering Testimony.622
Decision
403 The Commission appreciates the Parties'thoughtful and constructive arguments regarding
various proposed changes to the PBR metrics on which Avista will be required to report.
As noted in the August 2024 Policy Statement regarding reported metrics, the process of
selecting and refining utility metrics is iterative, and the Commission commends the
continued efforts of the Parties to both revise existing metrics and propose new metrics for
consideration.623 The Commission fully anticipates that PBR metrics will continue to be
reviewed and refined in the coming year and looks forward to additional robust
discussion.
404 As a threshold matter, the Commission rejects Avista's invitation to limit reported metrics
to only those metrics identified in the Commission's August 2024 Policy Statement.As
explained in the Policy Statement, the metrics that were developed in that proceeding were
not intended to be a final, comprehensive set of metrics for all utilities,624 and the
Commission fully encouraged parties to suggest new or additional metrics in the context
of a multi-year rate plan proceeding.625 Furthermore,while the Commission remains
619 NWEC's Post-Hearing Brief, at¶57.
62'NWEC's Post-Hearing Brief, at¶57.
62' NWEC's Post-Hearing Brief, at¶57.
622 NWEC's Post-Hearing Brief, at¶58.
623 In re Proceeding to Develop a Policy Statement Addressing Alternatives to Traditional Cost of
Service Rate Making, Docket U-210590, Policy Statement Addressing Initial Reported
Performance Metrics, 3 110(Aug. 2,2024) (Policy Statement Addressing Initial Reported
Performance Metrics).
624 policy Statement Addressing Initial Reported Performance Metrics, 3¶ 10 ("In doing so, we
reiterate our view that a comprehensive PBR framework cannot be established with finality at this
juncture.").
625 policy Statement Addressing Initial Reported Performance Metrics, 5¶ 16.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 110
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sensitive to redundant reporting requirements, as utilities continue to report various
metrics, the reported data may demonstrate that further adjustments and metrics are
necessary to adequately and efficiently monitor a utility's operations and progress with
state energy policies.626 Therefore, it is inappropriate to limit reported PBR metrics to
those identified in the August 2024 Policy Statement.
405 In reviewing the proposed changes to the reported metrics, the Commission has attempted
to balance considerations of efficiency regarding the scope and quantity of data required
by the metrics with the need to establish a reasonable baseline of data to evaluate utility
performance. The Commission generally agrees with Avista's proposal to eliminate
reporting requirements that are duplicative of data already reported elsewhere.627 The
Commission also considered additional modifications to reported metrics to consolidate
and simplify the collection of data where possible. Similarly, in evaluating new or
modified metrics proposed by the Parties, the Commission reviewed whether the reported
data would be helpful to evaluate utility performance and whether the requested data could
be found in existing reporting requirements.
406 Having considered all of the Parties' arguments regarding PBR metrics, the Commission
determines that it is reasonable to require Avista to report on the metrics contained in the
August 2024 Policy Statement, reduce the number of overall metrics reported to avoid
duplication, and require the Company to report on several modified or new metrics.
Appendix A, attached to this Order, contains a description of the changes to PBR metrics
in this proceeding as well as additional reasoning for the decision to require, retain,
modify, or remove a particular metric. Finally, the Commission declines to require any
performance incentive mechanisms (PIMs) for Avista as part of this rate case and
anticipates further discussion of how to best utilize PIMs after additional review and
analysis of the baseline data reported by Avista and other regulated utilities in the context
of either a future rate case or proceeding in Docket U-210590.
407 As shown in Appendix A, the Commission has reduced the number of PBR metrics on
which Avista will be required to report to 33. These metrics consist of 12 metrics that have
been refined or proposed during this proceeding and the 21 metrics contained in the
Commission's Policy Statement Addressing Initial Reported Performance Metrics,
including the metrics established pursuant to RCW 80.28.425(7).628 In many cases,
metrics were removed because the same information can be found in other reporting
required by the Commission, such as information reported as part of Customer Benefit
626 Policy Statement Addressing Initial Reported Performance Metrics, 4¶ 12.
627 Bonfield, Exh. SJB-IT at 7:12—8:15.
628 Policy Statement Addressing Initial Reported Performance Metrics, 7¶22 —21 ¶ 82.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 111
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Indicators, or were already incorporated into other required PBR metrics. The
Commission also authorized the removal of metrics where no parry opposed removal, as
the lack of opposition suggests that the metric provides little value in reviewing Avista's
operations. Similarly, the Commission declined to require a metric if the proposed
measurement involved too many factors outside Avista's control because the metric would
provide limited insight into the effect of Avista's operational decisions.
408 Similar to its review of PBR metrics, the Commission has attempted to balance the need
for regular information from Avista to evaluate its performance with the goal of reducing
the administrative burden on the Company caused by duplicative or inefficient reporting
requirements. To that end, the Commission determines that it is reasonable to eliminate
some of Avista's reporting requirements, consolidate duplicative requirements into other
existing reporting obligations, and maintain other reporting until such time as the
Commission may consider modifications with input from all utilities subject to the
reporting.Appendix B, attached to this Order, contains the Commission's disposition of
each reporting issue raised in this proceeding and the reasoning for the Commission's
determination.
Cost of Capital
Avistas Direct Testimony
409 The Company's proposed capital structure is 51.5 percent debt and 48.5 percent equity,
with a proposed cost of debt of 4.99 percent, a proposed 10.40 percent ROE, and a
requested overall rate of return(ROR) in this proceeding of 7.61 percent.629
Avista Proposed of i
Amount Percent Cost •
Total Debt $2,743,700,000 51.5% 4.99% 2.57%
Common Equity $2,588,899,805 48.5% 10.40% 5.04%
Total $5,332,599,805 100% 7.61%
410 Company witness Christie explains that maintaining a 48.5 percent common equity ratio is
necessary since Avista is dependent on raising funds in capital markets and a solid
financial profile will assist the Company in accessing debt capital markets on reasonable
terms.63' Additionally, Christie contends that a 48.5 percent common equity ratio solidifies
629 Christie,Exh. KJC-1T at 14:8-11.
610 Christie,Exh. KJC-IT at 14:13-18.
611 Christie,Exh. KJC-IT at 14:20-23.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 112
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Avista's current credit ratings and moves them closer to the long-term goal of having a
corporate credit rating of BBB+.632
411 Company witness McKenzie also argues that a common equity ratio of 48.5 percent is a
reasonable basis on which to calculate the overall rate of return for three primary reasons:
1) Avista's requested capitalization is consistent with the Company's need to support
its credit standing and financial flexibility,633
2) The proposed common equity ratio is consistent with the range of capitalizations
for the proxy utilities and their utility operating subsidiaries,634 and
3) The requested capitalization reflects the importance of an adequate equity layer to
accommodate operating risks and recognize the impact of off-balance sheet
commitments, such as purchased power agreements.635
412 McKenzie notes that for the 22 firms in the Utility Group, common equity ratios on
December 31, 2022, ranged between 33.0 percent and 63.5 percent and average 44.0
percent.636 McKenzie elaborates that Value Line expects an average common equity ratio
for the proxy group of utilities of 44.8 percent for its three-to-five year forecast horizon,
with the individual common equity ratios ranging from 27.0 percent to 59.5 percent.637
413 McKenzie further notes that the Commission has previously observed that"[i]t is
appropriate ... to afford more weight to forward considerations than to historic conditions
as we determine the appropriate equity ratio to be embedded in prospective rates."638
414 Christie testifies that the Company's proposed weighted average cost of equity is in-line
with other utilities' authorized weighted average cost of equity, and that its present
weighted average cost of equity is at the low end of actual, commission-authorized
values.639 Christie elaborates that if the Commission carries over the existing ROE of 9.4
percent and 48.5 percent equity component, the weighted cost of equity would be 4.56
percent.64o
632 Christie,Exh. KJC-IT at 15:1-3.
633 McKenzie. Exh.AMM-1T at 10:13-16.
634 McKenzie. Exh.AMM-1T at 10:17-18.
635 McKenzie. Exh.AMM-1T at 10:21-23.
636 McKenzie, Exh.AMM-1T at 38:2-4.
637 McKenzie, Exh.AMM-1T at 38:7-9.
638 McKenzie, Exh.AMM-1T at 38:10-12.
639 Christie,Exh. KJC-1T at 15:8-11.
640 Christie,Exh. KJC-1 T at 16:1-2.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 113
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415 Christie also contends that the proposed 10.40 percent ROE is reasonable to maintain
Avista's financial integrity.641 Witness McKenzie backs up this assertion by stating that
four out of five cost of equity methods the Company implemented produced an ROE of
10.4 percent.642 McKenzie posits that challenges to the Company's credit standing,
pressure of funding more than $1.5 billion of capital expenditures over 2024-2026,
Avista's reliance on hydroelectricity, the impact of the existing ERM on price volatility
exposure to wildfire, and Avista's relatively small size support this conclusion.643
416 McKenzie emphasizes that if the upward shift in investors'risk perceptions and required
rates of return for long-term capital is not incorporated in the allowed ROE, the results
will fail to meet the comparable earnings standard that is fundamental in determining the
cost of capital.644Further, McKenzie explains that other things equal, a higher debt ratio
and lower common equity ratio, translates into increased financial risk for all investors.645
McKenzie elaborates that a greater amount of debt means more investors have a senior
claim on available cash flow, thereby reducing the certainty that each will receive their
contractual payments, which is true for common shareholders as well.646 Additionally,
McKenzie asserts that a more conservative financial profile, in the form of a higher
common equity ratio, is consistent with increasing uncertainties and the need to maintain
the continuous access to capital under reasonable terms.647
417 Finally, McKenzie contends that in order to offset the debt equivalent associated with off-
balance sheet obligations, the utility must rebalance its capital structure by increasing its
common equity.641
418 The Company's requested overall cost of debt is 4.99 percent.649 The Federal Funds Rate
and Avista's short-term borrowing rate has increased about 525 basis points since the
beginning of 2022.650 Christie emphasizes that higher interest rates increase the cost of
641 Christie,Exh. KJC-1T at 16:6-7.
642 McKenzie, Exh.AMM-IT at 6:19-20.
Gas McKenzie, Exh.AMM-1T at 7:6-28.
644 McKenzie, Exh.AMM-1 T at 3 7:3-5.
645 McKenzie, Exh.AMM-1T at 37:12-13.
646 McKenzie, Exh.AMM-1 T at 37:13-18
647 McKenzie, Exh.AMM-1T at 39:3-5.
648 McKenzie, Exh.AMM-1 T at 40:11-13.
649 Christie,Exh. KJC-lT at 18:18.
650 Christie,Exh. KJC-1T at 19:23, 20:1.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 114
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borrowing under the Company's $500 million revolving credit facility and are expected to
increase the cost of issuing long-term debt over the next couple of years.651
419 Christie argues that if the Company were simply trying to grow its rate base to increase
earnings, it could fully justify increasing its capital budget to well over$600 million over
the next several years, but it is choosing not to, in order to balance investment need with
customer affordability.652
Public Counsel's Response Testimony
Return On Equity
420 Public Counsel witness D. Garrett testifies that the average results of the three models it
used to calculate ROE is 8.5 percent.653 D. Garrett argues that with respect to regulated
utilities, there has been a trend in which awarded returns fail to closely track with actual
market-based cost of capital, which leads to results that are detrimental to ratepayers and
the state's economy.654
421 D. Garrett argues that McKenzie's Capital Asset Pricing Model (CAPM) cost of equity is
overstated due to McKenzie's overestimation of the Equity Risk Premium as well as an
unnecessary size adjustment.655 Additionally, D. Garrett contends that McKenzie conducts
an additional unnecessary size adjustment and adds a flotation costs premium.656 D
Garrett further contends that the Company's Empirical Capital Asset Pricing Model
(ECAPM) further inflates that traditional CAPM's results.657
422 D. Garrett concedes that competitive firms maximize their value by minimizing their
weighted average cost of capital, or WACC, but this is not the case for regulated utilities.
651 Under the regulated rate of return model, a higher WACC results in higher rates, all
651 Christie,Exh. KJC-1T at 20:2-4.
612 Christie,Exh. KJC-IT at 34:8-12.
613 Garrett, Exh. DJG-1T at 4:7-8.
654 Garrett, Exh. DJG-1T at 7:3-6.
655 Garrett, Exh. DJG-1T at 38:1-3.
656 Garrett, Exh. DJG-1T at 38:3-4.
657 Garrett, Exh. DJG-1T at 43:4-5.
658 D. Garrett uses the terms "cost of capital" and"weighted average cost of capital, (WACC),"
interchangeably throughout their testimony. Garrett, Exh. DJG-1T at 49:6-7.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 115
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else held constant.659 Thus, because there is no incentive for a regulated utility to
minimize its WACC, D. Garrett articulates that a Commission must ensure that the
regulated utility is operating at the lowest reasonable WACC.660
423 D. Garrett testifies that according to the debt ratios recently reported in Value Line for the
utility proxy group, the average debt ratio of the proxy group is 55 percent and the average
equity ratio is 45 percent.661 D. Garrett notes that this debt ratio is notably higher than
Avista's proposed debt ratio of only 51.5 percent662 arguing that this means that Avista has
a lower level of financial risk relative to the proxy group, a discrepancy that D. Garrett
believes can be mathematically accounted for through the Hamada Model.663
424 Since Avista's debt ratio is notably lower than that of the proxy group, D. Garrett argues
that when Avista is "relevered"to match the proxy group, it results in a lower ROE than if
Avista had been operating with a capital structure equal to that of the proxy group. D.
Garrett concludes that according to the results of the Hamada model, if the Commission
were to adopt the Company's proposed capital structure, its indicated cost of equity
estimate (under the CAPM) would be 9.2 percent.664
Flotation Costs Adjustment
425 Additionally, D. Garrett disagrees with the Company's position of adding a flotation cost
adjustment of.08 percent to its overall modeling results.665 D. Garrett contends that
flotation costs are not actual "out-of-pocket" costs for the Company,666 the market already
accounts for flotation costs,667 and that it is inappropriate to add any additional basis
points to an awarded ROE proposal that is already 661
AWECs Response Testimony
659 Garrett, Exh. DJG-1 T at 51:1-3.
660 Garrett, Exh. DJG-IT at 51:7-10.
661 Garrett, Exh. DJG-IT at 52:14-16.
662 Garrett, Exh. DJG-IT at 52:16-17.
66' Garrett, Exh. DJG-IT at 52:17-20.
664 Garrett, Exh. DJG-IT at 56:2-4.
665 Garrett, Exh. DJG-1T at 44:3-6.
666 Garrett, Exh. DJG-1T at 44:11.
667 Garrett, Exh. DJG-1T at 44:19.
66' Garrett, Exh. DJG-IT at 45:17-18.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 116
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426 AWEC witness Kaufman recommends that the Commission accept Avista's proposed cost
of debt of 4.99 percent and capital structure with 48.5 percent equity and 51.5 percent
debt,669 and that Avista's return on equity be reduced from the current authorized amount
of 9.4 to 9.25 percent.670
427 Kaufman testifies that investors currently expect the U.S. equity market to have total
annual returns of 4 to 8 percent.671 Kaufman asserts that when considering the Company's
proposed proxy group of comparable investments,AWEC's cost of capital models support
an ROE in the range of 8.3 to 9.3 percent.672
428 Kaufman states that the results of their cost of capital models differ from the Company's
because AWEC excludes two models that are not consistent with financial theory, and
used model inputs that more accurately represent investor expectations.673 Kaufman urges
the Commission give no weight to the Risk Premium or Expected Earnings models, as
they believe those models are not grounded in market outcomes or consistent with
financial theory.674
429 Kaufman states that AWEC would make the following changes to the Company's cost of
capital modelling assumptions:
• AWEC assumes short term earnings growth converges to the long run GDP growth
rate from five to 25 years in a linear manner, as it argues that it is mathematically
implausible for firms to indefinitely grow at a rate greater than the GDP growth
rate.675
• AWEC assumes that utility stock betas will move towards the industry average
over time, rather than a beta of one.676
• AWEC excludes weeks with market returns more than three standard deviations
from mean weekly returns.677
661 Kaufinan, Exh. LDK-1CT at 21:3-4.
670 Kaufinan, Exh. LDK-1CT at 21:4-5.
671 Kaufinan, Exh. LDK-1CT at 21:5-8.
672 Kaufinan, Exh. LDK-1CT at 21:8-10.
67' Kaufinan, Exh. LDK-1CT at 23:3-4.
674 Kaufinan, Exh. LDK-1CT at 23:4-7.
671 Kaufinan, Exh. LDK-1CT at 23:10-13.
676 Kaufinan, Exh. LDK-1CT at 23:14-15.
67 Kaufinan, Exh. LDK-1CT at 23:16-17.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 117
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• AWEC uses a range for the equity risk premium from 5.0 to 6.9 percent.678
• AWEC excludes size premium adjustments from the ECAPM model.679
430 Kaufman opines that the ultimate question for the Commission is whether the proposed
ROE is fair and reasonable, not whether the models are fair and reasonable.680 While the
justification of models and inputs are important, Kaufman argues that the Commission can
also evaluate the ROE independently from the models.681
431 Witness Kaufman notes that AWEC's recommendation results in returns that are
somewhat higher than investor expectations.682 However, Kaufman argues that this
recommendation is closer to investor expectation than the Company's proposal.683 Further,
Kaufman contends that AWEC's ROE recommendation of 9.25 percent is well above the
short- and long-term returns expected for U.S. stocks, and reflects a return needed for an
equity investment with greater than average risk.bsa
Discounted Cash Flow (DCF)Model
432 Kaufman asserts that poor credit of specific utilities should not be resolved through return
on equity adders beyond that indicated by a market analysis.615 Kaufman proposes two
changes to the Company's Discounted Cash Flow (DCF) model:
• Consider short- and long-term growth forecasts; and
• Lengthen the second stage transition period from five to 20 years.686
433 Kaufman argues that the first recommendation reduces estimated cost of equity, while the
second increases estimated cost of equity.687 AWEC contends that net impact is an overall
reduction in the estimated cost of equity.688
671 Kaufinan, Exh. LDK-1CT at 23:18-19.
671 Kaufinan, Exh. LDK-1 CT at 24:1-2.
6a0 Kaufinan, Exh. LDK-1CT at 27:4-6
61' Kaufinan, Exh. LDK-1CT at 27:6-7.
612 Kaufinan, Exh. LDK-1CT at 27:14-15
683 Kaufman, Exh. LDK-1CT at 27:15-16.
614 Kaufman, Exh. LDK-1CT at 28:6-8.
615 Kaufinan, Exh. LDK-1CT at 29:6-8.
616 Kaufinan, Exh. LDK-1CT at 29:17-18.
687 Kaufinan, Exh. LDK-1CT at 29:18-19.
681 Kaufinan, Exh. LDK-1CT at 29:20.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 118
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Capital Asset Pricing Model
434 Witness Kaufman also proposes two changes to the Company's CAPM:
• Kaufman argues that Avista's betas are biased and grossly misrepresent reasonable
forecasts for utility stock betas. Instead,AWEC uses raw betas and betas adjusted
to the industry average.689
• For its equity risk premium,AWEC uses two alternatives that are less susceptible
to bias and more consistent with investor expectations and finance literature.690
435 Kaufman states that Avista's equity risk premium is 7.3 percent, while nearly all third-
party estimates of the equity risk premium indicate it is between 3.0 and 6.0 percent.691
436 Witness Kaufman argues including firms with growth forecasts between -20 and 20
percent is less biased.692 Kaufman refers to this symmetric filter as the "Corrected Avista
Method."AWEC testifies that while the Corrected Avista Method remains theoretically
unsound and inconsistent with investor expectations, it offers an improvement over
Avista's methodology in its direct case.693
437 Kaufman asserts that a forward-looking risk premium can be implied from current market
prices and expected cash flows.694 Kaufman states that the implied equity premium of the
trailing 12 months is the best predictor of the actual implied premium,695 and that the
January 2024 trailing 12-month period's implied equity risk premium is 4.6 percent.696
438 Kaufman also asserts that Avista's size premium model, instead of a standard CAPM
model, is not supported by peer reviewed research.69' Kaufman continues that, in general,
the size premium refers to a highly contested theory that small firms offer a size premium
that compensates investors for size related risk in addition to a market premium.698
689 Kaufinan, Exh. LDK-1CT at 31:17-19.
690 Kaufinan, Exh. LDK-1CT at 32:1-3.
691 Kaufinan, Exh. LDK-1CT at 46:13-14.
692 Kaufinan, Exh. LDK-1CT at 47:3-4.
693 Kaufinan, Exh. LDK-1CT at 47:7-9.
694 Kaufinan, Exh. LDK-1CT at 52:7-8.
69s Kaufinan, Exh. LDK-1CT at 52:9-10.
696 Kaufinan, Exh. LDK-1CT at 52:10-11.
697 Kaufinan, Exh. LDK-1CT at 53:18-20.
691 Kaufinan, Exh. LDK-1CT at 53:22-23.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 119
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Kaufman contends that due to a lack of consensus on the existence of a size premium, it is
not necessary to adjust Avista's cost of capital for a size premium.699
Floating Costs Adjustment
439 Kaufman finds Avista's floating costs unnecessary, and contends that they are a direct
result of Avista's decision to manage its equity through dividends and issuances rather
than through stock buybacks and retained earnings.700 Kaufman further argues that while
the Company provides evidence of historic flotation costs, it does not show that these
costs were historically unrecovered.701 Further, Kaufman contends that Avista fails to
demonstrate that either stock issuances or flotation costs are necessary or expected in the
test year.702
440 Finally,AWEC witness Kaufman argues that even if its cost of capital range of 8.5 percent
to 9.5 percent were increased by Avista's 8 basis point flotation cost adjustment, its
recommended cost of equity remains unchanged at 9.25 percent.703
Staff's Response Testimony
441 Staff witness Parcell testifies that the Company's proposed 48.5 percent common equity
ratio is proper and incorporates this ratio into its own cost of capital analysis.704 Based on
this analysis, Parcell recommends a 9.5 percent ROE for each year of the MYRP, for both
electric and natural gas utility operations.711
442 Parcell contends that Avista's bond ratings are similar to most electric utilities in the
U.S.706 Staff explains that this is evidenced by the relative Moody's and Standard&Poor's
debt ratings, which indicate that the Company's ratings are similar to those of Staff's
utility proxy group in developing their ROE recommendations.707 Additionally, Parcell
notes that Moody's and S&P regard Washington's recent legislation (ESSB 5295), in
699 Kaufinan, Exh. LDK-1CT at 54:12-13.
700 Kaufinan, Exh. LDK-1CT at 56:5,9-11.
701 Kaufinan, Exh. LDK-1CT at 55:22, 56:1.
702 Kaufinan, Exh. LDK-1CT at 56:2-3.
70' Kaufinan, Exh. LDK-1CT at 56:18-20.
704 Parcell, Exh. DCP-1T at 4:15-17.
701 Parcell, Exh. DCP-1T at 6:12-14.
706 Parcell, Exh. DCP-1T at 19:10.
707 Parcell, Exh. DCP-1T at 19:10-13.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 120
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addition to other favorable regulatory mechanisms, as risk-reducing to the Company.708
Witness Parcell recommends that the ROE established in this proceeding be set at a level
that is no higher than the bottom of the market-determined ROE range for the proxy
group, which is 9.5 percent.709
443 Parcell examined Avista's historic (2019-2023) capital structure ratios, which indicate that
Avista has had a slightly declining equity ratio over the past five years.710 Parcell notes
that the Avista Utilities (Division) capital structure has also declined slightly, with equity
ratios (including short-term debt) of about 48 percent or less over the past five years.711
Parcell further notes that over the past several rate proceedings for Avista, all of the
historic equity ratios used to determine cost of capital were less than 48.5 percent.712
444 Parcell argues that the capital structure used in Staff's analysis is similar to Avista's recent
actual ratios including its 2023 capital structure, and is consistent with the capital structure
of other electric and combination electric utilities.713
Discounted Cash Flow (DCF)Model
445 Parcell testifies that a range of 8.6 percent to 10.6 percent (9.6 percent mid-point)broadly
represents the current DCF-derived ROE for the proxy group.714 Parcell states that this
range includes most of the DCF proxy group rates and exceeds the low and mean/median
DCF rates.711 Parcell recommends a more narrow range of 9.0 percent to 10.0 percent(9.5
percent mid-point), which exceeds the mean/median DCF result, excludes the singular
highest DCF result, and includes many of the above-average DCF results.716
446 Parcell asserts that Avista uses four sets of DCF calculations collectively to produce DCF
ROE results with a range of 9.2 percent to 10.7 percent, three of which are within Parcell's
701 Parcell, Exh. DCP-IT at 24:28-29.
709 Parcell, Exh. DCP-IT at 25:17-20.
710 Parcell, Exh. DCP-1T at 28:2,10-11.
711 Parcell, Exh. DCP-1T at 28:11-13.
712 Parcell, Exh. DCP-IT at 28:13-16.
711 Parcell, Exh. DCP-1T at 31:18-19, 32:1.
714 Parcell, Exh. DCP-1T at 38:1-2.
715 Parcell, Exh. DCP-IT at 38:2-4.
716 Parcell, Exh. DCP-IT at 38:6-8.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 121
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own DCF results (9.2 percent, 9.7 percent and 9.9 percent).717 As a result, Parcell opines
that its DCF ROE results and the Company's DCF ROE results are similar.718
Capital Asset Pricing Model
447 Parcell notes that the CAPM results collectively indicate a ROE of 10.7 percent for the
proxy group but proposes the Commission give no weight to the CAPM modeling results
in determining Avista's ROE.719 Parcell highlights that McKenzie's testimony reaches
CAPM conclusions of 11.7 percent to 11.8, which greatly exceeds Parcell's testimony.720
Thus, Parcell finds the Company's CAPM results to be outliers that warrant no weight in
determining Avista's ROE.721
448 Parcell disagrees with McKenzie's risk premium estimates and the "size premium"
employed, as well as the use of ECAPM.722 Similar to Kaufman, Parcell argues that
Avista's 7.3 percent risk premium greatly exceeds the historic levels of risk premiums (4.9
percent to 6.4 percent), and that the Company offers no explanation as to why investors
would expect such a dramatic increase.723
449 Finally, witness Parcell argues that inclusion of a small-firm adjustment is improper and
results in an overstatement of the ROE for the proxy electric utilities.124 While Parcell
acknowledges that it may or may not be true that on an overall market basis, smaller
publicly traded firms exhibit more risk than larger firms, it believes that such is not the
case for regulated utilities.725
Comparable Earnings Analysis
450 Parcell testifies that their Comparable Earnings (CE) analysis indicates that the ROE for
the proxy utilities is no more than 9.0 to 9.5 percent (9.25 percent mid-point).726
717 Parcell, Exh. DCP-IT at 38:18-19.
711 Parcell, Exh. DCP-IT at 39:1-2.
79 Parcell, Exh. DCP-IT at 39:14-15,17-19.
720 Parcell, Exh. DCP-1T at 44:3-4.
721 Parcell, Exh. DCP-1T at 44:4-6.
722 Parcell, Exh. DCP-1T at 44:10-12.
721 Parcell, Exh. DCP-1 T at 45:1-4.
724 Parcell, Exh. DCP-IT at 45:12-13.
721 Parcell, Exh. DCP-IT at 45:18-22.
726 Parcell, Exh. DCP-1T at 51:16-17.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 122
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Parcell states that the Company's Expected Earnings (EE)Approach is a form of the
comparable earnings methodology.727 According to Parcell, the Company's tabulation of
Value Line's "expected"ROE for the proxy group shows an "Adjusted Return on
Common Equity" average of 10.8 percent.728
451 Parcell argues that it is inappropriate to focus only on expected ROE without any
reference to how such returns are perceived by investors.729 Further, Parcell notes that the
actual 2021, 2022, and 2023 median ROEs are less than the Company's 10.8 percent CE
recommendation.730 Parcell also notes that Staff's projected annual average and median
ROES are all less than Avista's 10.8 percent EE results.731
Risk Premium Model
452 Parcell argues that there are two primary problems with Company witness McKenzie's
risk premium analyses, which have the effect of overstating the ROE for the proxy
companies and Avista as:732
• The highest risk premium values over this period occurred in 2011-2022,
corresponding to the post-Great Recession period,733 and
• It is not proper to compare utility authorized ROES in the 1970's and 1980's with
current authorized ROEs.734
453 Parcell concludes that the risk premium result for Avista's ROE range is 9.8 percent to
10.8 percent(10.3 percent mid-point).735
Flotation Costs Adjustment
727 Parcell, Exh. DCP-IT at 52:12-13.
721 Parcell, Exh. DCP-IT at 52:16-17.
729 Parcell, Exh. DCP-1 T at 52:21-22.
730 Parcell, Exh. DCP-1T at 53:10-11.
731 Parcell, Exh. DCP-IT at 53:12-13.
732 Parcell, Exh. DCP-1T at 54:14-15.
733 Parcell, Exh. DCP-1T at 54:16.
734 Parcell, Exh. DCP-1T at 54:19-20.
711 Parcell, Exh. DCP-IT at 59:18-19.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 123
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454 Similar to other parties, Parcell disagrees with the Company's proposal to add a flotation
cost adjustment of.08 percent to the ROE calculation.736 Parcell notes that flotation costs
are known to investors and thus are reflected in the stock prices of companies and
therefore any effect of flotation costs is incorporated in DCF ROE model results.737 Thus,
Parcell argues that there is no need to add flotation costs to the results of ROE models.738
Parcell also notes that the Commission rejectedAvista's request to include flotation costs
in both the 2017 and 2020 GRCs.739 Parcell finds that as in those cases, the Company has
not demonstrated that it incurred flotation costs in this proceeding.740
Walmarts Response Testimony
455 Walmart witness Perry testifies that the Company's proposed ROE of 10.40 percent is
excessive.741 Perry argues that since the Company's most recent GRC was settled through
a"black-box" settlement,Avista's current ROE is unclear.142 Further, Walmart argues that
the requested ROE of 10.4 percent exceeds the average reported electric and natural gas
ROES and the 9.4 percent ROE the Commission has authorized since 2021.743
456 Further, Perry contends that according to S&P Global data, of the 118 reported electric
utility rate case ROES authorized between 2021 and present the average ROE is 9.5
percent with a median of 9.5 percent.744 For natural gas the average is 9.58 percent, with a
median of 9.59 percent. Perry notes that the Company's requested ROE of 10.4 is
significantly above the broader industry trends.745
457 Perry notes that the average ROE authorized for vertically integrated electric utilities in
2021 was 9.54 percent; 9.60 percent in 2022; 9.71 percent in 2023, and 9.72 percent thus
far in 2024.746
736 Parcell, Exh. DCP-IT at 63:15-17.
737 Parcell, Exh. DCP-1 T at 64:1-3.
731 Parcell, Exh. DCP-1T at 64:3-4.
739 Parcell, Exh. DCP-1T at 64:7-11.
740 Parcell, Exh. DCP-1T at 64:11-12.
741 Perry, Exh. LVP-IT at 8:15-16.
742 Perry, Exh. LVP-1T at 9:13-16.
743 Perry, Exh. LVP-1T at 9:20, 10:1, 13:17-18.
744 perry, Exh. LVP-1 T at 10:21, 11:1-4.
741 perry, Exh. LVP-IT at 11:4-6, 15:10-12.
746 Perry, Exh. LVP-1T at 11:12-15.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 124
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458 Perry elaborates that the average ROE authorized for investor-owned gas utilities in 2021
was 9.56 percent; 9.53 percent in 2022; 9.58 percent in 2023. and 9.93 percent thus far in
2024.747 As such, Perry again argues that the Company's proposed 10.40 percent ROE is
counter to broader industry trends.748
459 Perry states that if the Commission approved an electric ROE of 9.62 percent for Avista, it
would reduce the Company's propose electric revenue requirement increase for RY1 by
$11.6 million, or 15.1 percent, inclusive of taxes.749 For natural gas, Perry states that an
authorized ROE of 9.58 percent would reduce the Company's proposed natural gas
revenue requirement increase for RY1 by $3.1 million, or 17.9 percent, inclusive of
taxes.7so
Avistas Rebuttal Testimony
460 On rebuttal, Christie maintains the Company's proposed cost of capital: a rate of return of
7.61 percent, a capital structure of 48.5 percent equity and 51.5 percent debt, a 4.99
percent cost of debt, and a 10.4 percent ROE.751
461 Christie contends that the ROE recommendations of other parties' COC witnesses ("Other
Witnesses") fall well below a fair and reasonable level for the Company's electric and gas
operations.751 Christie argues that the Other Witnesses' analyses are undermined by errors
and methodological flaws and fall below accepted benchmarks.753 Christie asserts that
adjusting national authorized ROES for electric utilities to reflect current capital market
conditions, in and of itself, implies an ROE of approximately 10.43 percent.754
462 Further, Christie argues that adjusting previous ROES approved by the Commission to
account solely for increases in bond yields implies a current return on equity of 10.43
percent.755 Further, adjusting the risk premium of 5.01 percent to the averaged Baa utility
bond of 5.83 percent as of June 2024 results in an implied return on equity of 10.84
747 Perry, Exh. LUP-IT at 15:15-17.
741 Perry, Exh. LUP-IT at 15:17-18.
741 Perry, Exh. LUP-1 T at 12:6-7, 13:1-2.
750 perry, Exh. LUP-1 T at 16:6-7, 17:1-2.
751 Christie,Exh.KJC-4T at 18:13-15.
712 Christie,Exh.KJC-4T at 19:15-17.
753 Christie,Exh.KJC-4T at 19:17-19.
714 Christie,Exh.KJC-4T at 19:19-21.
711 Christie,Exh.KJC-4T at 20:1-2.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 125
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percent.756 Christie notes that the expected returns for the Other Witnesses' own proxy
groups fall in the range of approximately 10.0 percent to 10.7 percent.757 Finally, Christie
testifies that the Company's earned ROE has fallen below its authorized ROE in 11 of the
past 14 years, in many cases by a substantial margin, especially without the means to
address regulatory lag since 2018.758 Christie argues that these factors further support
Avista's 10.40 percent ROE request in this case.759
Response to Staff Testimony
463 McKenzie argues that Staff's recommendation contains numerous flaws that lead to a
significant downward bias, including:760
• Staff's criteria for its proxy group are arbitrary, unnecessarily restrict the size of
the group, and undermine the reliability of the analyses;761
• Staff's DCF analysis relies on historical data, including growth rates based on
dividends and book value; the decision to average individual growth rates together
to compute a single DCF estimate for each company; computational shortcomings
in the retention growth calculation, and subjectively excluding a 10.6 percent DCF
result as an outlier;762
• Staff's CAPM analysis relies on historical data when the ROE estimation process
is clearly forward-looking; adopting an improper methodology to calculate the
historic market risk premium; failure to account for the impact of firm size, and
subjectively excluding a 10.7 percent CAPM result as an outlier;763
• Staff's CE analysis relies on historical data in a process that is forward-looking;
considers market-to-book(NIB), and fails to apply an essential mid-year
adjustment factor; and764
• Staff's selective exclusion of available data in its risk-premium approach results in
subjective bias.761
756 Christie,Exh.KJC-4T at 20:11-14.
757 Christie,Exh.KJC-4T at 20:2-5.
758 Christie,Exh.KJC-4T at 22:13-15.
751 Christie,Exh.KJC-4T at 20:14-15.
760 McKenzie, Exh.AMM-15T at 3:6-7.
761 McKenzie, Exh.AMM-15T at 3:8-10.
762 McKenzie, Exh.AMM-15T at 3:11-15.
763 McKenzie, Exh.AMM-15T at 3:17-22.
764 McKenzie, Exh.AMM-15T at 3:23-27.
765 McKenzie, Exh.AMM-15T at 3:28-29.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 126
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464 In addition to the perceived modeling flaws, McKenzie provides several other arguments
opposing Staff's recommended ROE. First, McKenzie asserts that utility bond yields are
now approximately 260 basis points higher than when the Commission authorized Avista's
current ROE of 9.40 percent, suggesting that even a gradual move towards a fair ROE
requires far more than a 10-basis point increase.766 Second, witness McKenzie contends
the Commission made no specific adjustment to Avista's 9.40 percent ROE on the basis of
the Company's MYRP, despite the enactment of ESSB 5295 five months prior.767
465 Regarding Staff's DCF model,Avista argues that historical growth rates can differ
significantly from the forward-looking growth rate required by the DCF model.768 The
Company explains that to the extent historical trends for utilities are meaningful, they are
already captured in projected growth rates.769 Further, McKenzie contends that Staff
simply calculated the average of the individual growth rates with no consideration for the
reasonableness of the underlying data.770 As such, the Company asserts that Staff's DCF
analysis included individual growth rates that do not reflect investors' expectations.771
466 Responding to Staff's CAPM model, McKenzie opines that Staff analysis is based entirely
on historical, not projected, rates of return, significantly understating investors'required
rate of retum.772 McKenzie also takes issue with Staff calculating its equity risk premium
using the total return for Duff&Phelps' (Kroll's) long-term government bond series773 ; ,,
As a result, the Company concludes that two of three historical market risk premium
(MRP)s and the resulting CAPM cost of equity estimate are all understated.77' Finally,
McKenzie contends that averaging Staff's 7.82 percent MRP with the 7.17 percent long-
horizon historical MRP reported by Kroll results in an average of 7.5 percent.775
Substituting this average MRP into Staff's CAPM study results in an average return on
equity of 11.7 percent.776
766 McKenzie, Exh.AMM-15T at 32:16-20.
767 McKenzie, Exh.AMM-15T at 35:9-11.
768 McKenzie, Exh.AMM-15T at 39:3-4.
769 McKenzie, Exh.AMM-15T at 39:4-5.
770 McKenzie, Exh.AMM-15T at 43:6-7.
771 McKenzie, Exh.AMM-15T at 43:7-9.
772 McKenzie, Exh.AMM-15T at 46:12-13, 47:5.
773 McKenzie, Exh.AMM-15T at 51:11-15.
774 McKenzie, Exh.AMM-15T at 51:15-16.
775 McKenzie, Exh.AMM-15T at 52:3-5.
776 McKenzie, Exh.AMM-15T at 52:5-6.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 127
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467 McKenzie acknowledges that arguments regarding the implications of a M/B ratio greater
than 1.0 in comparative earnings analyses are not uncommon, however, the Company is
not aware of a single instance in recent history where a state regulator has relied on M/B
ratios as the basis to evaluate a fair ROE.777 Further, McKenzie emphasizes that the fallacy
of relying on M/B ratios in evaluating cost of equity estimates has been explicitly
recognized and characterized by FERC as "academic rhetoric."778
468 Witness McKenzie contends that Staff subjectively chooses to truncate the data available
in its risk premium approach by ignoring all observations prior to 2012.779 By choosing a
truncated period for its risk premium study, McKenzie argues that Staff unnecessarily
introduces a subjective bias that undermines the credibility of its analysis.780
469 McKenzie notes that the fact that Staff's expected earnings results exceed authorized
returns says nothing about the validity of its expected earnings ROE estimate.781
470 Finally, McKenzie maintains that flotation costs are legitimate expenses and that unless a
discreet adjustment is made to recognize them, they will not be recovered in the rate
setting process.782
Response to Public Counsel
471 In response to Public Counsel, McKenzie finds Public Counsel's recommendation of an
ROE of 8.50 percent extreme, and that the Commission should reject Public Counsel's
conclusions and recommendations in their entirety.78' The Company provides the
following reasons to support this conclusion:
• Public Counsel's DCF approach ignores projected earnings growth rates; relies on
a"sustainable" growth DCF model that wrongly assumes investors anticipate
every firm in the electric utility industry to mimic a long-term growth forecast for
GDP; and fails to remove illogical estimates;784
777 McKenzie, Exh.AMM-15T at 67:4-6.
778 McKenzie, Exh.AMM-15T at 67:6-8.
79 McKenzie, Exh.AMM-15T at 68:12-13.
780 McKenzie, Exh.AMM-15T at 67:13-15.
781 McKenzie, Exh.AMM-15T at 71:10-12.
782 McKenzie, Exh.AMM-15T at 73:11-12.
783 McKenzie, Exh.AMM-15T at 4:1-2.
784 McKenzie, Exh.AMM-15T at 4:4-9.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 128
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• Public Counsel's CAPM application uses unreliable, illogical, and undocumented
inputs, relies on historical data that is inconsistent with this method's assumptions,
and fails to incorporate the size adjustment;785
• Public Counsel's suggestion that Avista's capital structure would distinguish the
Company's overall investment risk from other electric utilities is incorrect, and the
"Hamada" adjustment to its CAPM results is deeply flawed and should be given no
weight;786 and
• Public Counsel's analysis fails to apply the risk premium approach.787
472 McKenzie highlights that Public Counsel's recommendation is 130 basis points below the
average allowed ROE for other vertically integrated electric utilities in 2023.788 McKenzie
further argues that such an outcome would fall well below the returns available from
comparable-risk investments and undermine the Company's financial integrity.789
473 McKenzie explains that the practical impact of Public Counsel's approach is that
differences in ROE are explained only by differences in dividend yield, which violates
basic tenets of securities valuation and the DCF model.790
474 McKenzie further argues that the fundamental difference between the Company's CAPM
analysis and Public Counsel's is that the Company's looks to the future return
expectations, while Public Counsel's "implied equity risk premium"methodology is based
on historical data.791 As a result, McKenzie asserts that Public Counsel's methodology is
inconsistent with the assumptions of the CAPM.792
475 McKenzie also refutes Public Counsel's contention that Avista's risk premium approach is
not market based.793
476 Witness McKenzie argues that a fair ROE is not evaluated in a vacuum; it is predicated on
analyses for a group of comparable risk utilities, with the relative reliance on equity
781 McKenzie, Exh.AMM-15T at 4:10-12.
786 McKenzie, Exh.AMM-15T at 4:13-15.
787 McKenzie, Exh.AMM-15T at 4:16-17.
788 McKenzie, Exh.AMM-15T at 77:21, 78:1-2.
789 McKenzie, Exh.AMM-15T at 78:2-4.
790 McKenzie, Exh.AMM-15T at 90:1-3.
791 McKenzie, Exh.AMM-15T at 95:4-6.
792 McKenzie, Exh.AMM-15T at 95:9-10.
793 McKenzie, Exh.AMM-15T at 102:14, 18-20.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 129
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financing being only one factor considered in this overall assessment.794 As a result,
McKenzie contends that there is simply no basis for Public Counsel's proposed CAPM
adjustment based only on variations in equity ratios between individual utilities.795
Response to AWEC
477 McKenzie testifies that AWEC's recommendation to reduce Avista's ROE from 9.40
percent to 9.25 percent makes no economic sense since investors'required rate of return
has increased significantly since the Company's last litigated rate proceeding.796
Additionally, McKenzie lists the following reasons in support of its position:
• The return benchmarks cited by AWEC provide no meaningful basis to evaluate a
fair ROE for Avista;797
• There is no support for the assumptions of AWEC's three-stage DCF model;798
• AWEC's constant growth DCF application is based on the incorrect notion that
investors expect growth for all utilities to converge to a long-term forecast of
growth in GDP;799
• AWEC's beta-calculations are subjective and results-oriented, which run counter to
those published by reputable sources;800 and
• The two MRPs AWEC used to apply the CAPM either lack any clear foundation or
were based on illogical modifications.Additionally,AWEC's CAPM results are
downward biased because Kaufman fails to account for the implications of firm
size."'
478 McKenzie asserts that AWEC's proposal to decrease Avista's ROE when capital costs have
demonstrably increased shows that its recommendation is divorced from fundamental
financial principles and should be given no weight.802 McKenzie further argues that
794 McKenzie, Exh.AMM-15T at 107:12-14.
795 McKenzie, Exh.AMM-15T at 107:14-15, 108:1.
796 McKenzie, Exh.AMM-15T at 4:20-23.
797 McKenzie, Exh.AMM-15T at 4:25-26.
798 McKenzie, Exh.AMM-15T at 5:1-2.
799 McKenzie, Exh.AMM-15T at 5:3-6.
800 McKenzie, Exh.AMM-15T at 5:7-10.
801 McKenzie, Exh.AMM-15T at 5:11-15.
802 McKenzie, Exh.AMM-15T at 114:7-10.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 130
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AWEC's 4.0 to 8.0 percent market return range is meaningless and cannot be used to make
the case that its ROE recommendation is conservative.803
479 McKenzie also argues that there is no basis for AWEC's assertion that the use of the
current five-year betas in the CAPM "overinflates utility cost of capital."804
Response to Walmart
480 McKenzie argues that although Walmart does not conduct any analysis or provide an
explicit ROE recommendation, it expresses concern over Avista's ROE request based on a
comparison with historical allowed ROEs and customer impact consideration.805
McKenzie contends that comparisons with historical allowed ROES are overly simplistic
and fail to account for the significant increase in long-term capital costs.806
481 McKenzie argues that the cost of equity is established in competitive capital markets, and
Walmart's suggestion that Avista's ROE might be artificially suppressed to minimize
customer impacts ignores the requirements of regulatory standards, and the long-term
harm that can result if investor confidence is undermined.807 Further, McKenzie contends
that while Walmart's data on allowed ROEs can be useful in the Commission's
deliberations, it is not a substitute for the detailed analyses presented in its direct
testimony.808 Finally, McKenzie refutes Walmart's suggestion that a lower ROE is to
customers'benefit.809 McKenzie argues that while a downward-biased ROE may provide
the illusion of"savings" in the form of a lower revenue requirement in the short-term, the
long-term impact of an inadequate ROE can work to the disadvantage of customers."'
Avista's General Rebuttal of the Other Parties
482 McKenzie argues that the 8.50 percent to 9.50 percent ROE recommendations of the Other
Witnesses fall approximately 93 to 193 basis points below national average authorized
ROES, once adjusted for current interest rates.811 Additionally, McKenize contends that the
803 McKenzie, Exh.AMM-15T at 115:3-4.
804 McKenzie, Exh.AMM-15T at 121:18-20.
805 McKenzie, Exh.AMM-15T at 5:18-20.
806 McKenzie, Exh.AMM-15T at 5:22-24.
807 McKenzie, Exh.AMM-15T at 5:25-28.
808 McKenzie, Exh.AMM-15T at 135:5-6.
809 McKenzie, Exh.AMM-15T at 135:19-20.
810 McKenzie, Exh.AMM-15T at 135:20, 136:1-2.
81 McKenzie, Exh.AMM-15T at 6:8-10.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 131
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ROE disparity is even more evident when considering that utility bond yields have
increased approximately 250 basis points since the Commission approved an ROE of 9.40
percent for Avista.812
483 McKenzie explains that trends in 30-year Treasury bonds and utility bonds are relevant
indicators for evaluating cost of equity.813 Witness McKenzie states that trends in these
bond yields since Avista's last rate proceeding demonstrate a substantial increase in the
returns on long-term capital demanded by investors.814 Additionally, McKenzie notes that
key interest rate benchmarks indicate that investors'required return on debt securities has
increased an average of 170 basis points from September 2021 to June 2022, and another
99 basis points to June 2024.s1s
484 Thus, McKenzie argues that the cost of capital—both debt and equity—has increased
significantly since the Commission authorized the current ROE of 9.40 percent.816 Further,
McKenzie contends that there is no evidence risks associated with increased cost levels for
capital projects have been mitigated by any offsetting risk since the Commission entered
its final order in the 2022 GRC.817
485 Additionally, McKenzie argues that the Other Witnesses do not address the implications of
declining utility credit ratings, increased financial pressures, or the heightened risk posed
by wildfires in their ROE recommendations. Nor does McKenzie believe their
recommendations reflect the significant upward trend in capital costs since Avista's last
litigated rate proceedings."'
486 McKenzie testifies that the ROE recommendations of Public Counsel and AWEC are
unmoored from fundamental principles of finance and violate the basic, common-sense
relationship between interest rates and the cost of equity."' McKenzie finds it
inconceivable that the Company's ROE could have decreased when other capital costs
have significantly increased.120
812 McKenzie, Exh.AMM-15T at 6:10-12.
813 McKenzie, Exh.AMM-15T at 7:15-18.
814 McKenzie, Exh.AMM-15T at 8:12-15.
815 McKenzie, Exh.AMM-15T at 9:5-6.
816 McKenzie, Exh.AMM-15T at 14:14-16.
817 McKenzie, Exh.AMM-15T at 15:7-10.
818 McKenzie, Exh.AMM-15T at 16:13-16.
819 McKenzie, Exh.AMM-15T at 17:5-7.
820 McKenzie, Exh.AMM-15T at 17:4-5.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 132
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487 McKenzie states that despite interest rates having increased substantially—which means
the cost of equity has climbed—Staff is arguing that Avista's ROE should be increased by
just 10 basis points, while Public Counsel and AWEC are arguing for a reduction.821
McKenzie believes that these outcomes are not credible and would violate accepted
principles of finance.822 Therefore, Company witness McKenzie argues that the
Commission should specifically reject the ROE recommendations of Public Counsel and
AWEC on this basis.823
488 McKenzie also argues that adjusting historical average allowed ROES from 2020 to Q 1
2024 to reflect current capital market conditions results in an implied cost of equity of
10.43 percent, therefore substantiating that the non-Company ROE recommendations are
insufficient.824
489 Finally, McKenzie reiterates that the average ROES for the non-utility group reported in
direct testimony range from 10.5 percent to 11.0 percent, and average 10.8 percent.'25
McKenzie asserts that a comparison of objective risk indicators shows the non-utility
group to be less risky than the utility group or Avista, and thus these ROE results provide a
conservative guideline for a fair ROE.826
Parties'Briefs
Avista's Brief
490 In its brief,Avista reiterated that Avista's earned ROE has fallen below its authorized ROE
in 11 of the past 14 years, in many cases by a substantial margin, especially without the
means to otherwise address regulatory lag since 2018, with an attrition adjustment.827 The
821 McKenzie, Exh.AMM-15T at 20:8-10
822 McKenzie, Exh.AMM-15T at 20:11.
823 McKenzie, Exh.AMM-15T at 20:11-13.
824 McKenzie, Exh.AMM-15T at 24:1-4.
825 McKenzie, Exh.AMM-15T at 31:7-9.
826 McKenzie, Exh.AMM-15T at 31:9-11.
827 Avista's Post-Hearing Brief, at¶30. Moody's noted that"the lag in cash flow recovery and
limited revenue increases have pressured Avista's credit metrics particularly during a time when
the sector faced material headwinds from higher natural gas prices and other cost pressures."
(Moody's Investors Service,Avista Corp.,update to credit analysis, Credit Opinion(Aug. 16,
2023)). Similarly, S&P reported the prospect of lowering Avista's ratings over the next 12 to 24
months if financial metrics are pressured by"regulatory lag."(S&P Global Ratings,Avista Corp.,
Ratings Direct,Ratings Score Snapshot(Dec. 8,2023)). (Christie,Exh. KJC-4T at 22:17-19).

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 133
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Company took issue with the other parties'recommendations for Avista's ROE, 828
specifically that the Other Witnesses'ROE recommendations fall below accepted
benchmarks.829
491 Avista also argues that the Other Witnesses'ROE analyses are undermined by errors and
methodological flaws, including, among other things: 1) failure to account for
significantly higher capital costs, declining creditworthiness, and rising risk exposures,
such as wildfires; 2) errors in the specification of their proxy groups; and 3) unsupported
growth rate assumptions in the application of the discounted cash flow ("DCF") model
that do not reflect investors' expectations.830 Avista then details and addresses the
particulars of recommendations by each of the Other Witnesses.831
Staff's Brief
492 Staff argues that the Company's conclusions are unsupported in McKenzie's testimony
and contradictory with his past testimony before this Commission.832 Staff asserts that the
Company's recommendations concerning its ROE are quite simply in direct contrast to the
objective facts presented by the parties in this case. Staff concedes that Avista is deserving
of a moderate rate increase, as stated above, but argues the wildly inflated numbers
McKenzie presented are contrary to both Commission precedent and reasoned policy.833
493 Additionally, with regard to bond yields, Staff argues that Avista's testimony is
contradictory with current bond trends and primarily the result of McKenzie's continued
use of the disfavored CAPM. Staff alleges that the CAPM has been deemphasized by the
Commission.831 Staff claims that witness McKenzie goes beyond just using the CAPM but
creates an ECAPM by substituting actual betas with hypothetical ones for the chosen
proxy group, skewing an already flawed model.831 Staff rejects Avista's proposed 10 basis
point increase of the Company's ROE using ECAPM.836
828 Avista's Post-Hearing Brief, at¶¶31-45.
82'Avista's Post-Hearing Brief, at¶32.
830 Avista's Post-Hearing Brief, at¶32.
831 Avista's Post-Hearing Brief, at¶¶33-45.
832 Staff's Post-Hearing Brief, at¶38.
833 Staff's Post-Hearing Brief, at¶40.
834 Staff's Post-Hearing Brief, at¶41-42 (citing, Wash. Utils. & Transp. Comm'n a Avista Corp,
Dockets UE-200900&UG-200901, Order 08/05, 39¶ 100 (Sept. 27,2021)).
835 Staff's Post-Hearing Brief, at¶42 (referencing,McKenzie,AMM-1T, at 47:8-9).
836 Staff's Post-Hearing Brief, at¶45.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 134
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494 Next, Staff argues that contrary to Avista's assertions, the Company is actually financially
healthy with an improving credit rating.837 Staff adds that Avista also has no fears of
lessened access to capital.As McKenzie testified,Avista's 10.4 percent return on equity is
not a requirement to obtain funding.838 Staff alleges that Avista's capital structure through
its last case was 48.5 percent common equity, the same as the proposed structure in this
case.839 Yet,Avista's actual common equity ratio stands at 46.2 percent, well below its
current authorized rate.840 Thus, Staff asserts that"by keeping its true equity lower, it can
charge ratepayers at an already inflated hypothetical rate structure of 48.5 percent while
pocketing the difference."841
495 Staff contends that, contrary to Avista's argument, expansion of infrastructure is
immaterial to ROE or cost of capital considerations.842 Further, Staff argues against the
Company's position that"constructive" and"supportive"regulation necessitates a higher
ROE, and that constructive regulation is not relevant to this case.843 Staff also rejects
Avista's attrition claim, and claims that the Company has not conducted and presented
studies demonstrating such attrition, nor has it shown any particularized reasonings for
why that attrition was outside the realm of the Company's control.844
496 Staff asserts that the Commission has a history of applying gradualism to ROE in rate
cases, including in Avista's own prior cases. Staff asserts that this approach benefits
ratepayers and utilities alike, and the Commission should reaffirm its use for ROE
considerations.845
Flotation Costs
497 Staff asserts that the Commission should reject Avista's flotation adjustment as the
Commission has denied this particular type of adjustment in prior litigated cases involving
83' Staff's Post-Hearing Brief, at¶¶45-46.
838 Staff's Post-Hearing Brief, at¶47 (referencing,McKenzie,TR, at 151:7-13).
839 Staff's Post-Hearing Brief, at¶47.
840 Staff's Post-Hearing Brief, at¶47 (referencing,Parcell, DCP-1 T, at 30:16-17).
841 Staff's Post-Hearing Brief, at¶47.
842 Staff's Post-Hearing Brief, at¶48.
843 Staff's Post-Hearing Brief, at¶49.
844 Staff's Post-Hearing Brief, at¶50.
845 Staff's Post-Hearing Brief, at¶53.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 135
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Avista.846 Staff argues that flotation costs are a known factor and are therefore already
incorporated into investor evaluations of stock by the ROE models used to calculate a
company's authorized return.847 Staff posits that adding flotation costs to rates would be
redundant and would in essence ask ratepayers to pay for flotation costs twice, once when
the costs were naturally incorporated in rates, and the second time through the Company's
proposed added adjustment.848 Staff also argues that that the Company has not presented a
rationale or argument as a basis for the Commission to change its position on flotation
costs from prior cases.849
Public Counsel's Brief
498 Public Counsel states that the Commission should set a ROE that is limited to Avista's
actual cost of capital.850 In that vein, Public Counsel argues that a more accurate ROE
given current economic realities would be 8.5 percent, resulting in an overall ROR of 6.86
percent, as opposed to the Company's proposed 10.4 percent ROE, which would result in
an overall ROR of 7.61 percent.851 Public Counsel adds that there is evidence in this
record that Avista's awarded rates have consistently exceeded the rates that are necessary
for capital acquisition and higher than are warranted by Avista's business risk."' Public
Counsel alleges that Avista's claim of under earning and attrition have not interfered with
the Company's access to capital or its financial soundness.853
499 Public Counsel argues that the Commission should accept its recommendation to lower
the Company's ROE from 9.4 percent, and that appropriate range for Avista's ROE is
is 8.0 percent to 9.2 percent.854 Public Counsel believes that lowering Avista's ROE will
not affect its financial performance.sss
846 Staff's Post-Hearing Brief, at¶54; Wash. Utils. & Transp. Comm'n a Avista Corp.,Dockets
UE-170485 &UG-170486, Order 07/02, at 30¶75;Avista,Dockets UE-200900&UG-200901,
Final Order 08/05, at 38¶99.
847 Staff's Post-Hearing Brief, at¶55.
848 Staff's Post-Hearing Brief, at¶55.
849 Staff's Post-Hearing Brief, at¶56.
850 public Counsel's Post-Hearing Brief, at¶2 and¶79.
851 public Counsel's Post-Hearing Brief, at¶79 (referencing, Christie, Exh. KJC-4T at 18:13-15).
852 Public Counsel's Post-Hearing Brief, at¶86.
853 Public Counsel's Post-Hearing Brief, at¶87.
854 public Counsel's Post-Hearing Brief, at¶89 (referencing, Garrett,Exh.DJG-1T at 3 Figure 1).
855 public Counsel's Post-Hearing Brief, at¶95.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 136
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500 Public Counsel contends that the Commission should discount Avista's modeling because
it does not accurately predict or explain investor behavior, and because the Company's
witness admits that his modeling and testimony are not useful to the Commission in
achieving the goals of Bluefield and the Commission's test.856 Public Counsel then goes on
to detail its additional reasons for its position that the Commission should not rely on
McKenzie's financial modeling, which allegedly result in bias and overstated growth
forecasts.857
Flotation Costs
501 Consistent with other party witnesses, Public Counsel argues that the Commission should
reject Avista's request for flotation costs. 858 Public Counsel adds that"these costs are not
out-of-pocket costs for the Company, and the Commission has no metric by which to
determine which party would have negotiated to capture that additional value; i.e. would
the stock price have dropped or risen slightly."859 Public Counsel opines that only
competition could fairly make that allocation.860
AWEC's Brief
502 AWEC argues that Avista's ROE should be lowered from its current level of 9.4 percent
and set at 9.25 percent.861 AWEC makes a similar argument to Staff that the Commission
should give little weight to usage of CAPM and ECAPM, based the Commission's recent
skepticism about those models.862 AWEC also takes issue with Avista's models for Risk
Premium and Expected Earnings as AWEC claims that FERC has rejected use of both
models.86'AWEC does not take issue with Avista's DCF model but rather the results of its
analysis, which yielded a cost of equity range between 9.2 percent and 11.9 percent, an
exceedingly broad range.AWEC believes that this range is too broad.864 AWEC opines
that its DCF results are more accurate as they yield a range between 8.5 percent and 9.2
ash public Counsel's Post-Hearing Brief, at¶96 referencing McKenzie,TR. at 151:1-6.
857 Public Counsel's Post-Hearing Brief, at¶¶82-83, 97-101.
858 Public Counsel's Post-Hearing Brief, at¶93 referencing Garrett, Exh. DJG-1T at 45:1-4.
859 public Counsel's Post-Hearing Brief, at¶93 referencing Garrett, Exh. DJG-1T at 45:5-16.
860 public Counsel's Post-Hearing Brief, at¶93.
861 AWEC's Post-Hearing Brief, at¶ 13.
862 AWEC's Post-Hearing Brief, at¶ 15.
863 AWEC's Post-Hearing Brief, at¶ 17.
864 AWEC's Post-Hearing Brief, at¶ 18.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 137
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percent, which is also in line with Public Counsel and Staff's models. Consequently,
AWEC posits that its recommended 9.25 percent is reasonable.865
Flotation Costs
503 As with other witnesses,AWEC recommends that the Commission reject Avista's flotation
cost adjustment, as it did in Avista's 2020 general rate case.866 AWEC claims that"while
Mr. McKenize attempted to respond to the Commission's criticism of this adjustment in
that case by showing Avista's actual flotation costs,Avista fails to show both that it did not
recover these flotation costs through its authorized rates and that Avista will incur flotation
costs in the test year."867
Walmart's Brief
504 Walmart contends that Avista's request for an ROE of 10.40 percent is not just and
reasonable."' In support of its position,Walmart cites to its testimony in which it alleges
that the nationwide average ROE is 9.5 percent,869 and that the average ROE for vertically
integrated utilities authorized from 2021 through the present is 9.62 percent,870 well below
Avista's proposed ROE of 10.40 percent.871 Walmart believes that increased costs to
retailers, in the form of higher energy costs resulting from a high ROE, will result in
passing through higher prices to retail consumers.172 For these reasons, Walmart requests
that the Commission deny Avista's proposed ROE of 10.40 percent and set a just and
reasonable ROE.873
Decision
86s AWEC's Post-Hearing Brief, at¶ 19-20.
866 AWEC's Post-Hearing Brief, at¶ 14; See also Docket Nos. UE-200900,UG-200901,UE-
100894 (Consolidated), Order 08-05¶96("2020 GRC Order").
867 AWEC's Post-Hearing Brief, at¶ 14.
868 Walmart's Post-Hearing Brief, at p. 1.
869 Walmart's Post-Hearing Brief, at p. 2 citing Perry, Ex.LUP-lT at 11:2.
870 Walmart's Post-Hearing Brief, at p. 2 citing Perry, Ex.LUP-1T at 11:12.
871 Walmart's Post-Hearing Brief, at p. 2.
872 Walmart's Post-Hearing Brief, at p. 1.
873 Walmart's Post-Hearing Brief, at p. 2.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 138
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505 In determining cost of capital,the Commission is guided by the longstanding precedent of
the Hope874and Bluefield875 cases. The Commission will analyze service on debt as well as
the return to the equity owner, which should be commensurate with returns on investments
in other enterprises having corresponding risks. That return, moreover, should be
sufficient to assure confidence in the financial integrity of the enterprise, so as to maintain
its credit and to attract capital.876 Moreover, "what the company is entitled to ask is a fair
return upon the value of that which it employs for the public convenience. There must be a
fair return upon the reasonable value of the property at the time it is being used for the
public."877
506 Based on this guidance of the Hope and Bluefield cases, in Wash. Utils. & Transp.
Comm'n a PacifiCorp, we stated that"a utility's cost of capital has three main
components: capital structure, return on equity, and cost of debt. Taking all these factors
into account, it is possible to describe the utility's overall rate of return(ROR), also known
as the weighted average cost of capital (WACC)."878
Cost of Capital (ROE)
507 As was stated previously,Avista proposes a capital structure of 51.5 percent debt and 48.5
percent equity, a proposed cost of debt of 4.99 percent, a proposed 10.40 percent ROE,
and a requested overall ROR in this proceeding of 7.61 percent.879 Avista contends that the
proposed 10.40 percent ROE is reasonable to maintain Avista's financial integrity.880
Avista supports this assertion by stating that four out of five cost of equity methods they
implemented produced an ROE of 10.4 percent.881 Avista also alleges that its earned ROE
has fallen below its authorized ROE in 11 of the past 14 years, in many cases by a
substantial margin, especially without the means to address regulatory lag since 2018.882
874 Fed. Power Comm'n a Hope Nat. Gas Co., 320 U.S. 591, 64 S. Ct. 281, 88 L. Ed. 333 (1944).
875 Bluefield Water Works &Improvement Co. a Pub. Serv. Comm'n, 262 U.S. 679,43 S. Ct. 675,
67 L. Ed. 1176(1923).
876 Federal Power Com. v Hope Natural Gas Co., 320 U.S. 591, 603 (1944).
877 Bluefield Water Works &Improvement Co. a Pub. Sere Comm'n, 262 U.S. at 690.
878 Wash. Utils. & Transp. Comm'n a PacifiCorp, Dockets UE-230172 &UE-210852, Order 08,¶
112 (Mar. 19,2024); See also Bluefield, 262 U.S. at 689-90.
879 Christie,Exh. KJC-1T at 14:8-11.
"0 Christie,Exh. KJC-lT at 16:6-7.
881 McKenzie, Exh.AMM-1T at 6:19-20.
112 Christie,Exh.KJC-4T at 22:13-15.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 139
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508 In turn, Staff does not contest the Company's capital structure, i.e., equity ratio, nor does
Staff contest Avista's cost of debt.883 However, Staff does contest Avista's proposed ROE.
Staff argues that the Company's proposed increase, from 9.4 percent to 10.4 percent,
represents a significant departure from recent ROES the Commission has approved for
Avista.884 Staff further argues that Avista's proposed ROE is not supported by testimony
and is inconsistent with Commission policies.88'An example, among others, Staff
provides as inconsistent with the Commission's policies is the Company's use of CAPM
and ECAPM to calculate ROE.886 Staff recommends a 9.5 percent ROE for each year of
the MYRP, for both electric and natural gas utility operations, a 10 basis point increase to
ROE.sa7
509 Similar to Staff, Public Counsel does not contest the Company's equity ratio, nor does it
contest Avista's cost of debt, but does contest Avista's proposed ROE (10.4 percent) and
its overall ROR(7.61 percent).888 Public Counsel argues that a more accurate ROE, given
current economic realities would be 8.5 percent, resulting in an overall ROR of 6.86
percent.889 Public Counsel, like Staff, also takes issue with Avista's financial modeling,
and argues that the Commission should continue to lower Avista's ROE to be consistent
with the actual cost of capital.890
510 AWEC also disagrees with Avista's modeling claiming that the Commission is skeptical of
the CAPM and ECAPM models on which Avista relies.891 AWEC states that of the other
forms of modeling Avista uses, discounted cash flow, is one acceptable to the
Commission. However,AWEC disputes the inputs Avista uses in its DCF modeling to
arrive at the range for its ROE, between 9.2 percent and 11.9 percent.892 AWEC believes
that this range is too broad, and that a range of 8.5 and 9.3 percent from AWEC's DCF
883 Staff's Post-Hearing Brief, at¶32.
884 Staff's Post-Hearing Brief, at¶33.
885 Staff's Post-Hearing Brief, at¶41-51.
886 Staff's Post-Hearing Brief, at¶41-45.
117 Parcell, Exh. DCP-1T at 6:12-14.
888 Public Counsel's Post-Hearing Brief, at¶79.
889 Public Counsel's Post-Hearing Brief, at¶79 referencing Garrett,MEG-3 (schedule 3.10)and
MEG-4 (scheduled 4.10).
ago public Counsel's Post-Hearing Brief, at¶¶89-101.
891 AWEC's Post-Hearing Brief, at¶ 16.
892 AWEC's Post-Hearing Brief, at¶ 18.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 140
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calculations is more in line with the results from Public Counsel's and Staff's DCF
models.AWEC recommends a ROE of 9.25 percent.893
511 Walmart opposes Avista's proposed ROE and asserts that the increased cost to retailers
like Walmart can put pressure on consumer prices and on the other expenses required by a
business to operate, and this can result in passing through higher prices to consumers.894
Walmart contends that Avista's 10.4 percent ROE is too high compared to the nationwide
ROE average of 9.5, and the authorized average ROE for vertically integrated utilities has
been 9.62 percent since 2021.895 Walmart suggests an ROE of 9.62 percent s96 for Avista's
electric operation and 9.58 percent for Avista's gas operation.897
512 After reviewing the evidence and testimony, we reject Avista's proposed ROE. In its brief,
Staff raises the principle of gradualism that this Commission has articulated in prior
proceedings. Staff makes a valid point that gradualism protects ratepayers and utilities
alike, and that the Commission should reaffirm its use for ROE considerations.898 We
agree. In past proceedings, including those involving Avista, we have relied on this
principle. Specifically, the Commission has said, "We must evaluate all cost of capital
evidence offered and consider other relevant principles and factors such as the general
state of the economy, investment cycles in the industry, and the principle of gradualism to
determine, consistent with the public interest, a reasonable range of returns and what
specific ROE within that range is appropriate for determining Avista's revenue
requirements."899
513 Even with economic factors Avista cites, approving an ROE at 10.4 percent, a 100 basis
point increase from the Company's current 9.4 percent ROE, is against this principle and
we cannot in good conscience and in our statutory duty approve such a steep increase
absent extreme circumstances that we do not see here. Doing so certainly would not be in
the public interest.
893 AWEC's Post-Hearing Brief, at¶20.
894 Walmart's Post-Hearing Brief, at p. 1.
895 Walmart's Post-Hearing Brief, at p. 2.
896 Perry, Exh. LUP-1 T at 12:6-7, 13:1-2.
897 Perry, Exh. LUP-1 T at 16:6-7, 17:1-2.
898 Staff's Post-Hearing Brief, at¶53.
899 Wash. Utils. & Transp. Conan n v Avista Corp,Dockets UE-200900,UG-200901 &UE-
200894, Order 08/05,¶97 (September 27, 2021);See Wash. Utils. & Transp. Comm'n v Puget
Sound Energy, Dockets UE-121697&UG-121705 (Consolidated),Order 15,Dockets UE-130137
&UG-130138 (Consolidated), Order 14,Final Order on Remand, 16,132 (Jun. 29, 2015)
[hereinafter PSE Remand Final Order].

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 141
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514 However, we also reject the ROES recommended by Staff, Public Counsel,AWEC, and
Walmart. The parties through their witnesses have utilized analytical tools with which we
are well-acquainted, including DCF, CAPM, ECAPM, and CE. The models yielded results
for ROE ranging from as low as 8 percent calculated by Public Counsel to a high of 11.8
percent calculated by Avista. We observe that the range of results is due to a similar
approach to modeling from Avista's rate case in Docket UE-200900 wherein we noted
"the wide-ranging results are directly attributable to the experts' selection of proxy groups
and reliance on different sources for growth rates, discount rates, and market risk
premiums."goo The difference here at least is that the witnesses' analyses produced a 380-
basis point range of possible returns rather than the 450-basis point range from the prior
Avista rate case.
515 Despite the range of possible returns, we note that Staff and Walmart offer to raise Avista's
ROE slightly higher with Staff at 9.5 percent for gas and electric for RY 1 and RY2, and
Walmart at 9.62 percent for electric for RY1 and RY2 and 9.58 percent for gas in RY1 and
RY2. Public Counsel and AWEC would actually reduce Avista's ROE to 8.5 percent and
9.25 percent, respectively. These proffered ROES are either too low or do not adjust high
enough to address the current conditions facing Avista.
516 While we cannot go as high as the 10.4 percent level for ROE the Company requests, for
previously stated reasons, we recognize that upward adjustment is needed to address the
challenges the Company faces and to ensure it remains a viable entity able to provide
reliable and adequate service to its customers. The challenges of remaining credit worthy
and acquiring capital for continued operation are very real. In fact, these challenges go to
the heart of the Commission's responsibility, which is to assure confidence in the financial
integrity of the utility company, to maintain its credit rating and to attract capital, so that it
can continue to provide service for the public convenience.901
517 Given this precedent and our adherence to it, we approve raising Avista's ROE to 9.8
percent for electric and gas operations for both RY1 and RY2. We believe doing so serves
two purposes. First, we remain consistent with the principles of gradualism and protect the
ratepayers from rate shock, which we believe would have been the case if we had
approved Avista's ROE at 10.4 percent. Second, approving a higher ROE allows the
Company to maintain its credit rating, attract needed capital, and continue to be a viable
900 Avista Corp,Dockets UE-200900,UG-200901 &UE-200894,Order 08/05,¶98.
901 Federal Power Com. a Hope Natural Gas Co., 320 U.S. 591, 603 (1944);Bluefield Water
Works &Improvement Co. v Pub. Sere Comm'n, 262 U.S. at 690.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 142
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utility, providing service to its ratepayers, pursuant to the precedent established in the
Hope and Bluefield cases.
518 In short, the ratemaking process, where agencies similar to the Commission seek to
establish just and reasonable rates, involves a balancing of the investor and consumer
interests.902 We believe that approving Avista's ROE at 9.8 percent strikes that balance
between investor and consumer interests, and therefore is in the public interest.
519 Given that no party contested Avista's proposed capital structure of 51.5 percent debt and
48.5 percent equity, we approve the Company's proposed capital structure. Similarly, no
party contested the Company's proposed cost of debt of 4.99 percent. Based on our
decision to increase the Company's ROE to 9.8 percent,Avista's overall rate of return, or
ROR, will be 7.32 percent.
Flotation Costs
520 Flotation costs are incurred when a company issues new securities.903 These costs are
incurred by the investors with the sale of these new securities,904 and include services such
as legal, accounting, and printing costs, as well as the fees and discounts paid to
compensate brokers for selling the stock to the public.90s Avista asserts that it should be
offered an opportunity to recover flotation costs, which it believes are a legitimate expense
incurred to provide equity capital.916 Avista proposes an 8-basis point increase to its ROE
based on flotation costs.907
521 Staff, Public Counsel and AWEC all argue for rejection of flotation costs because they are
a known factor already incorporated into investor evaluations of stock by the ROE models
used to calculate a company's authorized return, and because the Commission has rejected
inclusion of flotation costs in ROE in prior proceedings.908 Staff posits that adding
flotation costs to rates would be redundant and would in essence ask ratepayers to pay for
902 Federal Power Com. a Hope Natural Gas Co., 320 U.S. at 603.
903 Avista Corp., Dockets UE-170485 &UG-170486,Order 07/02, at fn. 80.
904 McKenzie, AMM-1T, at 49:4-11.
905 McKenzie, AMM-1T, at 49:4-11.
906 Avista's Post-Hearing Brief, at¶33.
907 McKenzie,AMM-1T at 54:4-11.
908 Staff's Post-Hearing Brief, at¶¶55, 56; Public Counsel's Post-Hearing Brief, at¶93;AWEC's
Post-Hearing Brief, at¶ 14.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 143
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flotation costs twice, once when the costs were naturally incorporated in rates, and the
second time through Avista's proposed added adjustment.909
522 Public Counsel adds that"these costs are not out-of-pocket costs for the Company, and the
Commission has no metric by which to determine which party would have negotiated to
capture that additional value; i.e. would the stock price have dropped or risen slightly."910
AWEC also recommends that the Commission reject the Company's flotation cost
adjustment as it does not provide adequate evidence to support its request.911
523 We agree with Staff, Public Counsel, and AWEC, and reject Avista's proposed flotation
cost adjustment. In Avista's 2017 rate proceeding the Commission rejected Avista's
request for flotation costs, reasoning that "while these costs may be legitimate adjustments
made during the underwriting process, the Company had failed to demonstrate the level of
flotation costs it had actually incurred during the test year."912 The Commission reiterated
this standard in Avista's 2020 case and rejected Avista's proposed flotation cost
adjustment. In that matter, the Commission stated, "we remain unpersuaded in this case
that we should include any flotation adjustment without a compelling showing."913
524 We remain unpersuaded in this case as well.Avista's witness McKenzie acknowledged the
precedent from the 2017 and 2020 rate cases and admitted that our concerns stated in
those proceedings were not addressed in this one.914 Based on the lack of evidentiary
support, we have no choice but to reject the Company's proposed flotation adjustment.
Cost of'Service, Rate Spread and Rate Design
Avista's Direct Testimony
525 Avista proposes rate increases for residential customers under Schedules 1 & 101 and
argues that the Company's fixed costs do not vary with customer usage and are therefore
customer allocated costs.915 Company witness Miller further argues it is important for
909 Staff's Post-Hearing Brief, at¶55.
910 Public Counsel's Post-Hearing Brief, at¶93 referencing Garrett, Exh. DJG-1T at 45:5-16.
91 AWEC's Post-Hearing Brief, at¶ 14.
912 Avista Corp., Dockets UE-170485 &UG-170486,Order 07/02, at¶76.
913 Avista Corp,Dockets UE-200900,UG-200901 &UE-200894,Order 08/05,¶96.
914 McKenzie,AMM-1T at 53:18-54:21.
915 Miller, Exh. No. JDM-IT at 32:5-11.We note that every reference to Schedule 1 in this section
also applies to Schedules 7 and 8 (TOU Pilot).

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 144
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charges to accurately reflect the actual costs incurred to serve customers.916TO further
detail,Avista proposes increasing the Basic Monthly Charge (BMC) for electric residential
customers from $9.00 to $15.00 in Rate Year 1 (RY1) and $20.00 in Rate Year 2 (RY2),
and for natural gas residential customers from$9.50 to $15.00 in RY 1 and $20.00 in
RY2.91 7
526 Avista bases its rate spread recommendation on its proposal for an electric revenue
increase of$77.0 million(13.0 percent) in RY1 over current base tariff rates in effect and
an increase of$78.1 million (11.7 percent) in RY2, and for natural gas customers proposes
a revenue increase of$17.3 million(13.6 percent) in RY 1 and$4.5 million(3.2 percent) in
RY2.91 s
527 Avista proposes to spread this rate increase through an equal increase of 13.1 percent for
the base tariff rates for each electric customer class (except the 12.8 percent increase for
Schedule 25) and on the gas side proposes an equal increase of 11.7 percent for all
customer classes.919 Avista justifies this proposal based on the size of the increase and
argues a uniform increase will make modest improvements towards more evenly
distributed return ratios.920
Staff's Response Testimony
528 Staff argues that the Company did not justify including a broader range of costs in its
proposed BMC calculation.921 Citing prior Commission guidance and policies regarding
gradualism, Staff recommends a $1.00 increase for residential gas and electric customers
to bring the Company's basic charge closer to cost parity without too sharp of an increase
to the basic charge.922
Public Counsel's Response Testimony
916 Miller, Exh. No. JDM-IT at 32:21-23.
91 Miller, Exh. No. JDM-1T at 32:5-11.
918 Miller, Exh. No. JDM-1T at 32:5-11.
919 Miller, Exh. No. JDM-4(schedule 25 has a proposed increase of 12.8 percent).
921 Miller, Exh. No. JDM-1T at 2:8-12.
Parity Ratio: Schedule revenue to cost ratio divided by system's revenue to cost ratio.
Return Ratio: Schedule rate of return divided by overall rate of return.
921 Hillstead, Exh. No. KMH-1T at 26:8-15.
922 Hillstead, Exh. No. KMH-1T at 27:14-18.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 145
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Basic Charge
529 Public Counsel recommends that the Commission reject the Company's proposed increase
in customer charges for both residential electric and natural gas general service. Public
Counsel witness Dismukes criticizes the Company for including non-customer related
activities into its cost allocation for calculating the basic charge.923
530 Public Counsel's calculation for what is necessary to recover customer related costs in the
basic charge amounts to $9.93 for electric schedule 1 in RY1 and$11.44 for gas schedule
101 in RY 1.92a Beyond the arguments for using those figures, Dismukes asserts that higher
basic charges reduce incentives for customers to conserve. Furthermore, Public Counsel's
analysis estimates that low-use electric residential customers would see an increase of
15.57 percent if the Company's proposal were to go into effect compared to the proposed
average rate increase for all residential customers of 13.02 percent.925 For low-use gas
customers, the bill increase would be 9.19 percent with the Company's proposal, as
opposed to a 6.74 percent average rate increase for all residential customers.926 Public
Counsel highlights the close correlation between having low usage and being low income
to support its position.
AWEC' Response Testimony
531 AWEC witness Kaufman begins the discussion of rate spread by referencing Staff's
"recent practice of characterizing deviations from rate parity of less than 0.05 as within the
margin of error, more than 0.1 as unreasonable, more than 0.2 as excessive, and deviations
more than 0.3 as grossly excessive."927 AWEC argues for rate increases described in Table
4 and 5.
923 Dismukes, Exh.No. DED-1T at 9:13-17.
924 Dismukes, Exh.No. DED-1T at 9-10.
925 Dismukes, Exh.No. DED-3.
926 Dismukes, Exh.No. DED-4.
927 Kaufman, Exh. No. LDK-1CT at 10:17-11:1.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 146
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Table 4: Recommended Electric Rate Change as Percent of Average928
Schedule Parity % of Avg. % of Avg.
(AWEC COS) Change RY1 Change RY2
Residential Service 1 0.85 51 150
General Service 11-12 1.18 125 75
Large Gen. Service 21-22 1.21 150 50
XL Gen. Service 25 1.30 200 25
Pumping Service 31-32 1.06 100 100
Street/Area Lights 41-48 1.08 100 100
Gen. EV 13 0.27 0 200
Large Gen. EV 23 0.14 0 200
Table 5: Recommended Gas Rate Change as Percent of Average929
Schedule Parity % of Avg.
(AWEC COS) Change RY1
Gen. Service 101 0.97 100
Large Gen. Service 111 1.21 50
Interruptible 131 1.34 25
Transport 146 0.74 150
532 Kaufman also notes that the Company's rate spread usually includes Colstrip costs and
rate impacts. Kaufman expresses concern that when the Colstrip tracker retires there will
be rate impacts that would result in the residential rate schedule moving further below rate
parity.930
Rate Design- Schedule 25 Special Contracts
533 In addition to its proposals for rate spread,AWEC proposes several changes to the rate
design for Schedule 25 that do not affect other rate schedules.93i These include:
• Increasing demand charges by 50 percent in RY1 and 25 percent in RY2.
928 Kaufinan, Exh. No. LDK-lCT at 12.
929 Kaufrnan, Exh. No. LDK-lCT at 12.
930 Kaufman, Exh. No. LDK-lCT at 13:10-14:2.
931 Extra Large General Service(electric).

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 147
ORDER 08
• Increasing the discount for usage greater than 115 kV primary voltage discount
from $1.93 to $4.39 ($6.10 ifAWEC's recommended COSS allocation is not
adopted); and
• Modifying the discount to apply to customers served through substations not
owned by the Company.932
The Energy Projects Response Testimony
534 TEP recommends the Commission reject Avista's proposal to increase customer charges
for residential and commercial electric customers as well as general service gas customers.
TEP witness Colton offers an in—depth study related to Avista's rate proposals using a
"stratification approach" which is further detailed in his testimony related to equity. In
short, Colton suggests that Avista's proposal to increase the BMC will disproportionately
impact lower income households who typically have lower average usage levels and
therefore would pay proportionally more with a higher basic charge.933
NWEC' Response Testimony
535 NWEC witness McCloy recommends the Commission reject Avista's proposal to increase
customer charges for residential and commercial electric customers as well as general
service gas customers.934 McCloy argues the purpose of the fixed charge is not to pay the
utility's total fixed costs. Instead, McCloy advocates for fixed charges to focus on
recovery for customer service, metering, and billing.
536 McCloy further testifies that the Company's proposed use of the customer charge
complicates decoupling mechanisms, arguing that any costs can be considered a fixed cost
over a long enough period of time. Recovering more revenue from a large basic charge
does help decouple revenue from sales, but McCloy argues that this is not a preferred
decoupling strategy. McCloy characterizes a high fixed charge as raising the "floor" for
utility revenues, without benefiting customers.935
537 McCloy also references in testimony an upcoming decision in California related to
income-based fixed charges. NWEC encourages future consideration of creative rate
932 Kauftnan, Exh. No. LDK-1CT at 16-17.
933 Colton,Exh. No. RDC-1T at 65:10-15.
934 McCloy, Exh.No. LM-1T at 3:2.
935 McCloy, Exh.No. LM-1T at 9:10-15.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 148
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design proposals that can bolster low-income affordability, but asserts more evidence is
needed for supporting such a novel idea.936
538 NWEC witness Gehrke recommends using the generation allocator SO to allocate costs
for Colstrip consistent with Commission rule and deviating from the Settlement regarding
Colstrip allocation.937 Gehrke argues the SO allocation would better match cost of service
principals.938
Walmarts Response Testimony
Rate Spread
539 Walmart's witness Perry testifies in support of aligning rates more closely with the cost of
service for each rate class.939
540 Perry identified that Avista's proposed electric revenue allocation brings each class closer
to cost of service but that parity ratios remain too far away from parity. While Perry
supports Avista's initial proposed revenue requirement, they assert that with a lower
revenue requirement Walmart would support maintaining the initial increase allocated to
Schedule 1, equal increases to Schedules 13, 23, and 31/32, and all remaining revenue
collected through an equal increase split between schedules 11/12, 21/22, and 25.941
Walmart supports the Company's rate spread proposal for gas service.941
Avista's Rebuttal Testimony
541 On rebuttal,Avista agrees to modify its basic charge proposal to reflect Staff's
recommendation of a$1.00 increase to the basic charge for residential customers on both
the gas and electric side.Avista asserts that it continues to believe in better aligning fixed
costs and basic charges and offers this compromise in the spirit of reducing the number of
contested issues.942
936 McCloy, Exh.No. LM-1T at 10:1-5.
937 Gehrke, Exh.No. WG-IT at 9:20-23.
938 Gehrke, Exh.No. WG-IT at 10:3-8.
939 Perry, Exh.No. LUP-1T at 18:10-12.
Sao perry, Exh.No. LUP-1 T at 23:1-6.
941 Perry, Exh.No. LUP-IT at 23:15-18.
942 Miller, Exh. No. JDK-8T at 13:1-6.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 149
ORDER 08
542 Avista does not oppose changes to the rate design of the Electric Extra Large General
Service in Schedule 25 but suggests a more modest change. Rather than a 50 percent
increase followed by a 25 percent increase in demand charges,Avista suggests a 25
percent increase for RY1 and RY2.943
543 Avista insists that the Commission should not consider party positions relitigating a
decision from a Full Multiparty Settlement Stipulation.944 Company witness Miller points
out that NWEC offered supplemental testimony supporting the Colstrip Tracker and
Schedule 99 as part of the Settlement Agreement in that docket.
NWECs Cross Answering Testimony
544 NWEC does not support AWEC's proposal to alter the Company's treatment of
Colstrip.945
Public Counsel's Cross Answering Testimony
545 Public Counsel witness Dismukes argues that the Company overstates the necessity of
increasing the BMC and urges the Commission to reject Staff's recommendation to raise
residential basic charges by $1.00.
546 According to Public Counsel,Avista recovers "82.4 percent of customer-related costs for
electric Residential Service and 51 percent of customer-related costs for natural gas
general service customers."946 Dismukes further argues that decoupling mechanisms
already allow the utility to reconcile volumetric rates with changes in volumetric use.94'
Finally, Dismukes reiterates that increases in the BMC impact low-income customers
disproportionately.941
547 Dismukes opposes AWEC's proposed rate spread.949 Public Counsel highlights that
AWEC did not factor in its proposal the full rate increase the Commission approved in
Avista's most recent GRC. Dismukes elaborates that the "AWEC proposal would add
941 Miller, Exh. No. JDK-8T at 15:16-21.
944 Miller, Exh. No. JDK-8T at 16:16-21.
945 Gehrke, Exh.No. WG-8T at 11:11-16.
946 Dismukes, Exh.No. DED-10T at 8:18-20.
94'Dismukes, Exh.No. DED-1OT at 8:20-21.
94s Dismukes, Exh.No. DED-1OT at 9:7-16.
949 Dismukes, Exh.No. DED-10T at 3.

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compounding disproportionate rate increases to low-load factor customers before it is fully
known what the relative cost of providing electric service to different customer classes
will be going forward."950 Dismukes recommends the Commission accept the Company's
proposal to equally allocate any potential rate change across all customer classes.
548 Public Counsel also opposes AWEC's proposal to include Colstrip costs and revenues into
rate spread considerations.951
AWECs Cross Answering Testimony
549 Kaufman notes that NWEC's reallocation of Schedule 99 would lead to Schedule 25
receiving an increase of 15.5 percent rather than 11.7 percent. Kaufman notes that this
would be significant because Schedule 25 already is above parity, and a higher-than-
average rate increase would grow the gap in parity.952 AWEC suggests "spreading the
combined revenue from base rates and Schedule 99 according to the approved allocation,
then subtracting the generation-based allocation of Schedule 99 from the combined
revenue to determine the appropriate base rate revenue" as a method to alleviate that
concern.953
Parties'Briefs
Avista
550 In the Company's post-hearing brief,Avista suggests the Commission does not need to
approve either Avista or AWEC's Cost of Service Study in this proceeding,but rather
should recognize that both are directionally similar and accurate for setting rates.954
551 On electric rate spread, the Company is supportive of AWEC's proposed rate spread for
RYI and RY2.Avista acknowledges that Schedules 11/12, 21/22, and 25 are overpaying
while Schedule 1 is underpaying.955 However,Avista argues the Commission should reject
AWEC's positions related to Schedules 13, 23, and 99.Avista also argues for an equal
percentage increase for Schedules 13 and 23 consistent with its original filing.Avista
95'Dismukes, Exh.No. DED-1OT at 3:13-16.
951 Dismukes, Exh.No. DED-10T at 7:12.
952 Kauftnan, Exh. No. LDK-6T at 3:10-17.
953 Kaufman, Exh. No. LDK-6T at 3:21-22.
954 Avista's Post-Hearing Brief¶¶ 159-60.
955 Avista's Post-Hearing Brief¶ 161.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 151
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further maintains that Schedule 99 should not be factored into rate spread because the
tariff is separate and distinct, and the allocation was agreed to in a prior settlement.956
552 Similarly, for natural gas rate spread,Avista is supportive ofAWEC's position because the
Cost-of-Service Studies that both the Company and AWEC performed show Schedules
111/112 and 131/132 are overpaying and Schedule 146 is underpaying.957
553 Regarding rate design,Avista is supportive of Staff's proposal for$1.00 increases to
residential basic minimum charges for both electric and gas customers. Further, the
Company supports AWEC's recommendation related to Schedule 25 demand charges, but
recommends the Commission approve a 25 percent increase for RY1 and RY2, instead of
the 50 percent increase in RY1 AWEC proposes to support full-cost recovery while
reducing variability of rate changes to Schedule 25 customers. The Company is also
supportive of AWEC's proposed increase to the greater than 115 kV discount from$1.93
to $4.39 for Schedule 25 customers.958
554 Finally,Avista argues the Commission should disregard the arguments NWEC put forward
regarding Colstrip Schedule 99, on the basis that the allocation is part of a settlement, to
which NWEC was a signatory.959
Staff
555 Staff reiterates its argument that the Commission should reject Avista's original rate design
proposal and adopt the proposed $1.00 increase to basic charges for residential electric and
gas customers. Staff argues that after discovery, they could not validate the Company's
claims regarding the basic charge and that Staff's proposal matches the principle of setting
the basic charge to recover"direct customer costs."960
Public Counsel
556 Public Counsel requests the Commission adopt an equal rate spread for electric and gas
customers. While Public Counsel concedes it cannot refute Avista's class cost of service
956 Avista's Post-Hearing Brief¶ 163.
957 Avista's Post-Hearing Brief¶ 164.
958 Avista's Post-Hearing Brief¶¶ 165-67.
959 Avista's Post-Hearing Brief¶ 168.
960 Staff's Post-Hearing Brief¶¶ 116-18.

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study showing a 0.86 rate parity, they argue that the Commission should"exercise caution
and approve an equal allocation."961
557 Public Counsel presents four reasons for adopting an equal rate spread. First, an
asymmetric rate spread would have outsized impacts on parity and may overshoot its goal.
Second, Public Counsel asserts the class cost of service study has not completely captured
the impacts of the last rate adjustment because of"pancaking"rate cases. Third, the
removal of Colstrip and move towards renewables energy is moving residential ratepayers
towards parity as they carry less of Colstrip and more of the costs from renewables.
Fourth, residential ratepayers are already troubled by recent increases and potential
overcorrections would intensify inequities from rate increases.962
558 Regarding rate design, Public Counsel argues the Commission should reject Avista's
proposal to increase the basic charge. Public Counsel argues the basic charge should not
be increased because Avista overstates costs attributable to customer-related activities,
stating 82.4 and 51 percent of costs for electric and gas customers respectively is
recovered through existing basic charges. Further, Public Counsel reasons that shifting
costs from variable to fixed reduces conservation incentives, and that an increase is not
necessary with a decoupling mechanism. Finally, Public Counsel argues that Staff's $1.00
increase should be rejected for the same reasons.963
AWEC
559 AWEC argues in its post-hearing brief that the Commission should adopt the rate spread
Avista proposes in its Rebuttal Testimony.AWEC opposes Public Counsel's approach for
an equal spread of revenue requirement on the basis that Public Counsel did not provide
any supporting evidence or perform its own cost of service study and maintains that its
suggested approach could in fact exacerbate the existing class parity levels.964
560 Additionally,AWEC argues that the Commission should adopt its three recommended
changes to Schedule 25, as modified by Avista, which AWEC asserts are unopposed. The
changes include (1) increasing demand charges for energy blocks 1 and 2 by 25 percent in
RY1 and 25 percent in RY2, (2) increasing the primary voltage discount from$1.93/kW to
961 Public Counsel's Post-Hearing Brief¶ 128.
962 Public Counsel's Post-Hearing Brief¶¶ 129-34.
963 Public Counsel's Post-Hearing Brief¶¶ 135-36.
964 AWEC's Post-Hearing Brief¶¶72-80.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 153
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$4.39/kW, and(3) changing language in Schedule 25 to make the primary voltage
discount applicable to customers served through third parry substations.961
NWEC
561 NWEC reiterates its argument to alter Schedule 99 rate spread to the generation allocator
SO as detailed in witness Gehrke's testimony. NWEC argues that it has reevaluated its
position, even though it supported the Schedule 99 allocation as part of a settlement.966
NWEC explains that since the Commission adopted the settlement without conditions,
made the settlement part of the Order, it may go back and amend the allocation pursuant to
its authority under RCW 80.04.210 and WAC 480-07-875.967 NWEC argues in favor of its
Schedule 99 adjustment by asserting that the reallocation would be consistent with the
Commission's cost of service methodology.968
562 Finally,NWEC opposes the basic minimum charge increases proposed by both Avista and
Staff on the basis that the increase is not mandated by rule, law, or governing principle,
exceeds those of other Washington regulated utilities and disproportionately impacts
marginalized customers.969
Decision
563 The Commission finds Public Counsel's recommended approach to rate spread to be the
most reasonable and equitable in this case and therefore rejects the rate spreads put
forward by AWEC and Avista. The Commission also agrees with Staff and Avista that a
$1.00 increase to the minimum charge for electric and gas customers is supported by the
record. The Commission further finds that the three adjustments AWEC proposed for
Schedule 25, as modified by Avista, should be adopted. However,AWEC's proposals
regarding Schedule 13 and 23 should be rejected, as should the proposals from AWEC and
NWEC for modifications to Schedule 99 allocations and calculation in rate spread.
564 Regarding rate spread, the Commission recognizes that some rate classes are not within
the range of parity that Staff has recently used to evaluate deviations from rate parity."'
965 AWEC's Post-Hearing Brief¶¶82-83 (Oct. 28, 2024).
966 WUTC a Avista Corp.,Dockets UE-240006&UG-240007,NWEC's Post-Hearing Brief¶¶29-
30, 34-35 (NWEC's Post-Hearing Brief).
967 NWEC's Post-Hearing Brief¶32 (Oct. 28, 2024).
968 NWEC's Post-Hearing Brief¶¶28, 37.
969 NWEC's Post-Hearing Brief¶¶39-41.
970 See, Kaufman,Exh.No. LDK-1CT at 10:17-11:1.

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While the Commission finds the framework instructive and helpful, it is not mandated that
each class falls within a certain range when looking at rate parity ratios, and as highlighted
in Public Counsel's arguments, there are a number of factors likely to impact parity ratios
over the rate effective period. While we acknowledge that the cost-of-service study does
not capture all the increases from Avista's last rate case, as noted in Public Counsel's post-
hearing brief, early results show parity improving.971
565 We also recognize and agree with Public Counsel that the 2025 removal of Colstrip from
rates is likely to impact parity, and adopting a differential allocation in this case may in
fact have impacts not fully reflected in the record before us. Because of this, the
Commission finds Public Counsel's recommendation for an equal allocation is fair,just,
and reasonable, and that Avista's next cost of service study shall account for removal of
Colstrip from rates.
566 On rate design, the Commission agrees with Staff, as supported by Avista, that electric and
gas basic charges should be increased by $1.00 each.As Avista asserts, and Staff to some
degree confirms,Avista's current basic charge does not meet the fixed costs components
of the basic charge. Staff calculated the components of the electric basic charge to be
$10.93 and the natural gas components to be $18.60, and the $1.00 increase for gas and
electric basic service charge will move the charges closer to customer fixed costs.972
567 While Public Counsel,NWEC, and TEP do not support an increase to the basic charge due
to its disincentive to conserve and other impacts such an increase may have on
marginalized customers, the record supports an increase. We agree with Staff that the basic
charge is intended to recover"direct customer costs."973 While NWEC is correct that no
law requires an increase, it is within the Commission's discretion to order an increase
here. We are further in agreement with Staff, that a$1.00 increase for electric and gas
customers, is consistent with the principle of gradualism and is a fair,just, and reasonable
increase at this time.
568 AWEC's three adjustments to Schedule 25, as modified by Avista, are unopposed and
should be adopted. Those include (1) increasing demand charges for energy blocks 1 and 2
by 25 percent in RY1 and 25 percent in RY2, (2) increasing the primary voltage discount
971 AWEC's Post-Hearing Brief 131 (citing,Dismukes,Exh. DED-10T at 3:19-4:3, 5:1-6;Miller,
Tr. Vol. III at 327:16-23).
972 Hillstead, Exh. KMH-1T at 27:4-28:10.
973 PacifiCorp,Dockets UE-140762,UE-140617,UE-131384 &UE-140094, at 91 ¶216.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 155
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from $1.93/kW to $4.39/kW, and(3) changing language in Schedule 25 to make the
primary voltage discount applicable to customers served through third party substations.
569 Finally, we decline to adopt AWEC's proposal to include Colstrip in rate spread, NWEC's
proposal to reallocate Schedule 99, and AWEC's proposals related to Schedules 13 and 23.
For the proposals related to Colstrip, we agree with Avista that both AWEC and NWEC
were signatories to the original settlement, and that the settlement should not be amended
at this time. While we agree with NWEC that the Commission has the authority to order
changes to the settlement, we decline to do so now and there is no compelling reason
within this record to disturb what is settled. Finally, we agree with Avista and find
Schedules 13 and 23 are newly adopted and should have time to mature.Accordingly, an
equal percentage of base revenue increase is appropriate, consistent with our approach to
rate spread generally, and Avista's original filing.
Return on Purchase Power Agreements
Avistas Direct Testimony
570 Avista witness Kinney testifies that pursuant to RCW 80.28.410(2)(b) the Company has
included interest on qualifying PPAs (Chelan, Clearwater III and Columbia Basin Hydro)
at the Company's proposed rate of return in this general rate case of 7.61 percent.974
Kinney testifies that its pro forma adjustment includes interest totaling $2.16 million
included for RY1 (2025).975 This reflects interest to be deferred in 2024 and recovered in
2025 ($0.66 million), and incremental interest in 2025 of$1.5 million.976 Schultz testifies
that the net impact of this adjustment decreases Washington electric net operating income
(NOI)by $1,706,000.97
571 In RY2 (2026) Kinney states that it included $2.34 million in total PPA interest, resulting
in incremental increase of$176,000 above RY1 levels.978 The net impact of this
adjustment decreases Washington electric NOI by$139,000.979
974 Kinney,Exh. SJK-1 T at 49:13-15.
975 Kinney,Exh. SJK-IT at 49:15-17.
976 Kinney,Exh. SJK-IT at 49:17-18.
97 Schultz, Exh. KJS-IT at 86:20-21.
978 Kinney,Exh. SJK-1T at 49:18-20.
979 Schultz, Exh. KJS-1T at 95:16-17.

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NWM Response Testimony
572 NWEC witness Gehrke recommends that the Commission reject Avista's proposal to
provide an incentive for purchased power agreements. Gehrke states that aside from citing
RCW 80.28.410(2)(b),Avista does not provide additional rationale for the inclusion of the
incentive, one that NWEC argues will cost customers several million dollars over the rate
plan.9s0
573 Gehrke does not believe that Washington statute requires the Commission to provide a
return on PPAs.981 RCW 80.28.410(2) states the utility "may...defer for later consideration
by the Commission," costs included in subsections (a) and (b) —the latter including a rate
of return for PPAs.982 Gehrke testifies that"[1]ater consideration by the Commission"
indicates that the Commission retains its broad discretion to approve or reject a proposal
to receive a return on PPAs.983
574 Additionally, Gehrke highlights that the Oregon Public Utilities Commission (OPUC)
analyzed the premise that an inherent bias exists in utility resource procurement, one that
favors utility ownership of generation assets over PPAs due in part to an inability to earn a
return on PPAs.914 Witness Gehrke states that while the OPUC agreed that such a bias
exists, it had no evidence as to its size or impact on rates and thus warned about the
potential for incentives on PPAs to greatly outweigh the impact of the bias.985
575 Gehrke argues that Avista makes no showing that a bias exists, nor does the Company
make any attempt to quantify that bias. NWEC further argues that it is possible, even
likely, that rewarding Avista with a full rate of return for CETA-compliant PPAs would
overcompensate the utility at the expense of customers.986
576 NWEC witness Gehrke contends that rather than using utility financing (debt or equity)to
fund PPAs,Avista contracts with a third-party power plant owner and pays for the resource
over the contract's duration.987 Gehrke states that regardless of the method used to acquire
9a0 Gehrke, Exh.WG-1T at 2:14-17.
9" Gehrke, Exh.WG-1 T at 3:13-14.
912 Gehrke, Exh.WG-1 T at 3:14-16.
983 Gehrke, Exh.WG-1T at 3:16-19.
914 Gehrke, Exh.WG-1 T at 4:1-5.
9s5 Gehrke, Exh.WG-1T at 4:8-24, 5:1-2.
916 Gehrke, Exh.WG-1T at 5:5-7.
987 Gehrke, Exh.WG-1T at 5:15-17.

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capital for a purchased power agreement project, the contracted price is structured to cover
the capital costs associated with the agreement, including a return on investment.988
Gehrke specifies that these costs are paid for by customers through the power cost rates.989
Gehrke thus argues that under Avista's proposal customers would be charged for two
financing costs, which is not appropriate for cost-based pricing.990
577 Gehrke contends that if the Commission concludes that it is inclined to provide the
incentive, RCW 80.28.410(2)(b) allows for"a rate of return of no less than the authorized
cost of debt and no greater than the authorized rate of return for the electrical
company."991 Gehrke further contends that in order to protect customers and keep CETA
compliance costs low, if the Commission decides to authorize a return, it should allow a
return for PPAs only equal to the cost of debt.992
578 Gehrke argues that since Avista must demonstrate that it acted prudently in order to
recover costs associated with the lowest reasonable-cost resource, it is counterintuitive
that adding additional costs to a contracted resource via a newly established return would
result in a greater acquisition of contracted resources.993 Gehrke emphasizes that Avista
must choose the lowest-cost resource that fits the resource need, which is true with or
without a return added for PPAs.994
579 In conclusion, Gehrke recommends that the Commission reject Avista's proposal to
include a rate of return for PPAs.995 In the alternative, should the Commission feel
compelled to provide an incentive, Gehrke believes that the Commission should set the
rate of return for PPAs at the cost of debt for the Company.996
988 Gehrke, Exh.WG-1 T at 6:14.
9a9 Gehrke, Exh.WG-IT at 5:17-18.
990 Gehrke, Exh.WG-IT at 5:18-20.
991 Gehrke, Exh.WG-1 T at 6:13-17.
992 Gehrke, Exh.WG-1T at 6:17-19.
99' Gehrke, Exh.WG-1T at 7:6-10.
994 Gehrke, Exh.WG-1T at 7:10-12.
99' Gehrke, Exh.WG-IT at 7:15-16.
996 Gehrke, Exh.WG-1T at 7:16-18.

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Staffs Response Testimony
580 Staff witness Hillstead does not agree that the Company should use a ROR of 7.61 percent
for calculating the interest in its PPA adjustment.997 Hillstead argues that the 7.61 percent
is a computation based on the Company's proposed capital structure which includes an
ROE of 10.4 percent.998 Hillstead further argues that using a rate of 7.61 percent results in
an inflated interest expense and thus a higher revenue requirement.999
581 Hillstead testifies that it has concerns with the Company's methodology for this
adjustment. The first issue is that pro forma adjustments are to be known and measurable,
not assumptions)000 The second issue in the Company's use of 7.61 percent, is that this
rate of return has not been authorized by the Commission and is solely based on the
Company's proposed capital structure.1001
582 Hillstead recommends that the interest rate for this adjustment be at Avista's cost of long-
term debt,per Staff witness Parcell's capital structure recommendations, which is 4.93
percent.1002 This is the appropriate rate to use because PPAs are contracts, not capital
investments.1003 In Hillstead's view, the lower end of the range should be used absent
adequate justification by the Company for the use of the upper end of the range.1004
Hillstead contends that the Company has made no such justification for the upper end of
the range.1005
NWEC's Cross-Answering Testimony
583 Gehrke argues that the Commission is not compelled to grant an incentive on CETA PPA
costs and retains broad ratemaking authority.1006 Additionally, in PSE's GRC, Gehrke
99'Hillstead, Exh. KMH-1T at 17:9-10.
998 Hillstead, Exh. KMH-1T at 17:10-12.
999 Hillstead, Exh. KMH-1T at 17:12-13.
1000 Hillstead, Exh. KMH-IT at 17:17-18.
1001 Hillstead, Exh. KMH-IT at 17:18-20.
1002 Hillstead, Exh. KMH-1T at 18:11-14.
100' Hillstead, Exh. KMH-IT at 18:14-15.
1004 Hillstead, Exh. KMH-IT at 18:15-16.
100'Hillstead, Exh. KMH-IT at 18:16-17.
1006 Gehrke, Exh.WG-8T at 10:22 and 11:1-2.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 159
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states that The Energy Project is making a similar argument regarding the language of
RCW 80.28.410 and that NWEC concurs with this position.1007
Avistas Rebuttal Testimony
584 Avista witness Andrews does not agree with NWEC's assertion that a return on PPAs does
not"follow traditional cost-based ratemaking."1008 Andrews argues that rather than being a
cost-based item, the return is essentially a performance-based incentive, created by the
Legislature, which serves to compensate utilities for securing clean energy PPAs over
potentially more expensive self-build options.
585 Andrews testifies that Senate Bill 5116 states, in reference to the transition to clean
energy, that the "legislature declares that utilities in the state have an important role to play
in this transition, and must be fully empowered, through regulatory tools and incentives, to
achieve the goals of this policy."loo9 Andrews argues that the purposeful inclusion of"a
rate of return of no less than the authorized cost of debt and no greater than the authorized
rate of return of the electrical company...," is such an incentive.1010
586 Avista witness Andrews further argues that incentives of any type are meant to drive
certain behaviors and that for CETA, an incentive rate of return will help drive adoption of
clean energy PPAs and/or remove any bias towards selecting self-build options!011
587 Company witness Andrews argues that the findings of the Oregon Public Utility
Commission are not relevant in this instance.'O"Andrews states that witness Gehrke cites
an investigation—from 2010—where the OPUC found it to be inconclusive as to whether
customers were harmed by paying an incentive rate of return as compared to the savings
from the mitigation of a self-build bias.'O"Andrews argues that such a"stale"proceeding
in Oregon should not be used to supplant the legislature's intent upon the passage of
CETA, that allows for an incentive rate of return.lol4
'00' Gehrke, Exh.WG-8T at 11:2-6.
"O'Andrews, Exh. EMA-6T at 50:5-9.
`09 Andrews, Exh. EMA-6T at 50:11-14.
'0'0 Andrews, Exh. EMA-6T at 50:14-16.
'0"Andrews, Exh. EMA-6T at 51:1-6.
1112 Andrews, Exh. EMA-6T at 51:9-10.
1013 Andrews, Exh. EMA-6T at 51:10-12.
1014 Andrews, Exh. EMA-6T at 51:18-20.

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588 Andrews states that it has filed a 4.99 percent cost of debt, which has been supported(or
not opposed)by the parties in this case.1015 Witness Andrews testifies that Staff witness
Hillstead states that the cost of long-term debt is 4.93 percent.1016 While Andrews
concedes that this is correct, it contends that what is contemplated in the law is the
"authorized cost of debt", not authorized cost of long-term debt.1017 As such,Andrews
argues that if the Commission were to authorize a return on PPAs at the authorized cost of
debt, 4.99 percent would be the appropriate value.1018
Parties Briefs
Avista
589 In its post-hearing brief,Avista reiterates its previously stated position, that the
Commission should authorize the Company's Pro Forma Power Purchase Agreement
Interests Adjustments as proposed(3.23 RY1 and 5.12 RY2).1019 Avista opposed NWEC's
proposal to remove interest; and Staff's proposal to limit interest to the Company's cost of
debt.
Staff
590 In opposition, Staff's brief reiterates that the return on CETA-qualifying PPAs should be
limited to the Company's authorized cost of debt.1020 Staff notes that RCW
80.28.410(2)(b) controls, and provides a range between an authorized cost of debt and its
authorized rate of return. Staff notes, that this range is difficult to square with NWEC
proposal to not allow any return of these costs. Staff's brief concluded by noting how the
Commission has broad discretion in determining appropriate deferred costs of capital; and
the Company bears the burden of showing proposed rates are fair,just, reasonable and
sufficient. Staff avers that Avista has not provided a sufficient showing as to why the high-
end of the range would be appropriate here. 1021
1015 Andrews, Exh. EMA-6T at 52:11-12.
1016 Andrews, Exh. EMA-6T at 52:12-13.
1117 Andrews, Exh. EMA-6T at 52:13-14.
""Andrews, Exh. EMA-6T at 52:14-16.
1019 Avista's Post-Hearing Brief, at¶ 113.
1020 Staff's Post-Hearing Brief, at¶¶ 106-109.
1021 Staff's Post-Hearing Brief, at¶¶ 106-109.

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NWEC
591 In its brief,NWEC reiterates its previously stated position that approving a rate of return
for PPAs executed for CETA compliance is not legally required of the Commission.
NWEC rejects both Staff and Avista's proposals here, because the "burden to demonstrate
that an incentive is necessary" has not been met.1022 NWEC points out that other
performance-based ratemaking constructs are being reviewed in an ongoing proceeding,
citing to Docket U-210590. NWEC urges the Commission to exercise its discretion to
reject this rate of return,because it will increase costs for customers. NWEC emphasizes
that an incentive is inappropriate—because Avista is already required to choose the
lowest-cost resource that fits the resource needs.
TEP
592 In its brief, TEP proffers that RCW 80.28.410 uses permissive language, such that the
Commission has the discretion to determine whether"any" cost recovery is appropriate.
TEP goes on to identify three reasons why authorizing a rate of return inappropriate
here.1023 First, TEP contends that capital costs are already included in the PPA contract
price, such that customers would be forced to pay twice for capital costs of such projects;
TEP describes this as a"phantom cost of capital."1024 Second, TEP argues that approving
a rate of return would raise the cost of contracting for clean energy—which is against the
state's clean energy policy. Finally, TEP highlights that Avista bears the burden and has
not demonstrated any convincing arguments for this incentive. 1025
Decision
593 The Commission finds it appropriate to allow a return on Avista's PPA. The plain language
of RCW 80.28.410 gives the Commission the discretion to allow such costs to be deferred
and is intended to incentivize PPAs, as they often are the lowest cost resource. The PPAs
at issue are for resources which need to be procured and these PPAs are the lowest
reasonable cost resources available. The statute contemplates returning a range between
the cost of debt and the authorized rate of return. See RCW 80.28.410(2)(b). This return is
meant to incentivize procurement of resources at the lowest reasonable cost to aid the
utilities in meeting Washington's long-term decarbonization goals. In reviewing the
record, we conclude that Avista did not present a case warranting the authorized rate of
return, and as such, we agree with Staff that the lower end of the spectrum, the cost of
1022 NWEC's Post-Hearing Brief, at¶¶ 12-27.
1123 TEP's Post-Hearing Brief, at¶¶27-33.
1124 TEP's Post-Hearing Brief, at¶59.
lots TEP's Post-Hearing Brief, at¶¶32-33.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 162
ORDER 08
debt, is appropriate here, and that the appropriate cost of debt is 4.93 as proposed by Staff.
We believe that 4.93 percent is the appropriate cost of debt given the statutory intent for
utilities to enter long-term PPAs to provide service to their Washington customers, with
the expectation that those resources reduce GHG emissions to meet Washington's long-
term emissions targets.
Targeted Electrification Pilot
Avistas Direct Testimony
594 Avista witness Thackston describes the Company's strategy for natural gas
decarbonization as diversifying and transitioning from conventional fossil fuel natural gas
to RNG, hydrogen, other renewable fuels, and reducing consumption via conservation and
energy efficiency. Witness Thackston further adds that the Company will also purchase
carbon offsets as necessary to meet CCA compliance obligations.1026
Sierra Clubs Response Testimony
595 Witness Dennison's testimony urges Avista to conduct a robust Targeted Electrification
Pilot program to advance electrification.102' Dennison specifically identifies (1)non-pipe
alternatives (NPAs) analysis, (2) identifying ways to incorporate electrification into its
CCA compliance strategy, and(3) opportunities to coordinate electrification efforts with
other electrification programs and policies as experiences that would help Avista.
596 Dennison continues to more fully describes each of these benefits:
• NPAs can avoid costs related to replacing,upgrading, or expanding gas system
infrastructure; avoid the risk of future stranded assets; reduce gas consumption and
emissions.1121
• CCA compliance requires reducing GHG emissions, Dennison cites electrification
as one of the most"promising, cost-effective strategies for reducing
[emissions]."1029
• Finally, Dennison claims targeted electrification will help coordinate electrification
efforts to make the most of investments. Sierra Club specifically mentions
1126 Thackston,Exh. JRT-1T at 9:5-9.
112'Dennison,Exh. JAD-1T at 31:3-5.
lots Dennison,Exh. JAD-1T at 20:13-18.
1129 Dennison,Exh. JAD-IT at 31:20-23.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 163
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incentives, state & federal rebates and tax credits as incentives that would be easier
to access.1030
597 Dennison also cites PSE's targeted electrification pilot as a success.'031 Dennison
mentions provisions of the PSE settlement agreement that resulted in the creation of the
pilot, including directives to PSE to demonstrate material benefits to low-income
participants, enroll eligible participants in bill assistance programs, and include
appropriate low-income customer protections.1032
598 Dennison identified accomplishments of the PSE electrification pilot in testimony
including:
• 7,712 home electrification assessments with 30 percent reaching Named
Communities.
• 852 heat pump rebates distributed.
• 14 low-income direct install weatherization and electrification projects and
identified candidates for small business and multi-family retrofit projects.
• Development of a joint pilot with Seattle City Light aiming to install heat pumps in
20 homes through the Low-Income Weatherization Program.
599 Dennison made four recommendations for a potential pilot program including:103 3
Customer Engagement targets
Dennison recommends a target of engaging 5,000 customers through home
electrification assessments and providing at least 1,000 rebates for
electrification equipment between June 2025 and December 2026.
Provisions to engage low-income customers and Named Communities
Dennison suggested that language from ESHB 1589 about the inclusion of
low-income electrification programs in large combination utilities'
Integrated System Plans(ISPs) could inform similar provisions for Avista.
Dennison further adds that target numbers for low-income and Named
Communities participation could be beneficial.
....Dennison,Exh. JAD-IT at 32:5-13.
1031 Dennison,Exh. JAD-1T at 33:5-6.
1132 Dennison,Exh. JAD-IT at 33:7-16.
1033 Dennison,Exh. JAD-IT at 34:4-13.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 164
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Provisions for public reporting
Dennison recommends a report summarizing the results of the pilot by
January of 2027; including information about the number of customers
engaged through each measure, the number and types of equipment
incentives provided, the Company's cost for providing each measure, and
lessons learned.
Provisions to incorporate the Pilot into Avista's decarbonization and
CCA compliance strategies
Dennison recommends using the lessons from an electrification pilot to
inform a Gas System Decarbonization Plan for the Company. The witness
further adds that the costs of the pilot should be treated as CCA compliance
costs and shared between gas customers and shareholders, this would be
different than how costs for PSE's pilot were treated.
Avista's Rebuttal Testimony
600 The Company does not support the proposal for the Commission to require a targeted
electrification pilot. Witness Bonfield claims, "If or when electrification is cost-effective,
the Company will pursue it as part of its [Preferred Resource Strategy] PRS".1034 Witness
Bonfield offers that in the Company's 2025 Natural Gas IRP, it plans to refine
electrification assumptions to include "an end use model to estimate a customer's decision
with equipment at its end of life and new building code requirements."1035
NWEC' Cross Answering Testimony
601 NWEC testifies in support of a targeted electrification pilot, citing the "valuable
experience in integrating electrification into the CCA compliance strategy."1o36
602 In response to the Seirra Club's suggestion that "it may be appropriate to set a target for
the number of electrification retrofits performed in low-income households and Named
Communities through the Pilot. This and other aspects of the Pilot related to low-income
and Named Community participation could be informed by input from the Company and
other parties,"witness Gehrke recommends:1037
1034 Bonfield, Exh. SJB-5T at 56:10-11.
1035 Bonfield, Exh. SJB-5T at 56:12-14.
1036 Gehrke, Exh.WG-8T at 2:22-23.
1017 Gehrke, Exh.WG-8T at 3:8—5:13.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 165
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• A program target of 40 percent of its customers from low-income or Named
Communities.
• A minimum of 25 no-cost, high-efficiency electric-only heat pump installations to
low-income and Named Community customers.
• Avista should acquire operational experience in conducting electric-only heat
pump installations for its customers.
• If the recommendations above are not adopted,NWEC encourages the Company
to consult with its Energy Assistance Advisory Group and Conservation Resources
Advisory Group on low-income electrification programming.
AWECs Cross Answering Testimony
603 AWEC does not mention targeted electrification directly in cross-answering testimony,
however,AWEC notes that"[n]o additional direction from the Commission is required to
obligate Avista to appropriately plan to meet long-term CCA compliance obligations cost-
effectively. While the proposal does not add to Avista's planning burden, prescribing
certain decarbonization planning requirements risks biasing the decarbonization plan
towards ineffective solutions."'03s
Parties'Briefs
Avista
604 In briefing,Avista reiterates that it does not support Sierra Club's proposal that the
Company be required to perform a targeted electrification pilot.1031
Sierra Club
605 Sierra Club requests that the Commission require Avista to conduct a targeted
electrification pilot with various specific targets, similar to the Puget Sound Energy
electrification pilot following its 2022 general rate case.`0 Sierra Club states that a
targeted electrification program would yield several benefits related to decarbonization,
CCA compliance, leveraging additional sources of funding, and synergy with Avista's
NPA analyses.1041
i0"Kaufrnan, Exh. LDK-6T at 12:8-14.
1039 Avista's Post-Hearing Brief, at¶ 158.
1040 Sierra Club's Post-Hearing Brief, at¶¶39-40.
1041 Sierra Club's Post-Hearing Brief, at¶40.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 166
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606 Sierra Club further recommends that if the Commission approves a performance incentive
mechanism (PIM) for Avista, that such a mechanism be tied to Avista meeting customer
engagement targets related to the targeted electrification pilot.1041 Sierra Club suggests that
its proposed PIM would aid the Commission's evaluation of Avista's efforts to advance
state climate policy as reflected in RCW 80.28.425.1041 Sierra Club also proposes that the
targeted electrification pilot be considered as a CCA compliance cost and recovered from
Avista's gas customers.1044 Sierra Club notes that NWEC is supportive of the proposed
targeted electrification pilot, as the pilot will aid Avista in meeting CCA emissions goals
and advancing equity, and agrees with NWEC's proposals for additional compliance
actions regarding the pilot.1041
607 Sierra Club disagrees with Avista's proposal to review electrification in the context of its
IRP for three reasons. Sierra Club raises concerns with (1)Avista's electrification analysis
in its IRP, (2) the delay in waiting for future IRP processes, and(3) the distinct purposes of
a pilot project as compared to the IRP process, suggesting that the IRP system-level
analysis is ill-suited to identifying smaller scale projects.1046
NWEC
608 NWEC is generally supportive of Sierra Club's proposal to require Avista to implement a
targeted electrification pilot and, similar to Sierra Club, asserts that such a pilot would
assist Avista in meeting its CCA obligations and promote equity in the context of
decarbonization.1047 NWEC recommends that the Commission adopt Sierra Club's
proposal, with modified thresholds to require that the program target 40 percent of
customers from low-income or Named Communities and a minimum of 25 no-cost high
efficiency electric-only heat pump installations to low-income and Named Community
customers.1048 In the alternative,NWEC recommends that the Commission require Avista
to consult with its Energy Assistance Advisory Group and Conservation Advisory Group
regarding a timeline that would align with other targeted electrification programming.1049
1042 Sierra Club's Post-Hearing Brief, at¶41.
1043 Sierra Club's Post-Hearing Brief, at¶41.
1044 Sierra Club's Post-Hearing Brief, at¶42.
loos Sierra Club's Post-Hearing Brief, at¶43 (Oct. 28, 2024) (citing Gehrke,Exh.WG-8T at 4:7-
16, 5:4-13).
1046 Sierra Club's Post-Hearing Brief, at¶44.
1047 NWEC's Post-Hearing Brief, at¶¶43-45.
loos NWEC's Post-Hearing Brief, at¶45.
1049 NWEC's Post-Hearing Brief, at¶45.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 167
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Decision
609 The Commission declines to require Avista to implement a targeted electrification
program in this proceeding.Although the aims of Sierra Club and NWEC are laudable, the
Commission determines that the benefits of future electrification may be adequately
addressed as part of the Company's IRP process, as suggested by Avista witness
Bonfield.'050 Furthermore, similar to the decision concerning the request that the Company
adopt a decarbonization plan, directing an electrification pilot would appear to be
explicitly prohibited by I-2066. The Commission believes that it would be prudent to
withhold further consideration of an electrification pilot until a future GRC, where the
Commission will have the benefit of full testimony and briefing regarding how the pilot
would promote state emissions policy goals in light of I-2066. To the extent that a
component of the requested electrification pilot would have required an analysis of non-
pipeline alternatives, we do not find that analyses of non-pipeline alternatives are
necessarily prohibited by I-2066 in the abstract. Indeed, earlier in this Order, we directed
the Company to conduct two NPA analyses on natural gas distribution projects related to
customer growth for any potential projects that exceed $500,000.
Wildfire Expense Balancing Account
Avista's Direct Testimony
610 In Avista's 2020 GRC, the Commission approved a two-way Wildfire Expense Balancing
Account to track the variability in Avista's wildfire expenses against an established
baseline, with deferral of the difference in actual wildfire expenses, up or down, over the
10-Year Wildfire Resiliency Plan.1051 The authorized wildfire expense baseline was first
set at $3.1 million for Washington electric operations, effective October 1, 2021, and
updated to $5.1 million in Dockets UE-220053, et. seq., with any deferrals above or below
this level to be deferred for later return to or recovery from customers.1052
611 In this proceeding, the Company is proposing to increase its annual baseline to $8.3
million for each year of its proposed two-year rate plan.1053 This is based on projected
annual wildfire expenses of$14.9 million is 2025 and $13.8 million in 2026, on a system
basis. Washington's share of these expenses, excluding labor, result in the proposed $8.3
1050 Bonfield, Exh. SJB-5T at 55:22—56:16.
1051 Andrews, Exh. EMA-1 T at 17:19— 18:2.
1052 Andrews, Exh. EMA-IT at 18:2-5 and 18:16-18.
1053 Andrews, Exh. EMA-1T at 19:4-6.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 168
ORDER 08
million annual baseline amount.1054 Avista states that the proposed increase in the baseline
is primarily caused by its enhanced risk-based vegetation management program, which
includes 100 percent risk-tree identification annually, and which has resulted in a"much
bigger and more expensive proposition than originally anticipated."loss
612 In addition, the Company requests carrying charges on its existing deferred Wildfire
balance, any new deferred balances going forward, and while any balances are being
amortized.1016 The Company claims that in its original request for the deferral mechanism
it inadvertently proposed"no interest on the unamortized Wildfire deferral balances,"
however its original intent was to accrue interest as the balances were being amortized and
recovered from, or returned to customers!!"Avista notes that the Commission approved
the balancing account deferral and amortization without carrying charges of any kind.los8
The Company argues that carrying charges are appropriate due to the large deferral
balances it has experienced in recent years, the higher carrying costs it has experienced to
cover all its operating costs, as well as its delayed recovery of wildfire costs.1059 The
Company proposes that its carrying charges be based on its actual cost of debt, updated
semi-annually on January 1, and July 1 each year, effective December 21, 2024 (Rate Year
1) 1060
Staff's Response Testimony
613 Staff does not contest Avista's proposed increase to its Wildfire Balancing Account
baseline, from $5.1 million to $8.3 million annually.1061 Staff also does not contest
Avista's proposal to accrue interest on its deferred balance, because "the circumstances
were outside of the utility's control and the costs were unexpected and significant."1062
Staff notes, however, that since the balancing account's creation in 2020, it is becoming
increasingly difficult for Staff to distinguish between spending that is specific to wildfire
1054 Andrews, Exh. EMA-1T at 19:6-10.
loss Andrews, Exh. EMA-1T at 20:13—21:11.
1056 Andrews, Exh. EMA-1 T at 24:11-17.
1057 Andrews, Exh. EMA-IT at 24:2-10.
1051 Andrews, Exh. EMA-1 T at 24:8-10.
1059 Andrews, Exh. EMA-1 T at 24:11-13.
1060 Andrews, Exh. EMA-1T at 24:16-17.
1061 Erdahl, Exh. BAE-1T at 26:7-10.
1062 Erdahl, Exh. BAE-IT at 26:14-16.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 169
ORDER 08
risk mitigation and"spending which results in other shared benefits, such as enhanced
reliability and reduced storm damage."1063
614 Staff offers two proposals forAvista's next GRC: (1) to fold into base rates all wildfire
mitigation costs that result in other shared benefits; and (2) "to clearly identify and report
learnings from any enhanced grid hardening(i.e.,undergrounding) wherever those
projects are located on Avista's electric transmission and distribution grid."1o64 Staff
identifies costs that it believes would be considered exclusively related to mitigation of
wildfire risk and properly contained in a future balancing account, including: weather
monitoring and establishment of prescribed system operating parameters; undergrounding
of equipment in high-fire risk areas; identification and removal of risk trees (accelerated
vegetation management); and the development of public power cutoff protocols and
mechanisms.lobs Staff argues that standard vegetation management and grid hardening
benefit not only wildfire resilience, but also system reliability and storm damage
mitigation, and would be more properly included in base rates in the future.1066 Staff
further argues for eventual phasing out of the wildfire balancing account completely,
stating that, because these practices have been codified and are becoming a typical part of
doing business for all electric utilities in the state, a tracker is not necessary for such costs
and they should instead become a part of base rates.1067
Avista Rebuttal Testimony
615 Avista does not agree with Staff's proposal to discontinue the wildfire expense balancing
account.1068 The Company agrees that these costs are becoming a normal part of its
operations but does not agree with Staff's contention that a tracker is no longer necessary
and should instead become embedded in base rates in its next GRC.1069 Avista argues that
the use of a balancing account protects both the customers and the Company, as it allows
the Company to defer and recover any excess costs over the established baseline, and to
refund to customers the difference if the costs are less than the baseline.1070 Also,Avista
argues that the tracker allows the Company to react to any future needs identified in its
106' Erdahl, Exh. BAE-1T at 26:19—27:5.
1064 Erdahl, Exh. BAE-1T at 27:14-19.
106'Erdahl, Exh. BAE-IT at 28:3-6 and generally Howell,Exh. DRH-3.
1066 Erdahl, Exh. BAE-IT at 28:14-16.
1067 Erdahl, Exh. BAE-1T at 28:18—29:3.
1061 Andrews, Exh. EMA-6T at 32:18-22.
1069 Andrews, Exh. EMA-6T at 30:13—31:1.
1070 Andrews, Exh. EMA-6T at 31:2-10.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 170
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Wildfire Resiliency Plan, and to pass along any benefits, which"are not easily identified
or quantified in real time, let alone estimated into the future in order to in include in the
next GRC."1o71 The Company requests that the Commission allow the Wildfire Expense
Balancing Account tracker to continue, at least through 2029, over its 10-year Wildfire
Resiliency Plan, as previously approved by the Commission in Dockets UE- 200900, et.
al.1072
Parties'Briefs
Avistas Brief
616 Avista requests the Commission approve the Company's electric Wildfire Expense
Adjustment 3.24,adjusting the Company's wildfire expense and Wildfire Expense
Balancing Account baseline to $8.3 million over the Two-Year Rate Plan, including a
carrying charge at the Company's cost of debt on the deferred balances (current and on-
going), and during amortization of these deferred balances, as-filed by the Company.1073
The Company alleges that these adjustments are supported by Staff, and are uncontested
by the remaining parties.1074 In addition, the Company requests the Commission allow the
Wildfire Expense Balancing Account"tracker"to continue beyond this GRC, at least
through 2029, as this tracker acts as protection for customers and the Company, if costs
expected over the life of the Wildfire Plan vary from that included in base rates.1075
Staff's Brief
617 Staff takes no issue with adjusting the Wildfire Expense Balancing Account baseline, nor
approval of a carrying charge for the account's balances, but also recommends that the
Commission order Avista to do two things: (1) move costs not strictly and exclusively
related to mitigating wildfire risk out of the balancing account and into base rates; and (2)
report on its experience with grid hardening." Staff notes that Avista seems to agree to
report on grid hardening,but rejects moving cost not strictly and exclusively related to
mitigating wildfire risk out the wildfire balancing account. Staff takes issue with Avista's
position that a tracker would provide dollar-for-dollar recovery or refund for any deviation
between actual costs and what is built into rates. But the Commission does not allow for a
1171 Andrews, Exh. EMA-6T at 32:5-14.
1072 Andrews, Exh. EMA-6T at 32:18-21.
1073 Avista's Brief,¶145.
1074 Avista's Brief,¶145;Erdahl,Exh. BAE-1T, at 26:12-16.
1075 Avista's Brief,¶145;Andrews, Exh. EMA-6T at 28-32.
1076 Staff's Brief,¶112 referencing Erdahl, Exh. BAE-1T at 27:12-19.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 171
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tracker for every cost, and it should not, given the incentive distorting effects noted by
AWEC witness Mullins.1077
618 Staff goes further by recommending that Avista remove non-wildfire-specific costs from
the tracker,1078 and leaving in the tracker costs incurred specifically needed to address
wildfire dangers, such as expedited vegetation management or undergrounding facilities in
high-risk areas.1079 Staff suggests that many of the costs Avista is recovering through the
tracker are providing shared benefits, such as those incurred generally for reliability,
instead providing benefits to address wildfire expenses and costs.1080
Decision
619 In Avista's 2020 rate case, we determined that Avista's circumstances concerning wildfires
are extraordinary and justified exercising the Commission's discretion to use regulatory
tools such as balancing accounts, trackers, or deferrals.10s1 As such, we found that
Avista had shown that use of a Wildfire Balancing Account was justified, and we expected
that implementation of the account would remove much uncertainty regarding wildfire
expenses, both for the Company and for customers!0" "Our intent in authorizing the
account is to track and review actual wildfire expense, encourage the utility to take actions
to address the increasing threat of wildfires to the utility and its customers with the
knowledge that prudent expenditures will be recovered and at least a portion will be
included in rates currently authorized for recovery, and ensure fairness to Avista's
customers by monitoring the incremental wildfire expenses collected from them.991083
620 The Commission authorized Avista to initiate the Wildfire Expense Balancing Account in
October of 2021 and established a baseline of$3.1 million for the balancing account.1084
The Commission directed that modifications to the mechanics of the account, such as the
application of a new base level of wildfire expense, additional requirements, or
performance-based metrics, should be considered in GRCs, in order to monitor wildfire
107 Staff's Brief,¶¶113-114 referencing Mullins, Exh.BGM-1T at 64:20-65:1.
1071 Staff's Brief,¶¶115 referencing Erdahl, Exh.BAE-1T at 27:14-16.
1071 Staff's Brief,¶¶115 referencing Erdahl, Exh.BAE-1T at 28:1-10.
10a0 Staff's Brief,¶¶ 115.
1081 Avista Corp,Dockets UE-200900&UG-200901, Order 08/05, 39¶256.
lost Avista Corp,Dockets UE-200900&UG-200901, Order 08/05, 39¶257.
1083 Avista Corp,Dockets UE-200900&UG-200901, Order 08/05, 39¶257.
1084 Avista Corp,Dockets UE-200900&UG-200901, Order 08/05, 39¶257.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 172
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expenses.1085 In Avista's 2022 rate case, the Commission approved a new baseline for the
balancing account of$5.1 million. 1016
621 None of parties, including Staff, contest the Wildfire Expense Balancing Account baseline
being raised to $8.3 million over the Two-Year Rate Plan, nor does any party contest the
carrying charge related to the Company's cost of debt on the deferred balances. The only
issue is Staff's recommendation to remove non wildfire specific costs from the tracker,
such as standard vegetation management and grid hardening, because they benefit not only
wildfire resilience, but also system reliability and storm damage mitigation, and would be
more properly included in base rates in the future.108' Staff does support Avista's inclusion
of expedited vegetation and undergrounding facilities in high-risk areas.1088
622 The Company argues that the use of a balancing account protects both the customers and
the Company, as it allows the Company to defer and recover any excess costs over the
established baseline, and to refund to customers the difference if the costs are less than the
baseline.'0"Also,Avista argues that the tracker allows the Company to react to any future
needs identified in its Wildfire Resiliency Plan, and to pass along any benefits, which "are
not easily identified or quantified in real time, let alone estimated into the future in order
to in include in the next GRC."1090
623 With regard to the non-wildfire costs that result in shared benefits for reliability that
should be removed from the Wildfire Balancing Adjustment, we disagree with Staff and
reject their recommendation.As the Company points out, the balancing account in its
present form allows Avista to react to any future needs identified in its Wildfire Resiliency
Plan.As we have seen with the unpredictable nature of wildfires, what may be non-fire
risk area today may turn into a fire-risk area tomorrow.Avista's standard undergrounding
and standard vegetation management protects against this very real, possible outcome,
given the unpredictability of wildfires. The Commission is hesitant to limit the Company's
flexibility in that regard. Therefore, we reject Staff's recommendation to remove standard
undergrounding in non-fire risk areas and standard vegetation management from Avista's
Wildfire Balancing Adjustment.
1085 Avista Corp,Dockets UE-200900&UG-200901, Order 08/05, 39¶258-259.
10" Wash. Utils. & Transp. Comm'n a Avista Corp, Dockets UE-220053 &UG-210584, Order
10/04,¶ 147 (December 12, 2022).
1017 Erdahl, Exh. BAE-IT at 28:14-16.
" Staff's Brief,¶115.
10s9 Andrews, Exh. EMA-6T at 31:2-10.
1090 Andrews, Exh. EMA-6T at 32:5-14.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 173
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624 As none of the parties contest the Wildfire Expense Balancing Account baseline being
raised to $8.3 million over the Two-Year Rate Plan, we accept Avista's proposed new level
for the balancing account's baseline. Furthermore, as none of the parties contest the
proposal to recover carrying charges at cost of debt, we accept Avista's proposal in that
regard.
Insurance Expense Balancing Account and Pro Forma Insurance Expense
Avista Direct Testimony
625 Avista proposes to continue the use of its insurance expense balancing account, which
defers actual insurance expense above or below its approved baseline, for later return to or
recovery from customers.1091 The Company proposes to increase its currently authorized
baseline from $8.3 million to $12.8 million(WA Electric) and from$1.7 to $2.3 million
(WA Natural Gas) for its proposed two year rate plan.1092 Avista witness Andrews notes
that the Commission's approval of the balancing account was non-precedential per the
approved Settlement, and that the Commission conditioned its approval, requiring Avista
to "document its action to seek out, negotiate, and attain the best insurance at the lowest
costs.""Avista witness Schultz argues that Avista met this condition in its annual
insurance expense balancing account filing beginning September 1, 2023.1094
626 Andrews argues that the Company continues to experience extraordinary and volatile
conditions currently and expects this to continue through its proposed two-year rate
plan."Andrews explains that the Company's proposed baseline increase is based on its
Pro Forma Adjustment 3.12,which contains expected increases in insurance premiums for
general liability, directors and officers (D&O) liability,property insurance, and other
insurance expense."Andrews states that the Company will update any 2023/2024
estimated amounts used in its proposal later in the proceeding once further actual invoices
become available.1197 Andrews notes that the Company incurred approximately $14.6
million in insurance expense during the test year, approximately $0.9 million below its
1091 Andrews, Exh. EMA-1T at 24:23—25:2 and at 25:16-17.
1092 Andrews, Exh. EMA-IT at 25:2-5.
1093 Andrews, Exh. EMA-IT at 25:17—27: 20. See also Dockets UE-220053,et. al., Order 10/04
¶¶ 144-146.
1094 Andrews, Exh. EMA-IT at 27:22-28.See also Andrews Exh. EMA-5C.
109s Andrews, Exh. EMA-1 T at 28:1-7.
1096 Andrews, Exh. EMA-IT at 28:14-19.
1097 Andrews, Exh. EMA-1T at 29:8-11.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 174
ORDER 08
2023/2024 authorized baseline, but reflecting an increase of 119 percent above 2020
levels.1098
627 Also, as with proposal with the Wildfire Expense Balancing Account,Avista proposes to
accrue interest at the Company's actual cost of debt on any existing deferred balances, any
new deferred balances going forward, and while being amortized.1099
Staff Response Testimony
628 Staff witness Erdahl agrees that Avista should be allowed to continue its insurance
balancing account, because "there has not been evidence of conditions becoming more
stable."Erdahl notes that the balancing account protects the ratepayers and the Company
from over or under-collection of insurance expense!100 Staff also supports Avista's
proposed increase to its baseline, and its request to accrue interest on its deferred
balance.'1°1
AWEC' Response Testimony
629 AWEC witness Mullins contests the continuation of the balancing account, arguing that as
a matter of policy and in the interest of ratepayer protections, the Commission should limit
the number of true-up mechanisms granted to Avista.1"' Mullins argues that the dollar-for-
dollar recovery of such a mechanism removes "the Company's incentive to seek out,
negotiate, and attain the best insurance at the lowest costs."1103 Mullins notes that the
insurance expense balancing account was created as part of the Commission's approval of
a multi-party settlement in its last rate case, and therefore represents a compromise of the
settling parties, subject to the Commission's additional reporting requirements that
conditioned its approval.)10'Mullins states that AWEC and other parties have since gained
additional understanding of the administrative burdens that multi-year rate plans impose
on the parties, and the additional work required for both Avista and reviewing parties
related to these additional reporting requirements."0s Mullins argues that this additional
109'Andrews, Exh. EMA-1 T at 30:3-14.
"99 Andrews, Exh. EMA-1 T at 33:1-18.
1100 Erdahl, Exh. BAE-IT at 32 5-8.
101 Erdahl, Exh. BAE-IT at 32:10—33:3.
1102 Mullins,Exh. BGM-IT at 64:15-20.
" Mullins,Exh. BGM-IT at 64:20—65:1.
1 104 Mullins,Exh. BGM-1 T at 65:3-6.
1105 Mullins,Exh. BGM-IT at 65:6-10.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 175
ORDER 08
reporting "introduces ambiguity in terms of what actions are available or appropriate upon
review of Avista's documentation."1106 Mullins believes that this additional burden, along
with the lack of incentive for Avista to manage its insurance expenses between rate cases,
supports discontinuance of the balancing account.1107
630 Mullins does not dispute inclusion of Avista's forecasted insurance expense in base rates,
and notes "AWEC's opposition is to the use of the single-issue ratemaking to recover these
costs.""0s
Public Counsel's Response Testimony
631 Public Counsel witness M. Garrett disputes the directors and officers portion of Avista's
insurance expense proposal, arguing that a 50150 cost allocation between customers and
shareholders is appropriate!109 M. Garrett's adjustment would reduce operating expenses
by $237,000 (WA Electric) and $75,000 (WA Natural Gas).1110 M. Garrett argues that
D&O liability insurance generally protects the assets of a company's directors and officers
from financial impacts of litigation resulting from their actions taken on the corporation's
behalf, and also shields shareholders, Board members, and senior leadership from legal
action resulting from their decisions!111 M. Garrett argues that the costs of a director or
officer's negligent acts are not a necessary cost of providing utility service, and because
they have a fiduciary duty to put the interests of shareholders first, some of these costs
should be borne by shareholders, including D&O liability insurance!112
632 M. Garrett argues that a 50150 allocation between customers and shareholders, as opposed
to the 90/10 allocation proposed by Avista is more appropriate, as both groups benefit
from the Company holding D&O liability insurance.1113 M. Garrett notes that several state
regulatory commissions have required equal sharing of these costs, including Arkansas,
California, Nevada,New Mexico, Florida, and New York, and that Connecticut previously
allowed only 25 percent of these costs in rates.1114
1106 Mullins,Exh. BGM-IT at 65:10-12.
107 Mullins,Exh. BGM-IT at 65:12-14.
"Mullins,Exh. BGM-IT at 65:15-19.
1109 M. Garrett, Exh. MEG-1T at 34:6-7.
110 M. Garrett, Exh. MEG-1T at 34:7-12.
1111 M. Garrett, Exh. MEG-1T at 28:15-18.
1112 M. Garrett, Exh. MEG-1T at 29:3-7.
11" M. Garrett, Exh. MEG-1T at 30:1-12.
1114 M. Garrett, Exh. MEG-1T at 30:16—34:3.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 176
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AWEC s Cross Answering Testimony
633 In Cross-Answer testimony directed at Staff, Mullins argues that under the balancing
account approach, insurance costs are updated annually on November 1 st each year,
resulting in more rate volatility and unpredictability for customers." s Mullins also argues
that this methodology could create a windfall for Avista, noting that the balancing account
is not subject to an earnings test, and should Avista earn at or above its rate of return and
also experience a material increase in its insurance costs, it will still be allowed to recover
these costs, even when such recovery is not necessary to ensure healthy earnings for the
utility.1116 Mullins argues that under a scenario where the balancing account is removed,
the Company still has the ability to file for a deferral to track and recover any excessive
insurance costs.""Mullins argues that this approach could be subject to an earnings test,
preventing potential windfall, and that any recovery would be granted in conjunction with
its next rate case, eliminating AWEC's rate volatility concerns.1118
Avista Rebuttal Testimony
634 Regarding Mullins's proposed discontinuation of the insurance expense balancing
account,Andrews disagrees with the assertion that the true-up mechanism is single-issue
ratemaking, results in additional administrative burden, and removes Avista's incentive to
manage its insurance costs.""Noting the findings of the Commission in the final order of
the Company's 2022 GRC, and reiterated by Staff in its response testimony,Andrews
argues that"the volatility experienced by Avista, and the utility industry, is extraordinary
and outside the Company's control."'120 Andrews argues that tracking mechanisms such as
this were created for this very reason, as protection for the Company and customers from
extraordinary circumstances and volatility in certain expenses.1121
635 Regarding M. Garrett's proposal to split the cost of D&O insurance equally between
shareholders and customers,Avista witness Schultz argues that M. Garrett's proposal
11" Mullins,Exh. BGM-8T at 20:5-8.
11"Mullins,Exh. BGM-8T at 20:11-14.
11"Mullins,Exh. BGM-8T at 20:15-19.
11"Mullins,Exh. BGM-8T at 20:19-24.
11"Andrews, Exh. EMA-6T at 37:3-7.
1120 Andrews, Exh. EMA-6T at 37:7-10.
1121 Andrews, Exh. EMA-6T at 37:10-12.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 177
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should be rejected!122 Schultz argues that M. Garrett's analysis focuses on the findings of
seven states, but ignores the other 43 states, and argues that it is this Commission's
findings that are most relevant to Avista.1123 Schultz states that the Company has
consistently applied the reduction of 10 percent for D&O insurance since ordered by the
Commission in Avista's 2009 rate case.1124 Schultz argues that Avista's Board of Directors
is focused primarily on utility operations, and that based on the actual time the Board
dedicates to the utility, "a 90%/l0% sharing of these fees is conservative."112s
Parties'Briefs
Avistas Brief
636 Avista states that the Commission should approve the Company's electric and natural gas
Insurance Expense Adjustments 3.12, updating the Company's insurance expense and its
proposed Insurance Expense Balancing Account baselines, over the Two-Year Rate Plan,
to $12.8 million for electric, and $2.3 million for natural gas, as filed by the Company.1126
The Company requests approval of the Pro Forma Insurance Expense as well as the
approval of the D&O Insurance expense sharing at its current level of 90percent/10
percent, as opposed to the 50150 proposed by Public Counsel.112'Avista seeks the
inclusion of a carrying charge at the Company's cost of debt on the deferred balances
(current and on-going), and during amortization of these deferred balances, was supported
by Staff, and uncontested by the other parties!121
Staff's Brief
637 In its brief, Staff supports approval of. 1)the continuation of Avista's insurance balancing
account;112' 2) an increase to its baseline;...° and 3) a carrying charge on the current
1122 Schultz, Exh. KJS-5T at 54:2-6.
1121 Schultz, Exh. KJS-5T at 54:10-12.
1124 Schultz, Exh. KJS-5T at 54:12—55:3.
1125 Schultz, Exh. KJS-5T at 55:4-6.
1126 Avista's Brief,¶146.
1121 Avista's Brief,¶146 referencing M. Garrett, Exh. MEG-1T, at 34:4-12.
1121 Avista's Brief,¶146 referencing M. Garrett, Exh. MEG-1T, at 32:18—33:3.
1121 Andrews, Exh. EMA-IT at 24:20-25:5.
1130 Andrews, Exh. EMA-1T at 24:20-25:5.Avista specifically seeks to increase the baseline from
$8.271 million to $12.795 million for electric operations and from$1.746 million to $2.247 for
natural gas operations.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 178
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deferred balance and any future deferrals.'131 Staff notes that AWEC opposes the
Insurance Expense Balancing Account as a single-issue ratemaking mechanism. Staff does
not agree with AWEC's position and points out that the insurance market has been volatile
for companies. Staff opines that the Commission's reporting requirements will allow the
parties to verify that Avista is taking all efforts toto minimize its insurance costs. 1132 Staff
asserts that the Commission should allow Avista to continue the account, adjust the
baseline, approve the carrying charge, and continue in effect the reporting requirements
for the account.'133
Public Counsel's Brief
638 Public Counsel reiterates that they favor a 50 percent or less rather than a 90 percent
allocation of insurance expenses.1134
AWEC's Brief
639 AWEC rejects Avista's proposal to continue the Insurance Expense Balancing Account
because it believes that balancing accounts constitute single-issue ratemaking and allows
Avista dollar-for-dollar recovery of insurance expense.1135 AWEC cites to Commission
precedent for the premise that"single-issue ratemaking is generally disfavored as it allows
for specific ratemaking treatment for a single or small subset of costs, regardless of
whether other costs have gone up or down during the same period, and"risks over-earning
by the company and over-paying by the customers."1136 AWEC opines that Avista forecast
the insurance expense within the confines of the MYRP, instead of truing up the expense
through the balancing account.'131
Decision
640 In Avista's 2022 rate case, and as part of settlement, the parties agreed to the establishment
of a non-precedential Insurance Balancing Account. The Commission approved the
131 Staff's Brief,¶110 referencing Andrews, Exh. EMA-1T at 33:12-18.
1132 Staff's Brief,¶111 referencing Erdahl, Exh. BAE-1T at 30:10-32:1.
1133 Staff's Brief,¶111;Andrews,Exh. EMA-6T at 37:13-38:6 (agreeing to continue reporting on
measures Avista has taken to minimize insurance costs).
1134 Public Counsel's Brief,¶106.
1135 AWEC's Brief,¶104.
1136 AWEC's Brief,¶104 citing In re Avista Corporation,Docket UG-060518, Order 04 at 11 (Feb.
1, 2007).
137 AWEC's Brief,¶104.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 179
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settlement and the Insurance Balancing Account)138 In that case, Public Counsel opposed
the establishment of the Insurance Balancing Account on the grounds that generally,
authorizing a pass-through guaranteeing a company recovery of its costs in a certain area
removes the business incentive for the company to control those costs."39 However, in the
present case, it is AWEC that seeks discontinuance of the Insurance Balancing
Account,'140 raising the same arguments that Public Counsel raised in Avista's 2022 rate
case.1141
641 In Avista's 2022 rate case we found that Avista had demonstrated unprecedented increases
and volatility in its insurance costs, and that the insurance expense increases in recent
years are "extraordinary" and"volatile" and caused an under-recovery of approximately
$5.3 million in 2022.1142 Moreover, we held that Avista demonstrated that it had taken and
is taking appropriate steps to try to control these costs, but had shown unprecedented
recent increases in insurance that were largely out of its control. These increases had been
driven primarily by the Company's general liability premiums, which cover wildfire risk
and property insurance premiums, and which tend to react to insurance industry losses due
to natural disasters.1143 Further, we agreed that these costs had increased due to factors
outside the Company's control and despite the Company's best efforts under its Wildfire
Resiliency Plan.'144
642 Based on the evidence and testimony, we reject AWEC's recommendation to discontinue
and accept Avista's proposal to continue the Insurance Balancing Account. Similar to the
circumstances in 2022, we again see a volatile insurance market due to the increase of
recent natural disasters, including the persistent presence of wildfires. We note that Avista
witness Andrews stated in her testimony that "the volatility experienced by Avista, and the
utility industry, is extraordinary and outside the Company's control."114s In addition, we
note Staff witness Erdahl's testimony that, "there has not been evidence of conditions
138 Avista, Dockets UE-220053, et. al., Order 10/04 T140.
1139 Avista, Dockets UE-220053, et. al., Order 10/04 T140; See also Mullins,Exh.BGM-1T at
64:20-65:1.
1140 Mullins,Exh. BGM-IT at 64:15-20.
141 Mullins,Exh. BGM-IT at 65:15-19.
1142 Avista, Dockets UE-220053, et. al., Order 10/04 T141;Andrews, Exh. EMA-1T at 66:16-19
and Exh. EMA-7T 28:5-11.
1143 Avista, Dockets UE-220053, et. al., Order 10/04 T141; See also Andrews, EMA-1T at 64:2-
74:19;Brandkamp,Exh. REB-1CT at 3:22-8:12.
1144 Avista, Dockets UE-220053, et. al., Order 10/04 T141; See also Andrews, EMA-1T at 64:2-
74:19;Brandkamp,Exh. REB-1CT at 3:22-8:12.
1145 Andrews, Exh. EMA-6T at 37:7-10.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 180
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becoming more stable," and that the balancing account protects the ratepayers and the
Company from over or under-collection of insurance expense.1146 Therefore, because of
the continued volatility of market conditions beyond Avista's control the Insurance
Balancing Account shall continue.
643 We turn to the baseline for the Company's Insurance Balancing Account.Avista proposes
adjusting the Insurance Expense Balancing Account baselines, over the Two-Year Rate
Plan, to $12.8 million for electric, and $2.3 million for natural gas, as filed by the
Company)14'No other parties contest Avista's proposed adjustments.Additionally, given
the current market and environment, increasing the Insurance Expense Balancing Account
baselines is appropriate. Therefore, we approve increasing Insurance Expense Balancing
Account baselines to $12.8 million for electric, and $2.3 million for natural gas.
644 Next,Avista has proposed to recover carrying charges at its cost of debt. No Party contests
Avista's proposal. We grant Avista's proposal to recover its carrying charges at its cost of
debt.
Association Dues
Public Counsel's Response Testimony
645 While not addressed in Avista's direct testimony, Public Counsel witness M. Garrett
proposes full disallowance of Avista's industry association dues paid to the American Gas
Association (AGA) and the Edison Electric Institute (EEI), which would reduce the as-
filed revenue requirement by approximately $140,000 for AGA dues and$252,000 for EEI
dues.1148 M. Garrett argues that Avista has not adequately demonstrated that its "request
for recovery of these dues relates to customer interests rather than lobbying and broader
industry advocacy efforts."1149
646 M. Garrett maintains that in recent years, regulatory commissions and legislators
nationwide are raising concerns of utilities inappropriately passing along costs of political
activities and"industry self-promotion to captive customers,"11 so since a significant
1146 Erdahl, Exh. BAE-IT at 32 5-8. In Order 10/04 T144,the Commission established that
overcollection or undercollection would be subject to rebate or surcharge.
141 Avista's Brief,¶146.
1141 M. Garrett, Exh. MEG-1T at 24:12-17. See also Exh. MEG-3 Sch. 3.8 and Exh. MEG-4 Sch.
4.8.
1149 M. Garrett, Exh. MEG-1T at 24:10-13.
1151 M. Garrett, Exh. MEG-1T at 15:16-18.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 181
ORDER 08
portion of the industry association dues relate to payments for lobbying efforts and
political activities!151 M. Garrett argues that given there is significant overlap between the
services these associations provide for the public interest and those which advocate for
their members'private interests, these expenses should be removed until "a clear
distinction between these services" can be made.1112 M. Garrett also refers to IRS
regulations that require these associations to report amounts spent on lobbying activity, but
argues that the narrow definition for "lobbying"is not sufficient to determine how much
of EEI's and AGA's efforts are "more appropriately described as advocating for its
members'private interests to federal, state, and local officials and policymakers."1153
647 Additionally, in light of growing concerns, M. Garett highlights that FERC recently
opened a Notice of Inquiry(NOI) to examine this issue, and he cites to a recent appellate
court decision holding that"indirect influence expenses (e.g., industry associations that
provide public policy advocacy services on behalf of dues-paying members) should be
recorded [below the line]."11sa M. Garett also cites to state public utility commissions in
Kentucky, Minnesota, California, and Avista's recent rate case in Oregon, where industry
association dues were disallowed, in full or in part."" M. Garret also cites to legislation
enacted in Colorado, Connecticut,New York, and Maine, as instructive to prohibit utilities
from recovering expenses for trade or industry association dues from retail customers!156
Sierra Club's Cross Answering Testimony
648 In its Cross-Answer testimony, Sierra Club witness Dennison supports Public Counsel's
proposed 100 percent removal of industry association dues, noting agreement with the
arguments put forth by Garrett above.'15' Dennison also highlights that Sierra Club led a
coalition of 17 organizations that called for Avista to end its membership with the AGA on
the basis of AGA's opposition to policymakers misleading the public by failing to disclose
their financial backers. Specifically, in a letter to Avista, the AGA in relevant part stated it
"opposed local, state, and federal building decarbonization policies, deployed tactics and
experts that were previously used by big tobacco companies to cast doubt about the health
1151 M. Garrett, Exh. MEG-1 T at 16:1-2.
1152 M. Garrett, Exh. MEG-1T at 16:6-13.
153 M. Garrett, Exh. MEG-1T at 17:19— 18:4.
1154 M. Garrett, Exh. MEG-1T at 19:10—20:4.
1155 M. Garrett, Exh. MEG-1T at 21:11 22:2.
156 M. Garrett, Exh. MEG-1T at 23:13-17.
157 Dennison,Exh. JAD-12T at 9:5-6.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 182
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harms of burning gas indoors, and mislead policymakers and the public by failing to
disclose its financial support for these efforts."1158
Avistas Rebuttal Testimony
649 Avista witness Schultz asserts that all costs associated with political activities and
lobbying efforts paid to the EEI and AGA are booked"below-the-line" and charged
directly to shareholders, and that all other costs related to membership are directly related
to utility operations, and therefore properly recoverable from ratepayers.1159 Schultz
argues that EEI and AGA provide "public policy leadership, critical industry data, market
opportunities, strategic business intelligence, and one-of-a-kind conferences and forums,
among other things."1160 Schultz also asserts that"Washington ratepayers benefit from
Avista's involvement in these organizations because they provide an opportunity for
Company's employees: (1) to stay abreast of critical electric and natural gas industry
issues issue specific to utilities: (2) to access to volumes of information on industry data;
and (3)to foster networking opportunities within those industries."1161
650 Schultz provides some specific examples of how Avista and its customers benefit from
Avista's membership in EEI and AGA, including its participation in EEI's Reliability
Technical Committee (RTC), EEI's Reliability Executive Advisory Committee (REAC),
EEI's Spare Transformer Equipment Program(STEP),AGA's Peer Review,AGA's
Technical Committees and Technical Discussion Groups, and AGA's Field Operations
Committee)162 Schultz cites to a specific example of a customer benefit received through
its membership. Namely AGA deployed its National Mutual Aid Program during the
Williams Pipeline dig-in that occurred in November 2023, which allowed Avista to
quickly restore services to its 36,000 natural gas customers after the pipeline was
damaged.1163 Through this program, Schultz states,AGA helped coordinate over 300
mutual aid workers from eight natural gas utilities across six states, which enabled Avista
to restore service to customers in less than a week.'161
Dennison,Exh. JAD-12T at 8:1-7.
Schultz, Exh. KJS-5T at 59:6-12.
1160 Schultz, Exh. KJS-5T at 59:15-17.
1161 Schultz, Exh. KJS-5T at 59:17-21.
162 Schultz, Exh. KJS-5T at 60:1 —61:24.
161 Schultz, Exh. KJS-5T at 61:27-33.
1164 Schultz, Exh. KJS-5T at 61:34—62:3.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 183
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651 Finally, Schultz disputes M. Garrett's statement that in Avista's recent general rate
proceeding in Oregon, the commission disallowed industry association dues. The Oregon
case was an all-party settlement, whereby as part of the "give-and-take,"Avista agreed to
remove these costs for settlement purposes.116'As such, Schultz explains that the
disallowance and approval of a settlement agreement "are two very different things and
should give the Commission pause"1166 in reviewing the arguments put forward by M.
Garrett and the Sierra Club. For these reasons, Schultz concludes that Avista's industry
association membership dues are prudently incurred and that Public Counsel's proposed
removal of such costs from revenue requirement should be rejected.1167
Decision -Association Dues
652 While the Commission acknowledges that an overlap can exist between the services
associations provide for the public interest and those which advocate for their members'
private interests in lobbying, absent any evidence in the record that demonstrate the dues
Avista pays go directly toward private interest and lobbying, we find this argument
speculative. More importantly,Avista identified a direct nexus to the benefits its customers
received through its membership in these groups, including deployment of AGA's
National Mutal Aid Program during the Williams Pipeline incident, which enabled the
Company to coordinate over 300 mutual aid workers from eight natural gas utilities across
six states to restore service to customers in less than a week.Additionally, because it is
unclear to what degree it is Avista's responsibility to perform an audit for each
association's costs and services, and because FERC's NOI into this issue is pending, we
reject Public Counsel and Sierra Club's proposal to disallow Avista's industry association
dues paid to AGA and EEI.
Investor Relations Expense
Public Counsel's Response Testimony
653 Public Counsel witness M. Garrett proposes an adjustment to Avista's investor relations
expense, arguing that a 50150 split of these costs between shareholders and ratepayers is
appropriate."" M. Garrett's adjustment would result in a revenue requirement reduction
of$201,000 (WA Electric) and$60,000 (WA Natural Gas).1169
165 Schultz, Exh. KJS-5T at 62:5-13.
1166 Schultz, Exh. KJS-5T at 62:13-16.
167 Schultz, Exh. KJS-5T at 62:18-19.
161 M. Garrett, Exh. MEG-1T at 36:7-9.
1169 M. Garrett, Exh. MEG-1T at 36:9-12.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 184
ORDER 08
654 M. Garrett argues that"shareholders and customers both benefit when the Company incurs
expenses to disseminate information about Avista's current and future earnings and
investments to the larger investment community in a timely manner,"noting that
customers benefit when the Company can access capital at a lower price, and shareholders
benefit through higher share prices.1170 Based on this, M. Garrett believes a 50150 split is
appropriate.1171
Avistas Rebuttal Testimony
655 Avista witness Schultz offers on rebuttal that the effect of a 90/10 adjustment would be a
reduction in revenue requirement of approximately$40,000 (WA Electric) and $12,000
(WA Natural Gas).'172
656 Schultz argues that the proposal to split these costs 50150 is "completely
unreasonable."1173 As an investor-owned utility, Schultz argues,Avista raises
approximately half of its funds used to serve its customers through equity markets, and as
a result is required to meet certain rules and requirements that set forth how Avista
operates, including "the development and issuance of quarterly and annual financial
reports, which is facilitated by investor relations."1174 Schultz explains that Avista's
investors, who are its owners, provide the funds necessary to operate its business for the
benefit of its customers and that its investor relations team facilitates its compliance with
Securities and Exchange Commission (SEC)requirements, financial reporting, and
communication with the investment community!175
657 Schultz also argues that Public Counsel's proposed 50150 split is arbitrary and
unsupported by evidence!171 Schultz notes that, unlike when Avista had significant non-
utility operations in the past which may justified a lower percentage sharing,Avista is now
comprised almost entirely of utility operations, with only a small set of passive
investments under Avista Capital.""
1170 M. Garrett, Exh. MEG-1T at 36:3-7.
1171 M. Garrett, Exh. MEG-1T at 36:7-9.
1172 Schultz, Exh. KJS-5T at 35:9-12.
1173 Schultz, Exh. KJS-5T at 49:6-9.
1174 Schultz, Exh. KJS-5T at 49:9-14.
1175 Schultz, Exh. KJS-5T at 49:16—50:4.
1176 Schultz, Exh. KJS-5T at 50:12-14.
1177 Schultz, Exh. KJS-5T at 50:15-19.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 185
ORDER 08
658 However, Schultz does believe that after review of the arguments made by M. Garrett,
some degree of adjustment is appropriate, and Avista offers a 90/10 split, which is
consistent with Avista's rationale for having 90 percent of the costs associated with its
Board of Directors allocated to utility customers.1178 Schultz states that"given a small
portion of the overall Company is related to non-utility activities, it is reasonable to assert
that a portion should be recognized as non-utility."1179
Decision —Investor Relations
659 The Commission finds that Avista's revised offer provided on rebuttal of a 90/10 split is a
reasonable middle-ground as opposed to the 50150 split proposed by Public Counsel. The
Company's proposal is also consistent with the 90/10 allocation of Avista's Directors' and
Officers' liability insurance policy.
Working Capital
AWEC' Response Testimony
660 AWEC Witness Mullins argues that Avista inappropriately includes interest-bearing
accounts within its Working Capital. Mullins testifies that although the Company claims to
deduct the interest associated with the two specific accounts in question,Avista errs in its
calculation of the net interest and is unable to track the interest specific to electric and
natural gas operations. He argues, too, that the historical period will not accurately reflect
the expected interest earned during the rate plan as interest is not earned based on an
average balance and is subject to changing condition in the commodities market.'"0
Further, Mullins testifies the Company's working capital model contained hardcoded
balances and therefore AWEC was unable to duplicate Avista's calculation. However,
Mullins estimates the impacts of AWEC's recommendation would reduce the revenue
requirement by approximately $2.5 million for electric and $311,000 for natural gas.
Avistas Rebuttal Testimony
661 Company witness Andrews refutes AWEC's proposed adjustment to Working Capital
testifying that Avista used the methodology for excluding interest-bearing portions of
accounts used for commodity trades in its 2019 GRC in consolidated dockets UE-190334,
1171 Schultz, Exh. KJS-5T at 50:5-8.
1171 Schultz, Exh. KJS-5T at 50:9-10.
...0 Mullins,Exh. BGM-1T at 26:3—28:2, 29:6-22.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 186
ORDER 08
UG-190335, UE-190222.Andrews argues this methodology was proposed by Commission
Staff and approved by the Commission)181
662 Additionally,Andrews rejects AWEC's contention that the Company is unable to
accurately identify the interest-bearing portion of the two accounts nor unable to identify
the impacts to electric and natural gas operations independently. Witness Andrews
references Company witness Schultz's calculations of the Working Capital adjustment
(1.03 ISWC Adjustment) that specifically identify that 92 percent of the accounts are non-
interest-bearing and identifies specific dollar amounts for the electric and natural gas share
of the interest-bearing portion of the accounts.1182
663 Further,Andrews disagrees with AWEC's position that historical account balances are not
an indicator of future balances. While Andrews agrees that the events that occurred in
winter 2022 were extraordinary, the collateral balances have not returned to pre-2022
levels. With continued changing market conditions, which have resulted in more market
transactions over the past five years, collateral balance baselines are anticipated to remain
elevated. Therefore,Andrews contends that margin rates have also not returned to pre-
2022 levels. Finally,Andrews argues the Company appropriately uses historical balances
in its Working Capital adjustment as it not feasible to project the hundreds of balance
sheet accounts that flow into this adjustment.Andrews states that allowing a party to
"cherry pick" accounts to reduce working capital is inappropriate; while some accounts
may decline from historical balances, others may just as likely increase.1183
664 Finally, witness Andrews provides testimony that generally supports the inclusion of
working capital as a mechanism to mitigate regulatory lag.Andrews claims otherwise the
Company would be required to incur a greater lost return beyond what it has already
absorbed.1 114
Parties'Briefs
Avista
665 Avista argues that the Commission should approve its Investor Supplied Working Capital
(ISWC) Restating Adjustment 1.03 and reject AWEC's proposal to remove the Wells and
Mizuho account balances from the adjustment.Avista states that it complied with the
"g'Andrews, Exh. EMA-6T at 45:3-15.
1112 Andrews, Exh. EMA-6T at 46:15 47:5.
11"Andrews, Exh. EMA-6T at 47:9-48:8.
1184 Andrews, Exh. EMA-6T at 49:3-19.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 187
ORDER 08
methodology that the Commission approved in Dockets UE-190334, UG-190335, and
UE-190222 by removing the minimal interest-bearing portion of these accounts such that
they represent expected ISWC balances during the effective period of the multi-year rate
plan.'185 The Company further notes that it has experienced a lost return of over $6.3
million in 2023 due to increased ISWC balances as a result of increased power supply
margin account balances, resulting in substantial regulatory lag.'186
AWEC
666 AWEC recommends that the Commission adopt an adjustment to reflect the removal of
Avista's Wells and Mizuho interest-bearing accounts.AWEC states that while the method
Avista used in this proceeding is consistent with the method used in Dockets UE-190334,
UG-190335, and UE-190222, the Commission did not expressly adopt that methodology
in its order.187 AWEC argues that Avista's methodology is inappropriate for two reasons.
First,AWEC contends that because there are factors that influence the accounts' earned
interest beyond the account balances, it is inappropriate to conclude that a portion of the
balances do not earn interest!188 Second,AWEC contends that the two accounts'
performance during the historical period are not representative of anticipated performance
during the rate effective period of the rate plan.'189
667 AWEC further disagrees with Avista's assertion that AWEC's proposed adjustment is
selectively interpreting accounts and maintains that its recommendation is grounded in
RCW 80.28.425(3)(b)'s requirement to determine the fair value of property during the rate
effective period of the rate plan.1190 AWEC assert that Avista's adjustment fails to properly
forecast the balances of the Wells and Mizuho accounts in the rate effective period
because Avista did not adjust its historical data to account for the influence of unusual
185 WUTC v Avista Corp.,Dockets UE-240006&UG-240007,Avista's Post-Hearing Brief¶ 112
(Oct. 28,2024).
1116 WUTC v Avista Corp.,Dockets UE-240006&UG-240007,Avista's Post-Hearing Brief¶ 112
(Oct. 28,2024).
1187 WUTC a Avista Corp.,Dockets UE-240006 &UG-240007,AWEC's Post-Hearing Brief¶95
(Oct. 28,2024).
1"' WUTC a Avista Corp.,Dockets UE-240006&UG-240007,AWEC's Post-Hearing Brief¶96
(Oct. 28,2024).
11a9 WUTC a Avista Corp.,Dockets UE-240006&UG-240007,AWEC's Post-Hearing Brief¶96
(Oct. 28,2024).
1190 WUTC a Avista Corp.,Dockets UE-240006&UG-240007,AWEC's Post-Hearing Brief¶97
(Oct. 28,2024).

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 188
ORDER 08
market prices during the winter of 2022-2023.""AWEC contends that Avista's power
supply forecasts demonstrate that the conditions that caused high prices during the winter
of 2022-2023 are unlikely to reoccur during the rate effective period of the rate plan."92
Instead,AWEC maintains that margin prices will be effectively zero based on the data
from 2020 to 2021, and consequently Avista's recommended approach does not comply
with RCW 80.28.425(3)(b).1193 Finally,AWEC argues that regulatory lag does not provide
a justification for adopting Avista's proposed treatment of its Wells and Mizuho accounts
because regulatory lag is within the control of the Company.1194
Decision
668 The Commission rejects AWEC's proposed revision to Avista's working capital Restating
Adjustment 1.03.As an initial matter, the Commission disagrees with AWEC's assertion
that the methodology used by Avista for its working capital adjustment is not precedential.
As AWEC acknowledges in its briefing, the methodology used by Avista in this case is the
same methodology used in Dockets UE-190334, UG-190335, and UE-190222.'195 While
the methodology was not explicitly discussed in the order, it was in fact used during the
case and incorporated into the final outcome, and the Company has used that methodology
in all of its subsequent rate cases.'196 Consequently, it was deemed fair,just, reasonable,
and sufficient by the Commission and AWEC's arguments to the contrary are
unpersuasive.
669 In its brief,AWEC argues that the Commission should reject Avista's methodology in part
because the extraordinary prices that occurred during the winter of 2022-2023 are not
representative of how the working capital accounts will perform during the rate effective
period!19' However, it is clear from Avista's testimony that it considered several factors
other than just the winter 2022-2023 prices, including elevated power and gas prices
191 WUTC a Avista Corp.,Dockets UE-240006&UG-240007,AWEC's Post-Hearing Brief¶97
(Oct. 28,2024).
1192 WUTC a Avista Corp.,Dockets UE-240006&UG-240007,AWEC's Post-Hearing Brief¶97
(Oct. 28,2024).
119' WUTC a Avista Corp.,Dockets UE-240006&UG-240007,AWEC's Post-Hearing Brief¶97
(Oct. 28,2024).
1194 WUTC a Avista Corp.,Dockets UE-240006&UG-240007,AWEC's Post-Hearing Brief¶98
(Oct. 28,2024).
119' Id., at¶95.
1196 Andrews, Exh. EMA-6T at 45:6-15.
197 WUTC a Avista Corp.,Dockets UE-240006&UG-240007,AWEC's Post-Hearing Brief¶96
(Oct. 28,2024).

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 189
ORDER 08
relative to past years, greater price volatility, and the impacts of significant market
events.'198 The Commission further shares Avista's concerns that attempting to forecast an
adjustment to its ISWC is not reasonably feasible, given that it consists of hundreds of
balance sheets.'199
670 Although AWEC argues that its adjustment method is more reasonable because it forecasts
the likely performance of the accounts during the rate effective period, there does not
appear to be supporting analysis for AWEC's forecast beyond a citation to witness
Mullins'testimony.1200 In turn, witness Mullins states in testimony "[a]s can be seen, in
the winter of 2022-2023, the margin balances were extraordinary, whereas in the past they
hovered close to zero."1201 Contrary to AWEC's assertions, this observation, standing on
its own, does not support the conclusion that the margin balances will in fact be close to
zero during the rate effective period. Furthermore, even assuming that AWEC's forecast
was accurate, it is not appropriate to adjust some,but not all, of the accounts in Avista's
ISWC, because the limited adjustments will not reasonably reflect the performance of the
entire ISWC during the rate-effective period.
671 Finally, the Commission disagrees with AWEC's assertion that its proposed methodology
is the only methodology that complies with RCW 80.28.425(3)(b). The Commission notes
that pursuant to RCW 80.28.425(3)(d), "[i]n ascertaining and determining the fair value of
property of a gas or electrical company pursuant to (b) of this subsection . . . the
commission may use any standard, formula, method, or theory of valuation reasonably
calculated to arrive at fair,just, reasonable, and sufficient rates."This statute affords the
Commission broad discretion regarding an appropriate methodology, provided that the
method is "reasonably calculated"to arrive at rates that are fair,just, reasonable, and
sufficient. Consequently, the Commission has discretion to authorize a methodology that
considers historical performance, even in the absence of a forecast. The Commission has
done so in the past on this issue and determines that it is reasonable to do so again based
on the record developed in this proceeding. The Commission accepts Avista's proposed
Restating Adjustment 1.03.
11"Andrews, Exh. EMA-6T at 47:9—48:2.
1199 Andrews, Exh. EMA-6T at 48:13 -20.
1200 WUTC a Avista Corp.,Dockets UE-240006&UG-240007,AWEC's Post-Hearing Brief 197,
fii. 242, 247 (Oct. 28,2024)(citing Mullins,Exh. BGM-IT at 28:12-13).
1201 Mullins,Exh. BGM-IT at 28:12-13.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 190
ORDER 08
FITIDFITIITC A djustm en t
672 We note that Avista filed a petition in Dockets UE-200896 and UG-200896, requesting the
Commission authorize a change to its accounting for federal income tax expense for
certain plants and defer the associated change in tax expense (Tax Customer Credit) on
October 30, 2020, the same date it filed its 2020 GRC in Dockets UE-200900 and UG-
200901.
673 In its order granting the petition, the Commission authorized Avista to change its
accounting method for plant related to IDD#5 mixed service costs (inventory costs) and
for meters from normalization to flow-through treatment.Additionally, Order 01
authorized the deferral for the associated change in tax expense. The Commission found
the proposed accounting treatment had no immediate impact on rates, and that the
treatment of unprotected ADFIT and EDIT(including the Tax Customer Credit) would be
addressed within the context of the 2020 GRC.
674 The 2020 GRC resulted in a partial multiparty settlement, however, the Tax Customer
Credit remained contested. In its final order, the Commission ordered that Avista begin
returning the benefit to customers as of the rate effective date over a two-year period
through separate tariff schedules. However, as the balance of the Tax Customer Credit
would not reach zero at the end of that two-year period, the Commission temporarily
ordered a new 10-year amortization schedule for that remaining balance subject to
reexamination in the subsequent GRC.
675 On December 12, 2022, the Commission issued its final order in that subsequent GRC
which resulted in a full multiparty settlement.1202 The settling parties agreed the Residual
Tax Customer Credit be returned to customers using the same tariff schedules created in
the 2020 GRC over a two-year period beginning with the rate effective date of the 2022
GRC.At that time, the residual amounts were $27.6 million for electric and$12.5 million
for natural gas.1211
1202 public Counsel opposed certain aspects of the settlement,but the Residual Tax Customer
Credit was not one of those issues.
1203 WUTC a Avista,Dockets UE-220053, UG-220054,and UE-210854 (consolidated), Order
10/04??58-61 (Dec. 12, 2022). The settlement provided no additional information regarding
continued tax deferrals or further residual credits, nor did it discuss how or when to discontinue
those deferrals and associated tariff schedules and subsequently including any remaining balances
into rate base.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 191
ORDER 08
AWEC Response Testimony
676 In this proceeding,AWEC proposes the Commission now require Avista to fully transition
to flow-through accounting rather than continuing the deferral process.1204 Mullins argues
these benefits are no more uncertain than any other tax provision. Therefore, Mullins
contends this is the appropriate proceeding to discontinue the deferrals, and on a going-
forward basis, include the benefits as a reduction to rate base. Mullins proposes a one-time
offset to RY2 for electric to mitigate the rate increase associated with the Colstrip
retirement. For natural gas, Mullins recommends the amount be amortized over the two-
year rate plan. However,AWEC recognizes residual balances will remain in that account
and recommends maintaining the tariff schedules to refund that ending balance to
customers.1205
677 Additionally, Mullins takes issue with the Company including a carrying charge at its full
cost of capital on the residual balances. Mullins argues that the Commission never
authorized such treatment.AWEC recommends eliminating the carrying charge, which in
combination with the full transition in tax treatment, results in a reduction in revenue
requirement of approximately $5.7 million for electric and $5.4 million for natural gas.1206
Avista's Rebuttal Testimony
678 Witness Andrews disagrees with AWEC's recommendations, testifies that witness Mullins
erred in his recalculation of the tax benefit amount owed to customers, and argues that the
Commission through approval of the two preceding rate cases accepted the Company's
appropriate inclusion of the carrying charge.
679 First,Andrews reasons the Commission's approval of the deferral treatment ensures
customers receive dollar-for-dollar actual tax benefits and keeps the Company whole.1207
Next,Andrews testifies that if the Commission were to decide to end the deferrals in
December 2024, that the end-of-period balances would result in a debit balance (due from
customers) of$0.5 million for electric and a credit balance of$2.4 million for natural gas,
and require an adjustment to the test period liability balances to reflect the revised ADFIT
1204 Mullins,Exh. BGM-IT at 36:6-19.
1205 Mullins,Exh. BGM-IT at 37:7-38:3, 39:14-18.
1206 Mullins,Exh. BGM-IT at 38:10-11, 39:2-3, 39:5-10.
1207 Andrews, Exh. EMA-6T at 57:14-19, 71:16-72:1.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 192
ORDER 08
level resulting in an increase in rate base of$30.1 million and $11.6 million for electric
and natural gas, respectively and by extension the revenue requirement.1201
680 Addressing the carrying charge,Andrews contends the customers have received the
benefit of lower rate base over the course of the deferral and subsequent amortizations. If
the Company did not include the full cost of capital,Avista would be "penalized" for the
return on that understated rate base in the amount of$9.7 million.1209 Further,Andrews
argues the treatment, including the return, were presented in its workpapers in both the
2020 and 2022 GRC proceedings.Andrews submits that no party contested those
calculations during either rate case and subsequently, the Commission approved that
treatment through its final orders in those proceedings.1210
681 Finally, while Avista proposes to continue the current deferred accounting treatment,
Andrews offers that if the Commission prefers to end the Customer Tax Credit deferred
accounting that it allows the Company to do so in the next GRC.Andrews argues this will
allow the Company to fully account for this change.1211
Parties'Brief's
AWEC
682 In its brief,AWEC notes that"the remaining balances due to customers, at least based on
Avista's calculation, will decline effectively to zero by December 31, 2024."1212 AWEC
agrees with Avista's calculation of associated accumulated deferred income taxes.
However,AWEC opposes the perpetual deferral of the annual impacts of the flow-through
accounting.1211 Instead,AWEC recommends to the Commission that the associated flow-
through benefits be considered in base rate revenue requirement, which AWEC contends
would be consistent with the accounting application approved by the Commission in
Dockets UE-200895/UG-20089. 1214 AWEC challenges Avista's characterization of its
1201 Andrews, Exh. EMA-6T at 58:13.Andrews notes correcting AWECs balances results in an
increase to Mullins revenue requirement by$2.8 million and$1.1 million for electric and natural
gas, respectively.Andrews,Exh. EMA-6T at 58:13-15.
1201 Andrews, Exh. EMA-6T at 67:6-10, 68:6-8, 70:6-12.
1210 Andrews, Exh. EMA-6T at 72:9-73:10.
1211 Andrews, Exh. EMA-6T at 60:7-12.
1212 WUTC a Avista Corp.,Dockets 240006 &240007,AWEC's Post-Hearing Brief¶59 (Oct. 28,
2024).
1211 AWEC's Post-Hearing Brief, at¶60.
1214 AWEC's Post-Hearing Brief, at¶61.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 193
ORDER 08
accounting application. 1215 Further,AWEC notes how this process did not result in
benefits to ratepayers in 2024.1216
Avista
683 In its brief,Avista reiterates its opposition to AWEC's proposal that Avista transition fully
to flow-through accounting of its 2025 estimated tax deductions associated with IDD#5
and meter expenditures.1217 Avista emphasizes that the process is to the benefit of
customers, citing to the $3.4 million saved over 2022 and 2023.121s At bottom,Avista
contends that the current"accounting for these tax credits has kept customers whole —
returning no more, no less owed them."1219
Decision
684 We acknowledge AWEC's point that extending these deferrals in perpetuity would be
inappropriate. However, we are not persuaded that a change is necessary at this time.
Therefore, we reject AWEC's proposal to immediately end the deferral and eliminate the
carrying charge. Instead, we accept Avista's alternative proposal to end the deferral in
Avista's 2026 general rate case.
Electric and Natural Gas Adjustments (3.03)Pro Forma EDIT Reverse South
Georgia Method(RSGM)Expense
685 Briefly, we turn to the issue Avista presented related to the Electric and Natural Gas
Adjustments (3.03) Pro Forma EDIT RSGM Expense. The Company's proposed
adjustment revises the Company's test year Excess Deferred Income Tax(EDIT) expense
levels for a change in its method of accounting for the reversal of long-term tax benefits
from the Average Rate Assumption Model (ARAM) to the RSGM.Andrews provides
supporting documentation in Exh. EMA-4 to justify the accounting change. The exhibit
contains an internal memo that recognizes an inadvertent error related to cost of removal
that was not properly accounted for as required by the IRS. This adjustment increases the
RY 1 electric and natural gas revenue requirement by $122,000 and $181,000,
1211 AWEC's Post-Hearing Brief, at¶62.
1211 AWEC's Post-Hearing Brief, at¶64.
1217 Avista's Post-Hearing Brief, at¶ 115.
1218 Avista's Post-Hearing Brief, at¶ 116.
1219 Avista's Post-Hearing Brief, at¶ 117.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 194
ORDER 08
respectively; with an incremental increase of approximately $1 million for electric in RY2
associated with removing Colstrip EDIT from base rates on January 1, 2026.1220
Decision
686 We note that no party has contested this adjustment. However, as the reversal of protected
EDIT was addressed in the Company's 2017 GRC and the Commission specifically
ordered the use of ARAM, the Commission addresses the change in accounting
methodology for the record in this proceeding. Furthermore, the Tax Cut and Jobs Act
(TCJA) of 2017 required that protected EDIT be returned due to the change in corporate
tax rate.1221 While ARAM is the most common methodology, when certain information is
not known (e.g., the age of assets) then the RSGM may be utilized to avoid violating the
normalization rules and passing back EDIT more rapidly or to a greater extent than under
the ARAM.
687 The Commission has reviewed Avista's testimony and supporting documentation filed in
this proceeding and is satisfied that the Company is required by law to change the method
of accounting. Additionally, changing the methodology in this proceeding avoids a
violation of the Safe Harbor provision that allows a Company to change its methodology
at its next available opportunity. Accordingly, the Commission accepts the Company's
change in accounting methodology.
Misc. Restating Non-Utility/Non-Recurring Expenses
AWECs Response Testimony
688 Witness Mullins recommends the Commission remove two cost items as non-recurring:
(1) wildfire litigation, and(2) patent and patent application costs. Mullins rationale is
simply that wildfire litigation is not an ongoing expense, and that the Company has a
history of developing venture corporations, and therefore, customers should not bear the
burden of those Costs.1222
1220 Andrews, Exh. EMA-1T at 14:15-15:7.
1221 Tax Cuts and Jobs Act(TCJA,P.L. 115-97).
1222 Mullins,Exh. BGM-1T at 34:3-12.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 195
ORDER 08
Avista Rebuttal Testimony
689 Company witness Schultz responds to AWEC's recommendations regarding the non-
utility/non-recurring restating adjustment.1223 First, Schultz testifies that the Company
does not include any patent-related costs that are non-utility or related to a subsidiary. To
the contrary, Schultz argues that Avista pursues innovation and protects those pursuits
through patents providing several project examples such as the Company's Digital
Exchange Platform, real time optimization of Avista hydro facilities, an invention to
facilitate load disaggregation, and enhanced outage management and electric
operations.1224
690 Second, witness Schultz argues that the Company must maintain some level of legal
expense for a variety of categories, with wildfire litigation being a continuing expense and
normal course of business given the nature of those cases. Schultz provides four examples
of wildfire litigation that occurred in the historical period and are expected to continue
through the rate plan period.1221 Further, Schultz contends it is in the best interest of the
Company and its customers that Avista"defend its interests and pursue those rights...."1226
Parties'Briefs
Avista
691 In its briefing,Avista rejects AWEC's characterization of legal and wildfire litigation costs
as "non-recurring."122'Avista explains that in the normal course of business, the company
becomes involved in "various claims, controversies, disputes and other contingent matters,
including wildfire litigation."In fact,Avista contends that it "has been conservative and
understated legal expenses in this case."1228 In support of this,Avista explains that the
requested legal expenses are lower than the level actually experienced in 2023.
1223 The Company did make a correction to this adjustment to exclude a single invoice as non-
utility. This correction lowered the revenue requirement by$2,000 for electric and$1,000 for
natural gas. Schultz,Exh. KJS-5T at 25:10-17.
1224 Schultz, Exh. KJS-5T at 36:14-21.
1221 Schultz, Exh. KJS-5T at 37:25-38:7.
1226 Schultz, Exh. KJS-5T at 38:10.
1227 Avista's Post-Hearing Brief, at¶98.
1228 Avista's Post-Hearing Brief, at fn. 130.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 196
ORDER 08
AWEC
692 In its briefing,AWEC continues to recommend that the Commission adjust Avista's
revenue requirement to remove non-recurring legal expenses incurred in the test
period.1229 AWEC argues that the Company's list of incidents amount to "Specific, discrete
cases that will most certainly conclude."1230 AWEC rejects the normalization of such costs
and requests that they be excluded from rates. AWEC goes on to state that the patents do
not provide a benefit to ratepayers, and thus litigation expense to protect them do not
"meet the used and useful standard. ,1231 In support of this,AWEC proffers that a
competing utility's infringement of Avista's patent does not harm ratepayers.
Decision —Litigation Costs
693 We reject AWEC's proposed adjustment to remove wildfire and patent litigation expenses
as non-recurring. Litigation costs generally are part of the cost of doing business.
However, we note that costs may become unreasonable, at which point such costs would
be excluded from rates.
Miscellaneous Pro Forma Adjustments—Non-Executive Labor,Employee
Benefits, and Incentive Pay Pro Forma Labor,Non-Executive Adjustments
Avista's Direct Testimony
694 Avista Pro Forma Adjustment 3.05 proposes increases in base pay for non-executive
Union and non-Union employees.113' This base pay reflects a portion of Avista employees'
total compensation package, which also includes pay-at-risk incentives (see Pro Forma
Incentives Adjustment 3.08), which aim to "provide competitive compensation in the
marketplace."1233 Avista witness Schultz states that base pay levels are determined through
consultation with third-party firms that compare Avista's compensation levels with other
organizations in the utility industry, and other industries regionally and nationally.1234
1221 AWEC's Post-Hearing Brief, at¶ 100.
1230 AWEC's Post-Hearing Brief, at¶ 101.
1231 AWEC's Post-Hearing Brief, at¶102.
1232 Schultz, Exh. KJS-lT at 56:3 and 57:5-7.
1233 Schultz, Exh. KJS-IT at 56:3-6.
1214 Schultz, Exh. KJS-1T at 56:9-11.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 197
ORDER 08
Based on these surveys, salary recommendations are presented to the independent
Compensation Committee of the Board of Directors, for consideration and approval.1235
695 Specifically,Avista's non-executive non-Union base pay adjustment annualizes the impact
of the actual pay increases effective March of 2023, and include expected increases for
March 2024,1216 and a final increase for non-Union employees that its Board will approve
in the first quarter of 2024."1237 Avista also included an estimated prorated March 2025
increase for total labor expense levels in RY1.1211
696 For Union employees,Avista proposes an increase to annualize the effect of the 3.5
percent increase that occurred in 2023, and notes that the Company is currently
negotiating 2024 merit increases, which it expects will be finalized during the pendency of
the case.1239 In lieu of final amounts which will be available upon ratification of its Union
contract,Avista proposes that its estimated merit increases for 2024 and 2025, be
consistent for its non-Union employees.1240
697 The effect of this adjustment is an expense increase, resulting in a decrease in Net
Operating Income(NOI) of approximately $5.2 million (WA Electric) and $1.4 million
(WA Natural Gas).1241
698 Avista's related adjustment for RY2, Pro Forma Adjustment 5.02, reflects incremental
increases in Union and non-Union wages and salaries for 2026,1242 the Company's
adjustment annualizes its estimated 2025 wage increases and includes the prorated salary
increases expected in March 2026 for both Union and non-Union employees.1243 The
effect of this adjustment would in turn result in a decrease in NOI of approximately $2.1
million(WA Electric) and$0.6 million(WA Natural Gas).1244
1235 Schultz, Exh. KJS-IT at 56:20—57: 3.
1236 Schultz, Exh. KJS-IT at 57:8-9.
1237 Schultz, Exh. KJS-IT at 57:8-13.
1231 Schultz, Exh. KJS-IT at 57:13-15.
1239 Schultz, Exh. KJS-IT at 57:16-21.
1240 Schultz, Exh. KJS-IT at 57: 19-20.
1241 Schultz, Exh. KJS-1T at 58:1-3.
1242 Schultz, Exh. KJS-1T at 92:3-6.
1243 Schultz, Exh. KJS-IT at 92:6-9.
1244 Schultz, Exh. KJS-IT at 92:9-10.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 198
ORDER 08
Staffs Response Testimony
699 Staff contests Avista Pro Forma Adjustment 3.05, on the basis that Avista's adjustment
uses estimated wage increases for its Union and non-Union employees for 2024 and 2025,
which are not known and measurable.1245 Staff witness Hillstead contends that the
amounts used in Avista's pro forma adjustment for non-Union employees differ slightly
from the wage increases approved by Avista's Board of Directors for March 1, 2024 and
March 1, 2025, which were approved after Avista's initial filing.1246 Accordingly, Staff
proposes a pro forma adjustment reflecting the actual approved non-Union wage increases
for 2024 and 2025.1247
700 Regarding base pay increases for Union employees, Hillstead notes that the Union
increases for 2024 and 2025 cannot be quantified, as the contract has not yet been
ratified.1241 Pending finalization of the contract, Staff proposes removal of Avista's
proposed Union pay increases for 2024 and 2025,but states that they would support
inclusion of these amounts should those costs become known and measurable on
rebuttal.1241
701 In total, Staff's proposed adjustment would result in a revenue requirement reduction of
approximately $1.85 million(Combined WA Electric and WA Natural Gas) in RY 1.1250
Avistas Rebuttal Testimony
702 On rebuttal, Schultz explains that Avista came to agreement with the Union and ratified
the contract on July 31, 2024, granting a 5 percent merit increase effective March 2024,
which will be retroactively paid, and a 5 percent increase effective March of 2025.1251
Avista initially estimated and based its pro forma adjustment on a 4 percent merit increase
for both 2024 and 2025,1252 and then updated the adjustment, which resulted in an expense
1245 Hillstead, Exh. KMH-1T at 11:10-18.
124'Hillstead, Exh. KMH-1T at 12:2-6.See also Hillstead, Exh. KMH-6C.
1247 Hillstead, Exh. KMH-IT at 12:7-8.
124'Hillstead, Exh. KMH-1T at 12:9-11.
1249 Hillstead, Exh. KMH-IT at 12:14-17.
1250 Hillstead, Exh. KMH-1 T at 10:1 (Table 3 —Impact of Contested Adjustments on NOI and
Revenue Requirement).
1251 Shultz,Exh. KJS-5T at 40:15—41:6.
1252 Shultz,Exh. KJS-5T at 41:9-10.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 199
ORDER 08
increase from the Union employee portion of its initial proposal of$417,000 (WA
Electric) and$126,000 (WA Natural Gas).1253
703 Regarding the non-Union portion of its pro forma adjustment, Schultz notes that Staff has
accepted and incorporated the Board approved pay increase in its adjustment, which
results in a reduction in expense of approximately$338,000 (WA Electric) and$89,000
(WA Natural Gas) when compared to the non-Union portion of Avista's initial proposal.
704 Schultz notes Staff's silence on its RY2 Pro Forma Adjustment (5.02), as Staff does not
support a multi-year rate plan(MYRP).1214 The Company has included in this adjustment,
a 3 percent merit increase for 2026 for both Union and non-Union employees, which
represents the minimum increase approved by the Board for its non-represented
employees.1255 The Company argues that it is appropriate to apply this increase to its
Union employees as well, as "the bargaining unit typically will not accept a merit increase
less than that of non-Union employees," and notes that over the past five years, Union
merit increases have exceeded the Board approved minimums.1216 When compared to
Avista's as-filed adjustment,Avista's revised proposal would increase its RY1 expense
slightly, by $80,000 (WA Electric) and by$37,000 (WA Natural Gas), and would reduce
expense in RY2 by $541,000 (WA Electric) and by $147,000 (WA Natural Gas).1211
Decision -Pro Forma Labor and Non-Executive Adjustments
705 We accept Avista's Pro Forma Adjustments 3.05 and 5.02, as revised on rebuttal.Avista's
revised adjustments appropriately reflect the Union wage increase that became effective
July 31, 2024, which granted a 5 percent merit increase effective March 2024, and a 5
percent increase effective March of 2025.Avista's revised adjustments also incorporate a
reduction from its initial proposal to its non-Union wage increase, which was approved by
the Board after the Company's initial filing. For RY2 the Company's adjustment includes
a 3 percent merit increase for both Union and non-Union employees, based on the Board
approved minimum. Staff indicated its support for the use of the Board approved
minimum in RY2 during the evidentiary hearing.1258
1253 Shultz,Exh. KJS-5T at 41:13-17.
1254 Shultz,Exh. KJS-5T at 40:1-2.
1255 Shultz,Exh. KJS-5T at 42:13-14.
1256 Shultz,Exh. KJS-5T at 42:12—43:8.
1257 Shultz,Exh. KJS-5T at 40:3-9.
12"TR at 408:10—409:2.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 200
ORDER 08
Pro Forma Employee Benefits
Avistas Direct Testimony
706 Avista proposes Pro Forma Adjustment 3.07 which adjusts its test year retirement plan
expenses and medical insurance expenses for active and retired employees to the amounts
expected in RY1.1219 Avista calculates its adjustment based on estimates determined
annually by Willis Towers Watson, an independent actuarial company which deals with
Avista's retirement plan, and by Mercer, which deals with its medical plans.1260
707 Regarding the retirement portion of its adjustment, the Company included only its test
year level of actual pension expense but plans to update its adjustment to reflect a prorated
amount for RY1 based on an updated actuarial report expected in first quarter of 2024.1261
Avista witness Schultz notes that the Company has made changes to its overall retirement
plan, and proposes an increase consistent with its proposed labor increases prorated for the
rate effective period, resulting in an increase in 401(k) expense of$749,000 (Total
System).1262
708 Schultz notes that Avista has closed its defined benefit pension plan to all non-Union
employees as of January 1, 2024, and for Union employees effective January 1, 2024, and
a defined contribution 401(k) plan replaced the defined benefit pension plan for
employees hired after these cutoff dates.1263
709 Schultz also discusses Avista's pension settlement and related amortization, which is a
component of its adjustment, and was authorized for a 12-year amortization beginning
January 1, 2023, as approved in Avista's last rate case.1264 Schultz notes that the test year
contained six months of this amortization, and Avista proposes to annualize this amount
within its pro forma adjustment.1261
1219 Shultz,Exh. KJS-5T at 59:3-6.
1260 Shultz,Exh. KJS-5T at 59:6-8.
1261 Shultz,Exh. KJS-5T at 60:15-19.
1262 Shultz,Exh. KJS-5T at 61:2-5.
1263 Shultz,Exh. KJS-5T at 61: 9-18.
1264 Shultz,Exh. KJS-5T at 62: 13-20.
1261 Shultz,Exh. KJS-5T at 62: 20—63: 1.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 201
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710 Regarding the medical benefits contained in its adjustment,Avista similarly plans to
update its adjustment based on updates from its consultant that it expects to receive in the
first quarter of 2024 and will adjust its medical expense once received.1266
711 Pro Forma Adjustment 5.03 represents the RY2 portion of Avista's employee benefits
expense adjustment.1267
AWECs Response Testimony
712 AWEC disputes Avista's pro forma employee benefits adjustment, and proposes its own
adjustment based on an updated actuarial report received in response to a data request.1268
AWEC witness Mullins argues that the pension and other post-employment benefit costs
were materially lower in the updated actuarial report than the values Avista used for its pro
forma adjustment.126'AWEC argues that Avista did not properly include the full reduction
to its benefits expense calculation, as provided through the updated actuarial report, and
instead relied on test period expense levels.1270
713 AWEC's proposed adjustment would result in a combined reduction in expense of
approximately $1.6 million in RY1 and$0.4 million in RY2.1271
Public Counsel's Cross-Answer Testimony
714 In cross-answer testimony directed at AWEC witness Mullins, Public Counsel witness M.
Garrett adopts Mullins'proposed adjustment.1272 M. Garrett agrees with Mullins rationale,
arguing that"the Company did not include the full reduction in its pension expense on an
on-going basis" as reflected in the results of the updated actuarial report.'...
1266 Shultz,Exh. KJS-5T at 64: 4-10.
1267 Shultz,Exh. KJS-5T at 92: 11-14.
1261 Mullins,Exh. BGM-1T at 21: 2-3.
1269 Mullins,Exh. BGM-1T at 21: 6-7.
1270 Mullins,Exh. BGM-1T at 21: 9-19.
1271 See Mullins,Exh. BGM-1T at 22: 5 (Table 4). Sum of WA Electric and WA Natural Gas
impacts.
1272 M. Garrett, Exh. MEG-9T at 2: 8-10.
1271 M. Garrett, Exh. MEG-9T at 3: 2-11.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 202
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Avista—Rebuttal Testimony
715 Schultz argues that AWEC's adjustment omitted an update to health insurance, post-
retirement medical expense, 401(k) expense, as well as the pension amortization expense
originally included in the Company's adjustment.1114 Avista also notes a discrepancy in
Mullin's testimony, in which Mullins states that both pension and post-retirement medical
expenses were updated per the updated actuary reports, when in fact, Mullins only updated
pension expense.12"Avista argues that Mullins appears to have chosen only to include the
one update that reduced expense, ignoring other components that increased expense.1276
716 Schultz argues that Avista has accurately reflected the full effect of the pension settlement
and amortization, as well as the updated actuarial report's findings in its adjustment, which
has been updated on rebuttal.1211 Schultz also notes that Mullins has accepted Avista's
RY2 adjustment(Pro Forma Adjustment 5.03).1278 Schultz urges the Commission to reject
AWEC's proposal and adopt Avista's revised adjustment, the expense impact of which is
shown below:1271
Table No. 17—PF Emnlovee Benefits Expense—As Filed versus Rebuttal
Pro Forma Employee Benefits Expense -As-Filed vs. Rebuttal (Adjs.PF 3.07& PF 5.03)
As-Filed Rebuttal Variance
RY1 RY2 RY1 RY2 RY1 RY2
2025 2026 2025 2026 2025 2026
WA Electric $ 131.936 $ 463.696 $ 299.016 $ 164.105 $ 167.080 $ (299.591)
WA Natural Gas $ 41.764 $ 146.782 $ 94,653 $ 51.947 $ 52.889 $ 94.835
Total S 173,700 S 610,478 $ 393,669 $ 216,052 S 219,969 $ 394,42
Decision
717 We accept Avista's Pro Forma Pension Adjustment 3.07, which the Company revised on
rebuttal and AWEC agreed to in briefing. The Commission agrees with Avista that
AWEC's originally proposed adjustment improperly excluded updates to health insurance,
post-retirement medical expenses, and 401(k) expenses and pension amortization expense
1274 Schultz, Exh. KJS-5T at 47: 2-5.
1275 Schultz, Exh. KJS-5T at 47: 9-12.
1271 Schultz, Exh. KJS-5T at 48: 13-16.
127 Schultz, Exh. KJS-5T at 48: 10-11 and 18-19.
1271 Schultz, Exh. KJS-5T at 48: 21 —49:2.
1279 Schultz, Exh. KJS-5T at 29: 10-18 (Table No. 17).

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 203
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originally included in the Company's adjustment.1280 Additionally, we accept the updated
employee pension and medical insurance expenses based on the updated actuarial reports
Avista provided on rebuttal.
Pro Forma Incentives
Avistas Direct Testimony
718 In its Pro Forma Incentive Adjustment 3.08, the Company proposes to deviate from its
traditional six-year average methodology, and instead proposes an adjustment based on
forecasted incentive payouts, which would result in an expense increase of$1.2 million
(WA Electric) and$0.4 million(WA Natural Gas).1281 Avista witness Schultz argues that
the six-year average of actual incentive expense "is simply not representative of the level
of incentive expense the Company is forecasted to incur in RY1 (and carrying into
RY2)."1282
719 Schultz explains that the Company's incentive program, which consists of the non-
executive short-term incentive plan(STIP) and the executive STIP, "provide incentives
and focus employees on stated goals, while recognizing and rewarding employees for their
contributions toward achieving those goals."1283 The Company has included 100 percent
of its non-executive STIP costs and approximately 40 percent of its executive STIP costs
(excluding metrics related to earnings per share and non-regulated activity targets).1284
Staffs Response Testimony
720 Staff contests Avista's proposed pro forma adjustment to incentive expenses, arguing that
the proposed methodology deviates from the previously established six-year average
methodology and the Commission's established standard for pro forma adjustments.1281
Staff witness Hillstead argues that Avista's proposal assumes that the forecasted incentive
pay is certain, when it cannot be due to the nature of incentive pay, and can therefore only
be known and measurable in retrospect.128' Hillstead references Avista's 2017 GRC in
1280 Schultz, Exh. KJS-5T at 47:2-5.
1281 Schultz, Exh. KJS-IT at 65: 1-13.
1212 Schultz, Exh. KJS-IT at 65: 6-8.
1211 Schultz, Exh. KJS-1T at 65:22—66: 4.
1214 Schultz, Exh. KJS-IT at 67: 4-6.
12"Hillstead, Exh. KMH-1T at 13: 11-18.
1216 Hillstead, Exh. KMH-1T at 14: 2-6.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 204
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which the Company proposed a similar adjustment using budgeted projections.1217
Hillstead notes that Staff contested this adjustment and proposed using a six-year average
of actual incentive payouts as the methodology for its adjustment, which the Company
ultimately accepted.1288
721 In this case, Staff analyzed the Company's actual incentive distributions between 2017 and
2022, the six years that comprise the six-year average, and found large variations between
targeted and actual payouts.1289 Hillstead states that the Company may be correct in its
speculation that incentive payments will be significantly higher than its current six-year
average, but argues that the Company will have the opportunity to include these actual
payouts as part of the six-year methodology in a future GRC.1290
722 Staff recommends full disallowance of Avista's proposed pro forma adjustment and to
maintain the level of incentive expenses at the six-year average, as reflected in Avista's
Restating Adjustment 2.13.1291 Staff's proposed disallowance would result in an
approximate $1.2 million reduction in total revenue requirement.1292
Avista's Rebuttal Testimony
723 Schultz argues that Avista's pro forma incentive adjustment meets the standard of a pro
forma adjustment and believes it is appropriate to increase incentive expense beyond the
normal six-year average methodology, arguing that its adjustment is more representative
of what the Company expects to incur in RY1 and RY2.1213 Schultz argues that incentive
expense is based on a percentage of each individual's salary, and that as these salaries
increase each year, incentive expense naturally increases with it.1294 Schultz notes Staff's
acceptance of Avista's pro forma non-executive non-Union labor increases through 2025,
and that Staff considers them to be known and measurable, and which are a larger increase
than the "conservative levels"the Company is proposing with this adjustment.1291
1287 Hillstead, Exh. KMH-1T at 14: 7-9.
12"Hillstead, Exh. KMH-1T at 14: 9-13.
12a9 Hillstead, Exh. KMH-1T at 14: 14-17.
1290 Hillstead, Exh. KMH-1 T at 15: 1-4.
1291 Hillstead, Exh. KMH-IT at 14: 19-21.
1292 Hillstead, Exh. KMH-IT at 10:1 (Table 3 —Impact of Contested Adjustments on NOI and
Revenue Requirement).
1293 Schultz, Exh. KJS-5T at 52: 2-8.
1294 Schultz, Exh. KJS-5T at 52: 11-13.
1291 Schultz, Exh. KJS-5T at 52: 13-16.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 205
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724 Schultz argues that the six-year average methodology understated the amounts "from the
get-go, since labor will increase through RY1 and RY2."1296 Schultz notes that Avista's
six-year average payout percentage from 2017-2022 is 95 percent for non-officer and 98%
for officers, and that if the Company were to apply these payout percentages to its planned
labor increases in 2025 and 2026, the result would be much higher than the "reasonable
and conservative" adjustment it proposes here, which is based solely on its expected 2024
incentive payouts.1297 Schultz argues that it"simply cannot leave a combined $1.6 million
of incentive expense unaccounted for and create yet more regulatory lag."1298 Schultz
states that Avisa's incentive compensation is a critical component of its total compensation
philosophy necessary to recruit and retain qualified employees, and as such, "customers
should have this benefit reflected in their retail rates."1299
Decision
725 We agree with Staff on his issue. While Avista's proposed adjustment is based on contracts
tied to specific incentives in 2024, Staff correctly points out that the contracts in the record
have not been performed.Accordingly, there is no guarantee that those incentive amounts
will be paid.!...
726 The 2024 expected incentive payments remain pending employee performance on
contracts, and thus the amounts remain unknown and unmeasurable.As we have said
throughout this order,pro forma adjustments generally must meet the known and
measurable standard, and not be based on speculation, estimates, or forecasts. The
incentive adjustment proposed by Avista is based on estimates and forecasts, and therefore
does not meet the known and measurable standard.Avista must continue to use the six-
year rolling average methodology with no escalation factor for the incentive adjustment,
consistent with the historic known and measurable methodology.
1296 Schultz, Exh. KJS-5T at 52: 18—53: 1.
1297 Schultz, Exh. KJS-5T at 53: 1-8.
1291 Schultz, Exh. KJS-5T at 53: 12-13.
1299 Schultz, Exh. KJS-5T at 53: 13-16.
1300 See, Staff's Post-Hearing Brief, at¶¶ 104-05.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 206
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Miscellaneous Issues
Electric Property Rent
727 AWEC witness Mullins recommends that the Commission adopt a higher level of rent
from Electric Property for Avista for RY1, based on revenue growth trends observed in
Avista's FERC Account 454 and increased pole costs.1301 Mullins recommends the
Commission increase rent from Electric Property by $2.1 million in RY1. Mullins
recommends an increase of$0.2 million in RY2, a rate of growth that is equal to the
expected growth in distribution plant. 1102 Public Counsel witness M. Garrett adopts and
supports Mullin's adjustment to rents from electric property. 1303
728 Andrews agrees with Mullins'proposal to include a higher level of rent from Electric
Property but does not agree with the magnitude of change AWEC proposed. On rebuttal,
Avista includes an additional $0.6 million of electric revenue requirement for RY1 and
$0.2 million for RY2.1304
729 Andrews disagrees with the rationale Mullins used to calculate the increase in rent from
Electric Property in RY1,1305 and instead uses updated data from a completed audit to
project revenue growth for calendar year 2024 to arrive at the $0.6 million increase in
Rent from Electric Property in RY1.1306 Andrews states that Avista adopts the 5.6% growth
rate proposed by Mullins for RY2 and calculates an increase of$0.2 million in Rent from
Electric Property for RY2. 1307
730 In briefing,Avista disagrees with AWEC's adjustment proposed in its response testimony,
arguing that AWEC's adjustment is based on an atypical, one-time back-billing of joint
users for unauthorized attachments.13os Avista recommends that the Commission approve
the Company's proposed Pro Forma Adjustments AWEC1 (RY1) and AWEC2 (RY2),
which have been updated to include more recent data regarding pole attachments,1309 and
1301 Mullins,Exh. BGM-1T at 23:4—25:3.
1302 Mullins,Exh. BGM-IT at 25:4—26:1.
"03 M. Garrett, Exh. MEG-9T at 2:5-11,4:11-14.
1304 Andrews, Exh. EMA-6T at 53:5-11.
13os Andrews, Exh. EMA-6T at 53:16—54:20.
1306 Andrews, Exh. EMA-6T at 55:1-56:4.
1307 Andrews, Exh. EMA-6T at 56:5-10.
1308 Avista's Post-Hearing Brief, at¶ 114 (citing Mullins,Exh. BGM-1T at 24:9 26:1).
1309 Andrews, Exh. EMA-6T at 53:18—55:19.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 207
ORDER 08
to reflect incremental joint use revenue from other utilities.13 10 The effect of these
adjustments is to increase other electric revenue by$600,000 in RY1 and $200,000 in
RY2 1311
Decision
731 While Public Counsel continues in brief to urge the Commission to adjust Avista's
revenues to reflect AWEC's electric property rental concerns,1312 AWEC changes its
position.After reviewing Avista's rebuttal testimony,AWEC agrees with the revised
electric property rental revenue to $600,000 in RY1 and $200,000 in RY2.1313 Given this
resolution of the issue, the Commission accepts the adjustment Avista proposes on rebuttal
and to which AWEC agrees, resulting in increases to other electric revenue by $600,000 in
RY1 and $200,000 in RY2.1114 The additional analysis provided on rebuttal to support its
revised adjustment is appropriate. The analysis is based on updated, more recent data
regarding pole attachments.131s Avista also removes one-time back-billing costs from the
calculation of revenues related to electric property rents because those costs are unlikely to
reoccur during the rate effective period.1316 Finally, with respect to the anticipated growth
rate for RY2, the Commission notes that Avista has adopted Mullins'proposed growth rate
proposed.13 11
Coyote Springs
732 On rebuttal,Avista revised its proposal related to overhaul expenses for Coyote Springs 2.
The Company's original request for the recovery of expenses of the Coyote Springs 2
(CS2) overhaul in direct testimony,13" required every 32,000 fired-hours, was uncontested
by intervening parties.13"After the Company filed direct testimony, the Company
determined the actual run hours of CS2 have been greater than anticipated and may
require the maintenance overhaul to occur in 2025 instead of 2026. To account for this
13"Avista's Post-Hearing Brief, at¶ 114.
131'Avista's Post-Hearing Brief, at¶ 114.
1312 Public Counsel's Post-Hearing Brief, at¶ 102.
""AWEC's Post-Hearing Brief, at¶94 (citing Andrews,Exh. EMA-6T at 7:4-15).
1314 Andrews, Exh. EMA-6T at 7:4-15;AWEC's Post-Hearing Brief,at¶94 (Oct. 28, 2024).
""Andrews, Exh. EMA-6T at 53:18—55:19.
1316 Andrews, Exh. EMA-6T at 56:1-4.
1317 Andrews, Exh. EMA-6T at 56:5-10.
1318 Andrews, Exh. EMA-6T at 47:7—53:35.
1319 Andrews, Exh. EMA-6T at 74:8—75:8.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 208
ORDER 08
change, the Company requests that the Commission approve the deferral of Washington's
share of the actual costs of the overhaul when the overhaul occurs, regardless of if it
occurs in 2025 or 2026. The Company is not requesting any other changes to its proposed
amortization expense in RY2.1320
733 Specifically,Avista requests that the Commission defer the actual Washington share of
Coyote Springs 2 major maintenance, with a carrying charge of actual cost of debt on both
the deferred balance and during a four-year amortization period. 1321 Avista states that the
maintenance will be required in either 2025 or 2026 depending on the usage of Coyote
Springs 2 and its proposed amortization period will last from July 2026 to June 2030.1322
The Commission accepts Avista's uncontested adjustment related to Coyote Springs 2.
Directors'Fees
734 Avista requests a 90/10 split of directors'total compensation between ratepayers and
shareholders,1323 while AWEC and Public Counsel argue that it should be a 50150 split of
cash compensation with a full disallowance of stock compensation.
735 AWEC witness Mullins recommends the Commission allow Avista to recover only 50
percent of directors' fees from ratepayers, and that no stock compensation provided to
directors be included in the revenue requirement.1324 He cites the Commission practice of
allowing a 50 percent recovery of directors' fees established in Avista's 2015 general rate
case, in Docket UE-150204.1325 Similarly, Public Counsel witness M. Garrett recommends
that the Commission allow Avista to recover 50 percent of directors' fees from ratepayers,
and that no stock compensation provided to directors be included in the revenue
requirement.1326 M. Garrett argues that the directors'compensation should come from
value that they add through maximizing Avista's long-term earnings, as they represent
shareholders and not ratepayers.1327
1320 Andrews, Exh. EMA-6T at 75:9—76:16.
1321 Avista's Post-Hearing Brief, at¶ 121.
1322 Avista's Post-Hearing Brief, at¶ 121.
1323 WUTC a Avista Corp. d/b/a Avista Utils.,Dockets UE-240006 &UG-240007(consolidated),
filed Revisions to Tariff WN U-28 (Electric)and Tariff WN U-29 (Natural Gas) (Jan. 18, 2024).
1324 Mullins,Exh. BGM-IT at 32:12-17.
1321 Mullins,Exh. BGM-1 T at 31:3-13.
1326 M. Garrett, Exh. MEG-1T at 27:8-14.
1327 M. Garrett, Exh. MEG-1T at 27:14—28:6.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 209
ORDER 08
736 In rebuttal and on brief,Avista rejects the recommendation from AWEC and Public
Counsel.Avista argues that the Company's structure has changed significantly since the
Commission established a 50150 split between shareholders and customers as part of the
general rate case in Dockets UE-090134 &UG-090135, and that the Company has
divested from other interests and is now comprised almost entirely of utility operations.1328
Schultz also argues that the complex regulatory environment in which the Company
operates further justifies increased recovery of directors' fees from ratepayers.1329
737 Schultz also claims that the Commission has never excluded director stock compensation
specifically from rates. Schultz explains that the overall compensation given to directors is
a mix of cash and stock subject to the preference of each director, and that the overall
value of the compensation is recorded to FERC Account 930.2.1330
738 On briefing,AWEC argues that Avista's request to recover 90 percent of its directors' fees
from ratepayers is contrary to the Commission's precedent of splitting the recovery
equally between ratepayers and shareholders.1331 AWEC maintains that an equal division
of directors'fees between ratepayers and shareholders is appropriate because directors
prioritize the interests of shareholders in the event of a conflict between shareholders' and
ratepayers' interests.1332 AWEC further notes that in Avista's 2009 general rate case, the
Commission determined that the Board of Directors provided services that benefited
ratepayers to the same extent as it benefited shareholders without relying on the time
directors spent on utility activities rather than non-utility activities.1333 Additionally,
AWEC contends that even acknowledging that utility operations have become more
complex over time,Avista has not demonstrated that the skills necessary for complex
operations provide additional benefits to ratepayers relative to shareholders.133'As such,
AWEC recommends that the Commission continue to allocate director cash compensation
equally between ratepayers and shareholders.
739 As to director stock compensation,AWEC requests that the Commission disallow the
portion of directors' fees associated with stock compensation because the purpose of stock
1328 Avista's Post-Hearing Brief, at¶ 107, fii. 148.
1329 Schultz, Exh. KJS-5T at 55:10—58:3.
1330 Schultz, Exh. KJS-5T at 58:4-17.
1331 AWEC's Post-Hearing Brief, at¶89.
1332 AWEC's Post-Hearing Brief, at¶89.
1333 AWEC's Post-Hearing Brief, at¶90.
1114 AWEC's Post-Hearing Brief, at¶90.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 210
ORDER 08
compensation is to align directors' interests with those of shareholders.1335 Furthermore,
AWEC contends that providing stock compensation to directors results in a dilution of
shareholder equity, which is not a cost that is includable in a revenue requirement
calculation and should be excluded from the revenue requirement.1336
740 Public Counsel argues that the Commission should only allow Avista to recover 50 percent
of the cash compensation of its Avista's Board of Directors from ratepayers and to wholly
preclude recovery of the Board of Directors' stock-based compensation.1337 Public
Counsel maintains that investor-owned utility directors and officers are biased toward
their shareholders' interests, as these executives owe a fiduciary duty to their shareholders,
but not toward ratepayers.1338 Public Counsel suggests that, as a result of the tension
between maximizing shareholder value and maintain low rates, as well the high level of
Avista's executive compensation relative to publicly-owned utility executives, it is
reasonable for ratepayers and shareholders to each bear 50 percent of the cost associated
with director-level compensation.1339 Public Counsel further contends that because the
primary value of Avista's Board of Directors is to the shareholders, a focus on shareholder
value is inappropriate in the context of regulated monopoly, and that the Board of
Directors must prioritize maximizing public value.1340
741 Turning to Avista's D&O liability insurance, Public Counsel states that while such
insurance is useful in attracting and retaining effective management personnel, other
jurisdictions have authorized an equal division of insurance related expenses between
ratepayers and shareholders.1341 Public Counsel maintains that the main beneficiary of
these insurance policies are shareholders and losses to the ratepayer are not compensable,
as payments from these policies only go to Avista, and that the benefits of attracting
qualified managers are ancillary to this benefit.1341 Consequently, Public Counsel argues
that the Commission should only allow Avista to recover 50 percent of its D&O liability
insurance costs from ratepayers.
1335 AWEC's Post-Hearing Brief, at¶91.
1336 AWEC's Post-Hearing Brief, at¶92.
1337 Public Counsel's Post-Hearing Brief, at¶ 104.
1338 Public Counsel's Post-Hearing Brief, at¶ 105.
1339 Public Counsel's Post-Hearing Brief, at¶ 105.
1340 public Counsel's Post-Hearing Brief, at¶ 105.
1341 Public Counsel's Post-Hearing Brief, at¶ 106.
1342 public Counsel's Post-Hearing Brief, at¶ 106.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 211
ORDER 08
Decision
742 The Commission authorizes Avista to recover 90 percent of its D&O liability insurance for
recovery through rates. Inclusion of this amount is consistent with Commission precedent
established in Avista's 2009 general rate case and is a reasonable component of executive
benefits intended to attract and retain qualified officers and directors)141 While both
AWEC and Public Counsel note that other state regulators have allocated D&O liability
insurance equally between shareholders and ratepayers or required ratepayers to bear less
of the costs than shareholders, the Commission addressed this issue in Avista's 2009
GRC.1344 As in that proceeding, those decisions offer limited insight into how to allocate
insurance costs in the context of this proceeding, and only represent a small subset of
other state regulatory jurisdictions.134' Furthermore, the Commission disagrees with Public
Counsel's assertion that D&O insurance provides no benefit to ratepayers, as the insurance
will shield ratepayers from financial harm in the event of shareholder litigation against
Avista's Board of Directors. Consequently, the Commission is not persuaded that it should
alter its precedent with respect to the allocation of D&O liability insurance in this case.
743 Turning to the issue of directors'fees, and the Commission rejects Avista's proposal to
increase the recovery of directors'fees from ratepayers from 50 percent to 90 percent.
According to Avista, the directors' allocation of time on utility vs. non-utility activities
demonstrate that the directors' activities predominantly benefit ratepayers, such that it is
appropriate for ratepayers to bear a larger proportion of directors' fees.1346 However, the
allocation of director time to utility functions does not necessarily imply that the function
is for the benefit of ratepayers, because a director's fiduciary duties to shareholders may
result in a director taking utility action that is to the benefit of shareholders, but not
ratepayers.As such, the Commission does not find that the allocation of director time and
the complexity of utility operation support changing Commission precedent with respect
to the allocation of directors' fees.Absent further evidence and argument as to why the
Commission should modify its precedent, the Commission will continue to allow 50
percent of directors' fees to be recovered from ratepayers.1347
1343 WUTC a Avista Corp.,Dockets UE-090134, UG-090135, &UG-060518, Order 10, 56-57¶
137 (Dec. 22, 2009).
1344 WUTC a Avista Corp.,Dockets UE-090134, UG-090135, &UG-060518, Order 10, 56¶ 136
(Dec. 22, 2009).
1341 WUTC a Avista Corp.,Dockets UE-090134, UG-090135, &UG-060518, Order 10, 56¶ 136
(Dec. 22, 2009).
1346 Avista's Post-Hearing Brief, at¶ 109.
1147 WUTC a Avista Corp.,Dockets UE-150204 &UG-150205, Order 5, 76¶220(Jan. 6,2016).

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 212
ORDER 08
744 The Commission also rejects Public Counsel and AWEC's request to exclude stock
compensation from the recovery of directors' fees from ratepayers.Assuming without
deciding that stock compensation is solely intended to incentivize directors to prioritize
the interests of shareholders over ratepayers, this consideration alone does not demonstrate
that stock compensation provides no benefit to ratepayers because, as witness Mullins
points out, shareholder interests may overlap with ratepayer interests.1348 In these
circumstances, director activities can be characterized as providing a benefit to ratepayers.
Furthermore, as Avista points out, the Commission has not previously excluded stock
compensation from director compensation in past rate cases and stock compensation is
recorded as a utility expense.1349 Consequently, the Commission declines to entirely
preclude the recovery of stock compensation to directors from ratepayers based on the
record in this case.
Labor-Executive(3.06 Pro Forma Labor Exec)
745 Public Counsel witness M. Garrett recommends that ratepayers should be responsible for
test year salaries of Avista's executives, but that shareholders should pay for the proposed
payroll escalations contained in Avista's pro forma adjustment. M. Garrett's
recommendation reduces electric O&M expense by $60,000, and the gas O&M expense
by $19,000.1350
746 M. Garrett justifies this position by stating that investor-owned utility(IOU) executive
salaries are higher than those at consumer-owned utilities (COU) and cooperative utilities,
claiming that this difference shows that increased executive salaries are not necessary
costs to provide utility service. M. Garrett also suggests that the Commission open an
investigatory docket to examine differences in compensation between IOUs, COUs, and
cooperative utilities, and require Avista to provide COU and cooperative compensation
data in its next GRC.1351
747 On rebuttal, Schultz testifies that its Pro Forma Labor Executive adjustment has been
updated to remove retired officers and reflect the current estimated breakdown of utility
and non-utility responsibilities, 96 percent to ratepayers and 4 percent to shareholders, as
well as to include the Board of Director approved labor increases.1311 On rebuttal, the
1341 Mullins,Exh. BGM-IT at 31:16-20.
1349 Schultz, Exh. KJS-5T at 6-11.
1310 M. Garrett, Exh. MEG-1T at 9:12-22, M. Garrett, Exh.MEG-4.
1351 M. Garrett, Exh. MEG-1T at 7:6—9:11.
1112 Schultz, Exh. KJS-5T at 28:6-15.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 213
ORDER 08
overall increase of the revenue requirement proposed by Avista above test period levels for
RY1 is $115,000 for electric and $37,000 for natural gas.1353
748 In response to Public Counsel's criticisms of Avista's pay structure, Schultz argues that a
significant portion of executive compensation is linked with goals related to specific items
of corporate performance that will likely produce shareholder value, and it is that
compensation that is charged to shareholders. Schultz claims that the appropriate amount
of compensation for utility activity is charged to ratepayers.Avista rejects Public
Counsel's recommendations to remove increased pro-forma executive compensation and
for the Commission to require a study comparing executive compensation between IOUs,
COUs, and cooperative utilities.
749 Both Avista and Public Counsel continue their arguments on brief.Avista disagrees with
Public Counsel's request to decrease director compensation based on the difference
between compensation between IOU executives and publicly-owned utility executives.1354
Avista argues that executive compensation is based on the particular responsibilities of
each officer, and divided into utility and non-utility activities.1355 Avista maintains that an
executive compensation survey is unnecessary because Avista completed a compensation
survey in Dockets UE-110876 & UG-110877.1356 Avista further argues that its proposed
increases to executive compensation in this case are reasonable relative to similarly sized
investor-owned utilities and notes that M. Garrett appears to agree with this
assessment.1357
750 Public Counsel requests that the Commission require Avista's shareholders pay for the
proposed adjustments related to director compensation, resulting in a$60,000 decrease to
electric revenue and a $19,000 decrease to gas revenue.1358 Public Counsel argues that the
differences in compensation between publicly-owned utility executives and IOU
executives is due to the fact that IOU executives owe dual fiduciary duties to both
shareholders and utility customers.1359 Public Counsel asserts that the difference in pay
between investor-owned and publicly-owned executives provides a reasonable estimate of
1353 Schultz, Exh. KJS-5T at 28:23-27.
1354 Avista's Post-Hearing Brief, at¶¶ 101-02.
1355 Avista's Post-Hearing Brief, at¶ 101 (See also, Schultz, Exh. KJS-5T at 44:7-14).
1356 Avista's Post-Hearing Brief, at¶ 101, fn. 139.
1357 Avista's Post-Hearing Brief, at¶ 102 (see also, M. Garrett, Exh. MEG-1T at 7:8-9).
1358 public Counsel's Post-Hearing Brief, at¶ 103.
1359 Public Counsel's Post-Hearing Brief, at¶ 103.Based on arguments presented in further
briefing, we understand Public Counsel to mean that Avista'executives do not have fiduciary
duties to their ratepayers.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 214
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the additional value that IOU executives provide to shareholders, and consequently that
Avista's shareholders should bear those Costs.1360 Public Counsel further recommends that
the Commission order Avista to conduct an executive salary survey, including
compensation data from both publicly-owned and investor-owned utilities.'361
Decision
751 We reject Public Counsel's proposed revisions to Adjustment 3.06 and decline to order
Avista to perform a compensation survey.As Avista explains, its updated adjustment only
includes the portion of executive activity attributable to utility functions (as opposed to
non-utility/shareholder functions) and excludes retired officers.1362 Furthermore, we agree
with Avista that IOU executive compensation is not directly comparable to publicly-
owned utility executive compensation due to the different responsibilities and relatively
greater complexity involved operating an IOU.1363 Additionally, that Avista's executive
compensation appears reasonable relative to other IOU executives supports the conclusion
that Avista's proposed executive compensation adjustment is appropriate.1364 Finally,
given that Avista previously performed a compensation survey in Dockets UE-110876 and
UG-110877, the Commission declines Public Counsel's request to require an additional
compensation survey.
Decoupling
752 Avista witness Anderson proposes to extend the Company's electric and natural gas
decoupling mechanisms, without modifications, through calendar year 2026, citing
benefits experienced by customers and the Company to date and a lack of adverse
impacts.1161
753 No party opposes Avista's request. Though the Company requests that the extension
continues through 2026,1366 Staff supports extending decoupling until Avista's next rate
case or until the Commission comes to a decision in Docket U-210590. Staff witness
Erdahl explains that the Commission is currently evaluating the merits of decoupling
1360 Public Counsel's Post-Hearing Brief, at¶ 103.
1361 Public Counsel's Post-Hearing Brief, at¶ 103.
1362 Schultz, Exh. KJS-5T at 28:7-15, 44:10-14.
1363 Schultz, Exh. KJS-5T at 46:7-15.
1364 M. Garrett, Exh. MEG-1T at 7:8-9.
1365 Anderson, Exh. JCA-1T 15:22—25:2.
1366 Anderson, Exh. JCA-1T 15:24— 16:1.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 215
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mechanisms, and that deciding the matter here would be premature.1367 AWEC also
supports Avista's proposal to continue its revenue decoupling mechanisms during the
multi-year rate plan.1368
754 Similarly, NWEC supports Avista's proposal to continue the revenue decoupling
mechanisms for the term of the MYRP. Witness McCloy clarifies that the transitions of
performance-based ratemaking and electrification may warrant a discussion to modernize
the mechanism.1369
755 While TEP does not comment on Avista's proposal to extend its decoupling mechanism
through 2025, Stokes does comment on Avista's proposal to discontinue its Quarterly
Decoupling Report. If the Commission allows the Company to discontinue its Quarterly
Decoupling Reports, it recommends that the relevant information from those reports
should be included in all future annual adjustment filings.1370 NWEC supports TEPs
request, stating that all Quarterly Decoupling Report information should be included in a
consolidated, accessible manner in future decoupling rate adjustment filings.1371
756 On rebuttal, witness Bonfield accepts witness Stokes'recommendation, stating that"the
Company will make sure all information from the quarterly reports is included in all future
annual adjustment filings."1372 Avista requests that the Commission approve the
Company's request to extend its current electric and natural gas decoupling mechanisms
through the multi-year rate plan until the end December 31, 2026 as uncontested by the
Parties.1373
Decision
757 The Commission accepts Avista's proposal to continue its decoupling mechanism during
its MYRP. The Commission anticipates that further discussion of whether to remove or
modify the mechanisms will occur during Avista's next general rate case or in the context
of Docket U-210590.
1317 Erdahl, Exh. BAE-IT 33:12—34:2
1368 AWEC's Post-Hearing Brief, at¶59.
1"9 McCloy, Exh. LM-1T 14:4— 15:2
1370 Stokes, Exh. SNS-1 T 40:17—42:4
1371 Thompson, Exh. CT-4T 11:18— 12:11.
1372 Bonfield, Exh. SJB-5T 44:10-21
1373 Avista's Post-Hearing Brief, at¶ 124.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 216
ORDER 08
Pro Forma Miscellaneous O&MAdjustment
Avistas Direct Testimony
758 This adjustment reflects escalated increases in certain Company operations and
maintenance (O&M) and administrative and general (A&G) expenses, from the historical
test year ending June 30, 2023, through RY1, not otherwise pro formed within the
Company's electric or natural gas Pro Forma Studies.1314 The Company applied an annual
escalation rate of 6.3 percent for electric and 4.57 percent for natural gas operations by
FERC account to certain O&M and A&G annual test period balances as of June 30, 2023,
through December 2025 (or 2.5 years).1315
759 This adjustment increases RY1 Washington expenses by $8,876,000 for electric and
$1,634,000 for natural gas and decreases RY1 Washington NOI by$7,012,000 for electric
and $1,291,000 for natural gas.1376
760 For RY2,Avista proposes Pro Forma Miscellaneous O&M Expense to reflect escalated
increases in certain Company O&M and A&G expenses, to reflect incremental expenses in
RY2, beyond RY 1 levels, effective December 2025, through December 2026, not
otherwise pro formed within the Company's electric or natural gas Pro Forma Studies.1377
The Company applied the same escalation growth rate used in RY1 of 6.3 percent for
electric and 4.57 percent for natural gas operations to escalate RY2 amounts above RY1
levels.1371
761 This adjustment increases RY2 Washington expenses by $3,550,000 for electric and
$653,000 for natural gas and decreases RY2 Washington NOI by$2,805,000 for electric
and $516,000 for natural gas.1379
AWEC's Response Testimony
762 AWEC contends that Avista's proposal to apply annual escalation factors of 6.30 percent
for electric services and 4.57 percent for gas services to the Historical Period non-labor
1374 Schultz, Exh. KJS-IT at 72:1-4.
1371 Schultz, Exh. KJS-IT at 72:4-7.
1371 Schultz, Exh. KJS-IT at 72:15-17.
1377 Andrews, Exh.AMM-IT at 12:4-8.
1371 Andrews, Exh.AMM-1T at 12:8-11.
1379 Andrews, Exh.AMM-1 T at 12:11-13.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 217
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O&M results is concerning as the escalation percentages are well above expected inflation
over the rate plan period.1380
763 AWEC argues that the trend Avista used was based on total O&M expense, excluding
power supply costs, not on non-labor O&M expense.1381 AWEC argues that the
percentages that Avista calculated are not representative of an escalation factor that
reasonably can be applied to non-labor O&M expense.1382
764 AWEC witness Mullins asserts that Avista's operating expenses for electric services
actually declined by 2.39 percent in 2023 and natural gas non-labor O&M expense
declined by 3.3 percent.1383 Given these reductions and AWEC's experience in the 2022
GRC, Mullins questions the veracity of what Mullins describes as aggressive non-labor
O&M escalation assumptions included in Avista's filing.1384
765 AWEC recommends including no rate escalation in RY 1, and a modest inflationary
escalator for RY 2. The inflationary adjustment AWEC recommends for RY 2 is 2.3
percent, which represents the mid-point Personal Consumption Expenditures inflation
forecast of the Federal Reserve, Federal Open Market Committee.1385
Public Counsel's Response Testimony
766 Public Counsel witness M. Garrett states that Avista's annual escalation rates substantially
overstate current inflation expectations through 2026.1386 Instead, M. Garrett calculated an
annual rate of 2.5 percent as a more reasonable inflation expectation through 2026 for the
Company's electric and gas operations.1381
767 According to Public Counsel, adjusting the electric utility's O&M escalation rate to 2.5
percent reduces the revenue requirement by $5.624 million for RY1 and by an additional
$2.249 million for RY2.1388 Public Counsel also testifies that the adjustments to reduce the
1380 Mullins,Exh. BGM-1T at 15:10-12.
1381 Mullins,Exh. BGM-IT at 16:2-3.
1382 Mullins,Exh. BGM-IT at 16:5-7.
" Mullins,Exh. BGM-IT at 19:5-6.
1384 Mullins,Exh. BGM-IT at 19:6-9.
1`5 Mullins,Exh. BGM-IT at 19:17-20.
1316 M. Garrett, Exh. MEG-1T at 11:4-5.
1317 M. Garrett, Exh. MEG-1T at 12:3-4.
1311 M. Garrett, Exh. MEG-1T at 14:28-29 and at 15:1-2.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 218
ORDER 08
gas utility's O&M escalation rate to 2.5 percent reduce the revenue requirement$778
thousand for RY 1 and an additional $170 thousand for RY2.13s9
Staffs Response Testimony
768 Staff contends that Avista's adjustment does not meet the Commission's standard of a pro
forma adjustment because the escalated increase is not known nor is it measurable. In
addition, the changes in the adjusted O&M expenses had significant fluctuations between
2018 and 2023.1390
769 Because the Company failed to provide evidence that the O&M expenses will escalate at
the level proposed in the rate year, Staff recommends including only the incremental
known and measurable 2023 O&M expenses not already included in the Company's test
year, and to disallow any escalation component.1391
Avista's Rebuttal Testimony
770 The Company modified its Pro Forma Miscellaneous O&M Adjustments 3.14 and 5.06, in
response to Public Counsel data request, PC-DR-297. This modification was intended to
reflect actual known changes in expense through end of 12 months ending in December
2023 (12ME December 2023), above the test period expense, which ended in June 2023
(12ME 6.2023). The Company also revised its annual historical O&M growth average to
include 2023 results (2019-2023), resulting in escalation growth rates of 4.57 percent for
electric and 4.28 percent for natural gas, above the actual results for the twelve-month test
year ending December 2023 (12ME 12.2023).1392
771 Witness Andrews further states that updating Avista's actual results to reflect known and
measurable increases in the specific O&M and A&G expenses as of 12ME 12.2023
produces an increase in actual electric O&M/A&G expense of$5.9 million above test
period levels, and shows a reduction in actual natural gas O&M/A&G expense of
$468,000.1393
772 Avista explains that if it were simply to support revised values for these expenses at 12ME
12.2023, for electric operations,Avista's electric pro forma Adjustment 3.14 would drop
1319 M. Garrett, Exh. MEG-1T at 15:5-7.
1390 Hillstead, Exh. KMH-lT at 16:7-10.
1391 Hillstead, Exh. KMH-IT at 16:13-16.
1392 Andrews, Exh. EMA-6T at 39:10-15.
'"'Andrews, Exh. EMA-6T at 39:16-19.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 219
ORDER 08
by $3.0 million, from a level of$8.9 million to $5.9 million. For natural gas,Avista's pro
forma Adjustment 3.14 would drop by $2.1 million, from an increase of$1.6 million to a
decrease of$0.5 million.1394
773 Additionally, the Company states that it now supports Public Counsel's proposed
inflationary rate of 2.5 percent annually through 2026.1395
774 With respect to Pro Forma Adjustments 3.14 and 5.06,Avista argues that the Commission
should approve its revised escalation adjustments from its rebuttal testimony that
incorporate both updated expenses from the 2023 test period and a 2.5 percent growth rate
as proposed by Public Counsel witness M. Garrett in RY 1 and RY 2.1396 The result of
these changes on rebuttal to Avista's electric and natural gas revenue requirement in RY I,
is an increase of$143,000 for electric, and a reduction of$1.5 million for natural gas.1397
For RY2, these changes reduce the Company's electric and natural gas revenue
requirements by $2.1 million for electric and $323,000 for natural gas.1398
Decision
775 The Commission authorizes a 2.5 percent escalation adjustment for Avista's Pro Forma
Adjustments 3.14 (RY 1) and 5.06 (RY2), as originally proposed by Public Counsel
witness M. Garrett.1399
776 Pursuant to Commission rule and precedent, a pro forma adjustment gives effect for the
test period to all known and measurable changes that are not offset by other factors.1411
Under this standard, an event that causes a change to revenue, expenses, or rate base must
be "known"to have occurred during or after the historical 12 months of actual results of
operations.141' The "known" component of the standard requires that the effect of the
event will be in place during the rate effective period.1412 Furthermore, the amount of the
change must be "measurable,"which traditionally has meant that the amount cannot be an
1394 Andrews, Exh. EMA-6T at 40:5-7.
1395 Andrews, Exh. EMA-6T at 43:16-17.
1396 Avista's Post-Hearing Brief, at¶ 111.
1397 Andrews, Exh. EMA-6T at 44:13-15.
1391 Andrews, Exh. EMA-6T at 44:15-16.
1399 M. Garrett, Exh. MEG-1T at 11:12- 13:6.
1400 WAC 480-07-510(3)(c)(ii).
1401 WUTC a Avista Corp.,Dockets UE-090134&UG-090135, Order 10, 21 ¶45 (Dec. 22,2009).
1402 WUTC a Avista Corp.,Dockets UE-090134&UG-090135, Order 10, 21 ¶45 (Dec. 22, 2009).

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 220
ORDER 08
estimate, projection, a product of a budget forecast, or some similar exercise of judgment,
even informed judgment, concerning future revenue, expense, or rate base.1403 There are,
however, exceptions to this general rule, for example in the context of attrition
adjustments and power cost modeling forecasts.1404 Finally, pro forma adjustments must
be matched with offsetting factors, factors that diminish the impact of the known and
measurable event, so as to avoid overstating or understating the known and measurable
change.1405
777 Avista witness Andrews testified that the purpose of the escalation adjustment was to react
to the anticipated effect of inflation during the rate effective period of the rate plan.1406 No
Party in this proceeding contends that inflation will not impact Avista's O&M expenses
during the rate effective period. Therefore, it is fair to conclude that the effect of inflation
on Avista's O&M expenses is "known."
778 Turning to the "measurable"prong of the analysis, the Commission determines that
although Avista's proposed adjustment is based on a projected forecast of the effect of
inflation, this adjustment, similar to power cost modelling forecasts, falls within the
exception to the usual precision required of pro forma adjustments. While the Commission
agrees that it is inappropriate to base this adjustment on Avista's own historical data on
this record, it is reasonable to rely on the inflation data published by the Federal Reserve,
in addition to other governmental sources, to forecast the likely effect of inflation during
the rate effective period.140' Reliance on this data strikes the appropriate balance between
allowing Avista to insulate itself from the anticipated effect of inflation and encouraging
Avista to control costs to the benefit of ratepayers.As such, the forecast of inflation data is
"measurable"within the exception to the Commission's general pro forma standard and
supports an adjustment of 2.5 percent for both RY1 and RY 2 of Avista's multi-year rate
plan.
779 Finally, the Commission is satisfied that Avista considered offsetting factors related to its
updated test year ending in December 2023.Avista witness Schultz's testimony contains
1403 WUTC a Avista Corp.,Dockets UE-090134&UG-090135, Order 10, 21 ¶45 (Dec. 22,2009).
1404 WUTC a Avista Corp.,Dockets UE-090134&UG-090135, Order 10, 21 ¶49(Dec. 22,2009)
(power cost modeling); WUTC v Avista Corp., Dockets UE-120436&UG-120437, and UE-
110876 &UG-110877, Order 09/14,26-28¶¶70-73 (Dec. 26, 2012) (attrition adjustment).
1405 WUTC a Avista Corp.,Dockets UE-090134&UG-090135, Order 10, 21 ¶46(Dec. 22, 2009).
1406 Andrews, Exh. EMA-1T at 13:8-14;Andrews, Exh. EMA-6T at 42:17—43:5.
1407 M. Garrett, Exh. MEG-1T at 11:1 — 13:6. See also, M. Garrett, Exh.MEG-1T at 13:2-3, fn. 8
(noting that a 2.5 percent inflation rate is consistent with numerous publicly available sources,
including Office of Management and Budget, Congressional Budget Office, Federal Reserve's
Open Market Committee, and several Federal Reserve Banks).

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 221
ORDER 08
information reflecting both electric and natural gas offsets for the Company's position on
rebuttal, including direct O&M offsets.140'Although Public Counsel asserts in briefing
that Avista did not properly consider offsetting factors related to its updated test year
proposed on rebuttal, they do not direct the Commission's attention to any specific
deficiencies or omissions in Avista's rebuttal analysis. Therefore, the Commission finds
that Avista's analysis properly incorporates consideration of offsetting factors.
780 In reaching this outcome, the Commission is mindful of RCW 80.28.425(3)(c), which
provides that the Commission"shall ascertain and determine the revenues and operating
expenses for rate-making purposes of any gas or electrical company for each rate year of
the multi-year rate plan."RCW 80.28.425(3)(d) further states in"projecting the revenues
and operating expenses of a gas or electrical company pursuant to (c) of this section, the
commission may use any formula, method, or theory of valuation reasonably calculated to
arrive at fair,just, reasonable, and sufficient rates."Based on this authority, and the pro
forma adjustment analysis described above, the Commission determines that it has the
discretion to authorize an inflation escalator adjustment to the miscellaneous expenses
contained in Avista's Adjustments 3.14 and 5.06. On the record developed in this
proceeding, the Commission chooses to exercise this discretion to approve a 2.5 percent
escalation increase to the expenses in Adjustments 3.14 (RY1) and 5.06 (RY2). The
Commission further orders Avista to provide the workpapers demonstrating its full
calculations of offsetting factors related its updated test year and adjustments as part of a
compliance filing in this docket.
FINDINGS OF FACT
781 Having discussed above in detail the evidence received in this proceeding concerning all
material matters, and having stated findings and conclusions upon issues in dispute among
the Parties and the reasons therefore, the Commission now makes the following summary
of those facts, incorporating by reference pertinent portions of the preceding detailed
findings:
782 (1) The Commission is an agency of the state of Washington vested by statute with
the authority to regulate rates, regulations, practices, accounts, securities, transfers
of property and affiliated interests of public service companies, including electric
and natural gas companies.
783 (2) Avista is a"public service company," an"electrical company," and a"gas
company" as those terms are defined in RCW 80.04.010 and used in Title
1401 Schultz, Exh. KJS-5T at 17:1 18:15; 31:10 32:2.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 222
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80 RCW. Avista provides electric and natural gas utility service to customers in
Washington.
784 (3) Avista's currently effective rates were determined by the Commission's Final
Order approving a full multiparty settlement in Wash. Utils. & Transp. Comm'n v.
Avista Corp. d/b/a Avista Utils., Dockets UE-220053, UG-220054 &UE-210854
(Consolidated), Order 08/05 (Dec. 12, 2022).
785 (4) In May of 2020, Avista issued its Wildfire Resiliency Plan. On October 30, 2020,
Avista filed with the Commission revisions to its currently effective Tariffs WN
U-28, Electric Service, and WN U-29, Natural Gas Service, and also filed its
Petition with the Commission to request accounting and ratemaking treatment of
costs associated with its Wildfire Resiliency Plan.
786 (5) Avista requests an increase in its annual electric revenue requirement of
approximately $28.5 million(5.38 percent), and an increase to its annual natural
gas revenue requirement of approximately $10.7 million (10.14 percent).
787 (6) On September 30, 2024, through October 1, 2024, the Commission held an
Evidentiary Hearing before Administrative Law Judges James E. Brown II and
Connor A. Thompson, who presided along with the Commissioners.
788 (7) The Commission finds it would be premature to conduct prudency reviews of
CCA costs and compliance on an annual basis.
789 (8) During Avista's annual submission of updates to its CCA tracker tariff, the
Company shall submit and present information pertaining to where CCA costs are
being included in decision making to include, but not be limited to IRPs, CEIPs,
dispatch, power purchase, carbon market transactions, and capital projects.
790 (9) CCA allowance prices and costs in dispatch, market purchases, and market sales,
and the Commission's policy surrounding their inclusion in NPE, should be
addressed in Docket U-230161 so that policy and implementation is consistent for
all regulated utilities, and each impacted utility has an opportunity to comment on
the issue.
791 (10) The Commission finds that the modeling errors should be addressed by the parties
before the Commission adjusts the dead and sharing bands under the ERM.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 223
ORDER 08
792 (11) The Commission finds that the modeling errors should be addressed by the parties,
and that the forecast error adjustment is not just, reasonable, or sufficient at this
time.
793 (12) Because Avista no longer collects GHG revenues in the WEIM since the CCA's
implementation, we find that AWEC's adjustment should be rejected.
794 (13) Avista uses an approved methodology to calculate non-energy WEIM benefits and
therefore we reject the adjustments proposed by AWEC and supported by Staff for
including additional non-energy benefits.
795 (14) The Commission finds that because the CAISO estimate does not account for the
opportunity cost of leaving the bilateral market, it should not be used to calculate
WEIM benefits for Avista at this time as the evidence suggests its adoption would
likely result in an overestimation of benefits not likely to be realized.
796 (15) The Commission finds that the Colstrip transmission assets should remain in rates
at this time.
797 (16) The Commission finds that each of AWEC's proposals related to Colstrip as it
relates to the ERM and NPE should be rejected.
798 (17) The Commission finds that the adjustment for COB proposed by AWEC to account
for COB margins was agreed to during the evidentiary hearing and should be
made.
799 (18) The provisional plant review process should continue to be assessed on a portfolio
rather than project-by-project basis.
800 (19) To allow for additional evaluation of provisional capital filings, the review process
should be extended to six months.
801 (20) Classification of plant and naming conventions should remain consistent
throughout the provisional capital review and general rate case process.
802 (21) A separate provisional plant tariff is not necessary at this time.
803 (22) Allowing new business cases is consistent with the Commission's Policy
Statement to allow flexibility and further the reduction of regulatory lag.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 224
ORDER 08
804 (23) The Commission finds Public Counsel's recommendation for an equal allocation is
fair,just, and reasonable, and that Avista's next cost study shall account for
removal of Colstrip from rates.
805 (24) Avista provided insufficient evidence to support its request to include its proposed
flotation cost adjustment in its calculation for return on equity.
806 (25) Avista's proposed flotation cost adjustment should be rejected from its calculation
for return on equity.
807 (26) The Commission finds that a $1.00 increase to the minimum charge for electric
and gas customers is supported by the record.
808 (27) AWEC's proposals regarding Schedule 13 and 23 should be rejected, and an equal
percentage of base revenue increase is appropriate, consistent with our approach to
rate spread generally and Avista's original filing.
809 (28) AWEC's three adjustments, as modified by Avista, to Schedule 25 are unopposed
and should be adopted. Those include (1) increasing demand charges for energy
blocks 1 and 2 by 25 percent in RY1 and 25 percent in RY2, (2) increasing the
primary voltage discount from $1.93/kW to $4.39/kW, and(3) changing language
in Schedule 25 to make the primary voltage discount applicable to customers
served through third party substations.
810 (29) Sierra Club's proposal to require a decarbonization plan is inappropriate given the
subsequent passage of Initiative 2066.
811 (30) Sierra Club and NWEC's proposals relating to line extension allowances are
inappropriate given the subsequent passage of Initiative 2066.
812 (31) In light of the record evidence, the Commissions adopts the Non-Pipeline
Alternatives framework used by the Oregon Public Utilities Commission, with
some modification as an appropriate balance. The first modification we deem
appropriate is that Avista must examine the relationship between any NPA and the
Climate Commitment Act and should not assume that all CCA allowances will be
purchased at the ceiling price. Second,Avista is required to provide an explanation
of the resulting investment selection (either the NPA or a traditional investment)
that compares the costs of both projects,but Avista is not required to rank or score
any NPA in its evaluation process.Avista must conduct at least two NPA analyses
on natural gas distribution projects related to customer growth for any potential
projects that exceed $500,000, using the criteria described above.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 225
ORDER 08
813 (32) In October of 2020,Avista filed with the Commission in Docket UE-200894 a
petition for an accounting order authorizing the accounting and ratemaking
treatment of the costs associated with the Company's Wildfire Resiliency Plan.
814 (33) The record evidence demonstrates that Avista continues to face increased wildfire
threats, risks, costs, and other circumstances.
815 (34) The record evidence demonstrates that Avista has been taking incremental
wildfire actions above normal activities, and that the circumstances it faces are
extraordinary.
816 (35) The record evidence demonstrates that the base level of Avista's wildfire expense
of its Wildfire Balancing Account should be adjusted to $8.3 million and applied
across Avista's two-year rate plan.
817 (36) AWEC failed to demonstrate that removal of standard undergrounding in non-fire
risk areas and standard vegetation management is appropriate.
818 (37) The record evidence demonstrates that Avista's proposal to recover carrying
charges related to the Wildfire at its cost of debt is appropriate.
819 (38) The record evidence demonstrates that increasing Avista's Insurance Expense
Balancing Account baselines to $12.8 million for electric and $2.3 million for
natural gas is appropriate.
820 (39) D&O insurance benefits both customers and shareholders as part of the
compensation package necessary to attract and retain qualified directors and
officers and allocating 90 percent to customers and 10 percent to shareholders is
appropriate.
821 (40) The performance measures outlined in Appendix A and their related reporting
requirements are fair,just, and reasonable, consistent with applicable law, in the
public interest, and will provide necessary information to allow the Commission to
evaluate Avista's operations during the MYRR
822 (41) The modified recurring reporting requirements outlined in Appendix B are fair,
just, and reasonable, consistent with applicable law, in the public interest, and will
provide necessary information to continue evaluating Avista's operations.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 226
ORDER 08
823 (42) The evidence supports Avista's proposed capital structure of 51.5 percent debt and
48.5 percent equity as reasonable and resulting in fair,just, reasonable, and
sufficient rates.
824 (43) The evidence supports Avista's proposed return on equity of 9.8 percent as
reasonable and resulting in fair,just, reasonable, and sufficient rates.
825 (44) The evidence supports Avista's proposed overall rate of return of 7.32 percent as
reasonable and resulting in fair,just, reasonable, and sufficient rates.
826 (45) Staff's proposed rate of return of 9.5 percent is unreasonably low and not
supported by persuasive cost of capital modeling.
827 (46) Public Counsel's proposed rate of return of 8.5 percent is unreasonably low and
not supported by persuasive cost of capital modeling.
828 (47) AWEC's proposed rate of return of 9.25 percent is unreasonably low and not
supported by persuasive cost of capital modeling.
829 (48) Walmart's proposed rate of return of 9.62 percent for electricity and 9.58 percent
for gas are unreasonably low and not supported by persuasive cost of capital
modeling.
830 (49) Avista provided insufficient evidence to support its request to include its proposed
flotation cost adjustment in its calculation for return on equity.
831 (50) Avista's proposed flotation cost adjustment should be rejected from its calculation
for return on equity.
832 (51) The Commission finds it appropriate to allow a return on Avista's Power Purchase
Agreements. The Commission further finds that the appropriate rate is the
company's cost of debt.
833 (52) The record evidence is insufficient to demonstrate that Avista should be required to
engage in a targeted electrification pilot as proposed by Sierra Club.
834 (53) The record evidence is insufficient to demonstrate that AWEC's proposed
adjustment to Avista's Working Capital Restating Adjustment (ISWC Adjustment
1.03) will result in rates that are fair,just, reasonable, and sufficient.
835 (54) The record evidence demonstrates that Avista's proposed Working Capital
Restating Adjustment(ISWC Adjustment 1.03) is based on a methodology

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 227
ORDER 08
previously approved by the Commission and is reasonably calculated to result in
rates that are fair,just, reasonable, and sufficient.
836 (55) AWEC's proposal to adjust Avista's wildfire and patent litigation costs as non-
recurring is not appropriate in light of the record evidence.
837 (56) AWEC's proposal to modify Avista's accounting of deferred tax credits balances is
inappropriate in light of the record evidence.
838 (57) The record evidence demonstrates that Avista's proposed adjustment to electric
property rent as revised on rebuttal is reasonable and appropriate.
839 (58) Avista's proposal to defer the actual Washington share of Coyote Springs 2 major
maintenance is uncontested and supported by the record.
840 (59) The record evidence does not support AWEC and Public Counsel's proposal to
exclude 50 percent of Avista's Directors' and Officers' liability insurance. Because
Directors' and Officers'liability insurance benefits both customers and
shareholders as part of the compensation package necessary to attract and retain
qualified directors and officers, allocating 90 percent to customers and 10 percent
to shareholders is appropriate.
841 (60) The record evidence does not support Avista's proposal to increase the ratepayer
share of directors'fees from 50 to 90 percent.Avista has not demonstrated that the
Commission should alter its precedent of allocating directors'fees equally between
ratepayers and shareholders, as established in Avista's 2009 GRC.
842 (61) The record evidence does not support AWEC and Public Counsel's proposal to
wholly exclude stock compensation from Avista's directors' fees.
843 (62) The record evidence supports including 50 percent of Avista's directors' fees in
rates, consistent with the Commission's precedent established in Avista's 2009
GRC.
844 (63) The record evidence does not support Public Counsel's proposal to adjust Avista's
executive compensation. Public Counsel has not demonstrated based on the
evidence in this case that the publicly-owned utility executive compensation is
directly comparable to investor-owned utility executive compensation.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 228
ORDER 08
845 (64) Public Counsel has not demonstrated that requiring Avista to conduct an executive
compensation survey including data from publicly-owned utility executives is
reasonable or appropriate based on the evidence in this case. Public Counsel has
not demonstrated based on the evidence in this case that the publicly-owned utility
executive compensation is directly comparable to investor-owned utility executive
compensation and Avista has previously performed an executive compensation
survey in Dockets UE-110876 and UG-110877.
846 (65) The incentive adjustment 3.08 shall utilize the six-year rolling average
methodology with no escalation factor, consistent with historic known and
measurable methodology.
847 (66) Avista's proposal to continue its revenue decoupling mechanisms during the multi-
year rate plan is uncontested and adequately supported by the record.
848 (67) The record evidence demonstrates that Avista's proposed 2.5 percent escalation
adjustment for Pro Forma Adjustments 3.14 and 5.06 is intended to respond to the
known effect of inflation during the rate effective period, that inflation is
measurable in a similar manner to other adjustments such as Avista's power cost
modeling, and that Avista has incorporated offsetting factors into its proposed
adjustment.
849 (68) The Commission finds that it is reasonable to require Avista to file its workpapers
supporting its pro forma adjustments regarding its updated test year ending in
December 2023, as part of a compliance filing within 45 days of this Order.
CONCLUSIONS OF LAW
850 Having discussed above all matters material to this decision, the Commission now makes
the following summary conclusions of law, incorporating by reference pertinent portions
of the preceding detailed conclusions:
851 (1) The Commission has jurisdiction over the subject matter of, and Parties to, this
proceeding.
852 (2) Avista is an electric company, a natural gas company, and a public service
company subject to Commission jurisdiction
853 (3) At any hearing involving a proposed change in a tariff schedule the effect of
which would be to increase any rate, charge,rental, or toll theretofore charged,
the burden of proof to show that such increase is just and reasonable will be upon

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 229
ORDER 08
the public service company. RCW 80.04.130 (4). The Commission's
determination of whether the Company has carried its burden is adjudged based
on the full evidentiary record.
854 (4) Avista's existing rates for electric and natural gas service are neither fair,just,
reasonable, nor sufficient, and should be adjusted prospectively after the date of
this Order.
855 (5) Avista shall submit and present information pertaining to where CCA costs are
being included in decision making to include, but not limited to Integrated
Resource Plans (IRPs), Clean Energy Implementation Plans (CEIPs), dispatch,
power purchase, carbon market transactions, and capital projects. This annual
report will be addressed and acknowledged through the Open Meeting process
and will help the Commission assess a utility's progress and decision making
leading up to the Commission's prudency determination at the conclusion of the
compliance period
856 (6) CCA allowance prices and costs in dispatch, market purchases, and market sales,
and the Commission's policy surrounding their inclusion in NPE, should be
addressed in Docket U-230161 affording opportunity to comment from all
regulated utilities.
857 (7) The Commission denies Avista's and Staff's proposals to modify the ERM at this
time.
858 (8) The Commission denies Avista's forecast error adjustment as it fails to meet the
known and measurable standard.
859 (9) Avista shall convene a workshop series with interested parties to address modeling
inputs, power supply modeling methodology, use of AURORA, and a changing
energy landscape. These conversations should include discussions regarding
inclusion of CCA costs and addressing the forecast error as well as other issues
raised by the parties in this proceeding.
860 (10) The EIM benefits calculation methodology proposed by Avista, resulting in $6.6
million in benefits is just and reasonable.
861 (11) Avista's transmission assets are used and useful and the Company has provided
evidence and testimony showing that they will remain so.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 230
ORDER 08
862 (12) There is insufficient evidence supporting the need for an update to the Colstrip
mark-to-market valuation and the Commission does not find that the benefits
would outweigh the costs of an additional rate proceeding to update that valuation.
863 (13) Consistent with the Commission's Used and Useful Policy, the provisional plant
review process should continue to be conducted on a portfolio basis, with a six-
month review period, with consistent classification of plant and naming
conventions, and shall not be tracked through a separate tariff at this time.
864 (14) In spite of our desire to maintain flexibility, and not be overly prescriptive, we
wish to provide further clarification on the Commission's expectations for
provisional plant filings. Specifically,Avista must conform to the following:
1) Identify if a business case is identified in the Clean Energy Implementation
Plan (CEIP);
2) Identify if a business case is required for CETA and/or Climate
Commitment Act (CCA) compliance;
3) Identify each new business case and provide a narrative for business need;
4) Provide information on an annual and cumulative rate-effective period
basis;
5) Provide a narrative that explains the filing structure and how worksheets fit
together; and
6) Maintain consistent naming conventions.
865 (15) The Commission finds Public Counsel's recommendation for an equal allocation is
fair,just, and reasonable, and that Avista's next cost of service study shall account
for removal of Colstrip in rates.
866 (16) Avista proposed a multi-year rate plan as required by RCW 80.28.425.
867 (17) The Commission should approve Avista's filing as a multi-year rate plan and not as
a traditional rate case filing.
868 (18) The Commission should authorize and require Avista to make a compliance filing
in these consolidated dockets to recover in prospective rates its revenue deficiency
of$783,000 for rate year 1 and an incremental $68.9 million in rate year 2, for
electric operations before offsetting Colstrip factors, and an increase of$14.2
million in rate year 1 and an incremental $4.0 million for rate year 2, for natural
gas operations as provided in Appendix C (electric) and Appendix D (natural gas).

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 231
ORDER 08
869 (19) A$1.00 increase to the minimum charge for electric and gas customers is
supported by the record and is just, reasonable, and sufficient.
870 (20) Avista must revise Schedule 25 to include (1) increasing demand charges for
energy blocks 1 and 2 by 25 percent in RY1 and 25 percent in RY2, (2) increasing
the primary voltage discount from $1.93/kW to $4.39/kW, and (3) changing
language in Schedule 25 to make the primary voltage discount applicable to
customers served through third party substations.
871 (21) For the proposals related to reallocating Colstrip and including Colstrip in rate
spread calculations, we agree with Avista that both AWEC and NWEC were
signatories to the original settlement, and that settlement should not be amended at
this time.
872 (22) The Commission should authorize a capital structure of 48.5 percent equity and
51.5 percent debt, a cost of debt of 4.99 percent, and an ROE of 9.8 percent,
resulting in a ROR of 7.32 percent.
873 (23) The flotation costs incurred by the Company's investors are not expenses the
ratepayers shall bear.
874 (24) In the recent election, voters approved Initiative Measure No. 2066, which in
pertinent part states:
(12) The commission shall not approve, or approve with conditions, a
multiyear rate plan that requires or incentivizes a gas company or large
combination utility to terminate natural gas service to customers.
(13) The commission shall not approve, or approve with conditions, a
multiyear rate plan that authorizes a gas company or large combination
utility to require a customer to involuntarily switch fuel use either by
restricting access to natural gas service or by implementing planning
requirements that would make access to natural gas service cost-prohibitive.
875 (25) The Commission should adopt the non-pipeline alternatives framework described
in paragraph 809, as fair,just, reasonable, sufficient and in the public interest.
876 (26) While the consideration of equity pursuant to RCW 80.20.425(1) is distinct from
the legal requirements pertaining to low-income customer programs, the
Commission's equity analysis naturally focuses on low-income customer
programs, among other broader social, economic, and environmental impacts
related to utility rates, services, and practices.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 232
ORDER 08
877 (27) Avista has demonstrated sufficient evidence of its continued dedication to
promoting equitable outcomes by agreeing to: (1)retain the reporting requirements
in accordance with U-210800; (2) collaborate with EAAG and EAG on its
disconnection policies and its multilingual MLS strategy; and(3) obtain customer
demographic information for DER on an optional basis. The Commission therefore
rejects TEP's recommendations that Avista:
1) Prioritize customers for disconnection based on only current arrearage
amount and duration of current arrears;
2) Develop a separate LAP in coordination with EAG and EAAG;
3) Provide a new LINA/EBA and report data in its disconnection reduction
report using the stratification framework.
4) Publish its stratification and data reporting on its website.
878 (28) The Commission is legally obligated by RCW 80.28.425(7)to determine a set of
performance measures that will be used to assess Avista's operations under the
MYRR
879 (29) The Commission's determination of a set of performance measures need not be
based upon a company's initial filing, the record testimony and evidence, or the
proposals made by a company or party throughout the proceeding.1409
880 (30) The Commission should adopt the performance measures outlined in Appendix A
and Avista should be authorized and required to make necessary and sufficient
future compliance filings in accordance with the directions and conditions of this
Order.
881 (31) Avista should be authorized and required to make an annual compliance filing to
report the performance measures outlined in Appendix A for each year of the
MYRP (beginning January I and ending December 31 of each year) as an
appendix or appendices to its annual Commission Basis Reports.1410
882 (32) Avista should be authorized and required to make recurring reporting filings
consistent with the Commissions modifications outlined in Appendix B.
1409 See RCW 80.28.425(7).
1410 In re Proceeding to Develop a Policy Statement Addressing Alternatives to Traditional Cost of
Service Rate Making, Docket U-210590,Policy Statement Addressing Initial Reported
Performance Metrics, 3-4¶ 11 (Aug. 2, 2024).

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 233
ORDER 08
883 (33) The plain language of RCW 80.28.410 gives the Commission discretion to allow a
return on power purchase agreements costs to be deferred.
884 (34) Sierra Club's proposal to require Avista to engage in a targeted electrification pilot
should be rejected.
885 (35) AWEC's proposal to remove Avista's interest-bearing Wells and Mizuho accounts
from Avista's cash working capital should be rejected.
886 (36) The Commission should authorize Avista's Working Capital Restating Adjustment
(ISWC Adjustment 1.03) as reasonably calculated to result in rates that are fair,
just, reasonable, and sufficient.
887 (37) Avista's litigation costs related to wildfire and patent litigation are fair,just,
reasonable and in the public interest.
888 (38) Avista's accounting of deferred tax credit balances is fair,just,reasonable, and in
the public interest.
889 (39) The Commission should authorize Avista's proposed adjustment to electric
property rent as revised on rebuttal.
890 (40) The Commission should authorize and order Avista's proposed deferral regarding
Coyote Springs 2 major maintenance costs.
891 (41) Avista's Wildfire Balancing Account should be authorized with a baseline of
wildfire expense of$8.3 million, over Avista's two-year rate plan.
892 (42) Avista's proposal to recover carrying charges on the Wildfire Balancing Account at
its cost of debt should be approved by the Commission.
893 (43) Avista's Insurance Expense Balancing Account should be authorized with
baselines of$12.8 million for electric, and$2.3 million for natural gas.
894 (44) Public Counsel and AWEC's proposal to exclude 50 percent of Directors' and
Officers' liability insurance should be rejected.
895 (45) Avista's proposal to require increase ratepayers' share of directors' fees from 50 to
90 percent should be rejected.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 234
ORDER 08
896 (46) Public Counsel and AWEC's proposal to exclude stock compensation from Avista's
directors' fees should be rejected.
897 (47) The Commission should authorize Avista to recover 50 percent of its directors' fees
in rates.
898 (48) The non-executive labor incentive adjustment proposed by Avista, is based on
estimates and forecasts, and therefore does not meet the known and measurable
standard.
899 (49) Public Counsel's proposal to adjust Avista's executive compensation based on
comparisons to publicly-owned utility executive compensation should be rejected.
900 (50) Public Counsel's request to require Avista to conduct an executive compensation
survey including data from publicly-owned utility executives should be rejected.
901 (51) Avista's proposal to continue its revenue decoupling mechanism during the multi-
year rate plan should be accepted.
902 (52) The Commission should authorize Avista's proposed 2.5 percent escalation
adjustment for Pro Forma Adjustments 3.14 and 5.06.
903 (53) Avista should be authorized and required to make a compliance filing within 45
days of this Order to provide the workpapers supporting its pro forma adjustments
regarding its updated test year ending in December 2023.
904 (54) The Commission Secretary should be authorized to accept by letter, with copies to
all Parties to this proceeding, filings that comply with the requirements of this
Order.
905 (55) The Commission should retain jurisdiction over the subject matter and the Parties
to effectuate the terms of this Order.
ORDER
THE COMMISSION ORDERS:
906 (1) The proposed tariff revisions Avista Corporation, d/b/a Avista Utilities, filed in
these dockets on January 18, 2024, and suspended by prior Commission order, are
rejected.

DOCKET UE-240006 and UG-240007(Consolidated) PAGE 235
ORDER 08
907 (2) Avista Corporation, d/b/a Avista Utilities, is authorized and required to make
compliance filings in this docket including all tariff sheets that are necessary and
sufficient to effectuate the terms of this Order.
908 (3) The Commission Secretary is authorized to accept by letter, with copies to all
Parties to this proceeding, filings that comply with the requirements of this Order.
909 (4) The Commission retains jurisdiction to effectuate the terms of this Order.
DATED at Lacey, Washington, and effective December 20, 2024.
WASHINGTON UTILITIES AND TRANSPORTATION COMMISSION
L-1 4,1 4 .,
DAVID W. DANNER, Chairman
ANN E. RENDAHL, Commissioner
MILT DOUMIT, Commissioner
NOTICE TO PARTIES: This is a final order of the Commission. In addition to
judicial review, administrative relief may be available through a petition for
reconsideration, filed within 10 days of the service of this order pursuant to RCW
34.05.470 and WAC 480-07-850, or a petition for rehearing pursuant to RCW
80.04.200 or RCW 81.04.200 and WAC 480-07-870.

Service Date: December 20, 2024
BEFORE THE WASHINGTON
UTILITIES AND TRANSPORTATION COMMISSION
WASHINGTON UTILITIES AND DOCKET UG-240891
TRANSPORTATION COMMISSION,
ORDER 01
Complainant,
CORRECTED ORDER
V.
COMPLAINT AND ORDER
AVISTA CORPORATION, ALLOWING RATES SUBJECT TO
LATER REVIEW AND REFUND;
Respondent. SETTING MATTER FOR
ADJUDICATION
BACKGROUND
1 On October 31, 2024, Avista Corporation d/b/a Avista Utilities (Avista or Company)
filed with the Washington Utilities and Transportation Commission(Commission)
proposed revisions to its rates under electric Tariff WN U-28, Schedule 99—Colstrip
Tracker. The revised tariff sheets bear an effective date of January 1, 2025. In its filing,
Avista seeks to revise Schedule 99 rates to reflect forecasted costs for Colstrip Units 3
and 4 for calendar year 2025. Notably, Avista's proposed rates reflect full recovery(over
one year) of all plant investments expected to be placed in service in calendar years 2024
and 2025.
2 The revisions to Schedule 99 rates would increase Avista's annual revenues by $18
million, or 2.7 percent. A typical residential customer using 945 kWhs per month would
see an increase of$4.47 per month, or 4.1 percent.
3 Commission Staff(Staff) has reviewed the Company's tariff filing and recommends that
the Commission suspend the matter and initiate an adjudication. Staff highlights a
number of capital investments reflected in the filing that are potentially unrecoverable by
law or imprudent for Washington ratepayers. Specifically, these investments relate to the
Colstrip coal-fired generating facility, and require scrutiny given the Clean Energy

DOCKET UE-240891 PAGE 2
ORDER 01
Transformation Act's mandate to remove costs associated with coal-fired generation
facilities from rates no later than December 31, 2025.1
4 In this filing, Avista seeks to increase annual Schedule 99 revenues by $18.7 million—
from $23.9 million in 2024 to $42.6 million in 2025, which would represent a year-over-
year increase of 78 percent. The proposed rate increase is driven predominantly by
significant capital investment in the Colstrip facility in 2024 and 2025, all of which
Avista seeks to recover in full in 2025. The relatively high level of investment in Colstrip
forecasted for 2024-2025 coupled with the accelerated recovery of those investments
over one year manifests itself as a $13.4 million(or 110 percent) increase in the level of
depreciation expense Avista embeds in its proposed Schedule 99 rates for 2025.
5 This matter came before the Commission at its December 19, 2024, Open Meeting. Staff
shared its three concerns as outlined in Staff s memo, to include that this filing may
include investment in plant that will not be used and useful until 2027. Staff
recommended that the Commission require Avista to file revised tariff pages by
December 23, 2024, effective January 1, 2025, indicating that the rates are subject to
refund, and set this matter for adjudication. Staff also recommends suspending the tariff
sheets filed by Avista on October 31, 2024, but allowing the proposed rates to become
effective on January 1, 2025, on an interim basis, subject to refund,pending the
Commission's final determination in this Docket. Staff observed that interim rates subject
to refund would prevent potential rate shock. In addition, given the time for
adjudication, if the Commission were to find the costs prudently incurred, the Company
may only have a few months to recover the full amount by the end of 2025, due to the
prohibition created by CETA. In response to questions by the Commission, Staff agreed
that it would be appropriate to recommend setting the matter for adjudication rather than
suspending the tariffs.
6 Avista provided comments that it does find itself in a different position than Puget Sound
Energy. Avista supports allowing recovery starting January 1, 2025, and is supportive of
the resolution to set the matter for adjudication. Public Counsel indicated its support to
set this matter for adjudication.
' RCW 19.405.030(1). For Avista,this mandate pertains to Colstrip Units 3 and 4.

DOCKET UE-240891 PAGE 3
ORDER 01
DISCUSSION AND DECISION
7 We agree with Staff s revised recommendation to require Avista to file amended tariff
sheets, and to set this matter for adjudication while allowing rates to become effective
January 1, 2025, subject to review and refund upon the Commission's final determination
in this matter. Staff has identified a number of concerns, and the Commission would
benefit from a full record, including testimony and briefing from the parties. The
Commission also recognizes that the prohibition on retroactive ratemaking and the
impending prohibition of coal-fired generation being included to rates after 2025, creates
a risk that Avista would be unable to collect on these investments.
8 We conclude that Avista's proposed tariff revisions might injuriously affect the rights and
interests of the public, and Avista has not demonstrated that the proposed changes would
result in rates that are fair,just, reasonable, equitable, and sufficient. Pursuant to RCW
80.04.130(1), the Commission, therefore, suspends the tariff filing and will hold public
hearings, as necessary, to determine whether the proposed increases are fair,just,
reasonable, equitable, and sufficient.
9 The Commission therefore requires Avista to file amended tariff sheets, no later than
December 23, 2024, with rates effective January 1, 2025, indicating that the increased
rates in this Docket are subject to refund, and sets this matter for adjudication, pending
the Commission's final determination in this Docket. By allowing the rates to be
collected beginning January 1, 2025, the Commission notes this Order does not represent
a resolution or final determination of any matter raised in this Docket. Avista shall
provide an update to the status of this matter by March 31, 2025.
FINDINGS AND CONCLUSIONS
10 (1) The Commission is an agency of the State of Washington vested by statute with
the authority to regulate rates, regulations, and practices of public service
companies, including electric companies and gas companies.
11 (2) Avista is an electric company and a public service company subject to
Commission jurisdiction.
12 (3) The tariff revisions Avista filed on October 31, 2024, might injuriously affect the
rights and interests of the public.

DOCKET UE-240891 PAGE 4
ORDER 01
13 (4) Avista has not yet demonstrated that the tariff revisions would result in rates that
are fair,just, reasonable, equitable, and sufficient.
14 (5) In order to carry out the duties imposed upon the Commission by law, and as
authorized in RCW 80.04.130, the Commission believes it is necessary to
investigate Avista's books, accounts, practices, and activities; to make a valuation
or appraisal of Avista's property; and to investigate and appraise various phases
of Avista's operations.
15 (6) The Commission finds that this Docket meets the criteria of WAC 480-07-
400(2)(b)(i) and that the parties may conduct discovery pursuant to the
Commission's discovery rules in WAC 480-07-400—425.
16 (7) As required by RCW 80.04.130(4), Avista bears the burden to prove that the
proposed increases are fair,just, reasonable, equitable, and sufficient.
17 (8) Avista may be required to pay the expenses reasonably attributable and allocable
to such an investigation, consistent with RCW 80.20.020.
18 (9) After considering the Company's filing, Staff s recommendation, and for good
cause shown, the Commission directs the Company to file revised tariff pages, no
later than December 23, 2024, with an effective date of January 1, 2025,
indicating that the increased rates in this docket are subject to refund, and the
Commission sets this matter for adjudication pending the Commission's final
determination of this matter.
19 (10) The Commission finds cause to require Avista and all parties to file an update as
to the status of this Docket, no later than March 31, 2025.
ORDER
THE COMMISSION ORDERS:
20 (1) The Commission orders that Avista Corporation d/b/a Avista Utilities shall file
revised tariff pages, no later than December 23, 2024, with an effective date of
January 1, 2025, indicating that the increased rates in this docket are subject to
refund, and the Commission sets this matter for adjudication pending the
Commission's final determination of this matter, and that said tariff sheets shall
be effective starting January 1, 2025, subject to later refund, and that Avista

DOCKET UE-240891 PAGE 5
ORDER 01
Corporation d/b/a Avista Utilities shall file a status update in this Docket no later
than March 31, 2025.
21 (2) The Commission will hold hearings at such times and places as may be required.
22 (3) Avista Corporation d/b/a Avista Utilities must not change or alter the tariffs filed
in these Dockets during the suspension period unless authorized by the
Commission.
23 (4) The Commission will institute an investigation of Avista Corporation d/b/a Avista
Utilities' books, accounts, practices, activities, property, and operations as
described above.
24 (5) The parties may conduct discovery pursuant to the Commission's discovery rules
in WAC 480-07-400-425.
25 (6) Avista Corporation d/b/a Avista Utilities shall pay the expenses reasonably
attributable and allocable to the Commission's investigation consistent with RCW
80.20.020.
26 (7) The Commission retains jurisdiction over the subject matter and Avista
Corporation d/b/a Avista Utilities to effectuate the provisions of this Order.
DATED at Lacey, Washington, and effective December 20, 2024.
WASHINGTON UTILITIES AND TRANSPORTATION COMMISSION
DAVID W. DANNER, Chair
ANN E. RENDAHL, Commissioner
MILTON H. DOUMIT, Commissioner

Service Date: December 19, 2024
BEFORE THE WASHINGTON
UTILITIES AND TRANSPORTATION COMMISSION
WASHINGTON UTILITIES AND DOCKET UG-240891
TRANSPORTATION COMMISSION,
ORDER 01
Complainant,
V. COMPLAINT AND ORDER
SUSPENDING TARIFF REVISIONS;
AVISTA CORPORATION, ALLOWING RATES SUBJECT TO
LATER REVIEW AND REFUND
Respondent.
BACKGROUND
1 On October 31, 2024, Avista Corporation d/b/a Avista Utilities (Avista or Company)
filed with the Washington Utilities and Transportation Commission(Commission)
proposed revisions to its rates under electric Tariff WN U-28, Schedule 99—Colstrip
Tracker. The revised tariff sheets bear an effective date of January 1, 2025. In its filing,
Avista seeks to revise Schedule 99 rates to reflect forecasted costs for Colstrip Units 3
and 4 for calendar year 2025. Notably, Avista's proposed rates reflect full recovery(over
one year) of all plant investments expected to be placed in service in calendar years 2024
and 2025.
2 The revisions to Schedule 99 rates would increase in Avista's annual revenues by $18
million, or 2.7 percent. A typical residential customer using 945 kWhs per month would
see an increase of$4.47 per month, or 4.1 percent.
3 Commission Staff(Staff) has reviewed the Company's tariff filing and recommends that
the Commission suspend the matter and initiate an adjudication. Staff highlights a
number of potentially inappropriate capital investments which are reflected in the filing.
Specifically, these investments relate to Colstrip, and require scrutiny given the Clean

DOCKET UE-240891 PAGE 2
ORDER 01
Energy Transformation Act's mandate to remove costs associated with coal-fired
generation facilities from rates no later than December 31, 2025.1
4 In this filing, Avista seeks to increase annual Schedule 99 revenues by $18.7 million—
from $23.9 million in 2024 to $42.6 million in 2025 —which would represent a year-
over-year increase of 78 percent. The proposed rate increase is driven predominantly by
significant capital investment at Colstrip in 2024 and 2025, all of which Avista seeks to
recover in full in 2025. The relatively high level of investment at Colstrip forecasted for
2024-2025 coupled with the accelerated recovery of those investments over one year
manifests itself as a $13.4 million(or 110 percent) increase in the level of depreciation
expense Avista embeds in its proposed Schedule 99 rates for 2025.
S This matter came before the Commission at its December 19, 2024, Open Meeting. Staff
recommended that the Commission suspend the tariff sheets filed by Avista on October
31, 2024, but allow the proposed rates to become effective on January 1, 2025, on an
interim basis, subject to refund, pending the Commission's final determination in this
Docket. Staff observed that interim rates subject to refund would prevent potential rate
shock. Given the amount of time adjudications take, if the Commission were to find the
costs prudently incurred, the Company may only have a few months to recover the full
amount by the end of 2025, due to the prohibition created by CETA.
DISCUSSION AND DECISION
6 We agree with Staffs recommendation to suspend this matter for adjudication while
allowing rates on an interim basis, subject to later review and refund. Staff has identified
a number of concerns, and the Commission would benefit from a full record, including
testimony and briefing from the parties. The Commission also recognizes that the
prohibition on retroactive ratemaking and the impending 2025 prohibition of coal-fired
generation being included in rates, creates a risk that Avista would be unable to collect on
these investments.
7 We conclude that Avista's proposed tariff revisions might injuriously affect the rights and
interests of the public, and Avista has not demonstrated that the proposed changes would
result in rates that are fair,just, reasonable, equitable, and sufficient. Pursuant to RCW
80.04.130(1), the Commission, therefore, suspends the tariff filing and will hold public
' RCW 19.405.030(1). For Avista,this mandate pertains to Colstrip Units 3 and 4.

DOCKET UE-240891 PAGE 3
ORDER 01
hearings, as necessary, to determine whether the proposed increases are fair,just,
reasonable, equitable, and sufficient.
8 The Commission therefore suspends the tariff sheets filed by Avista on October 31, 2024,
but allow the proposed rates to become effective on January 1, 2025, on an interim basis,
subject to refund, pending the Commission's final determination in this Docket.
FINDINGS AND CONCLUSIONS
9 (1) The Commission is an agency of the State of Washington vested by statute with
the authority to regulate rates, regulations, and practices of public service
companies, including electric companies and gas companies.
10 (2) Avista is an electric company and a public service company subject to
Commission jurisdiction.
11 (3) The tariff revisions Avista filed on October 31, 2024, might injuriously affect the
rights and interests of the public.
12 (4) Avista has not yet demonstrated that the tariff revisions would result in rates that
are fair,just, reasonable, equitable, and sufficient.
13 (5) In order to carry out the duties imposed upon the Commission by law, and as
authorized in RCW 80.04.130, the Commission believes it is necessary to
investigate Avista's books, accounts, practices, and activities; to make a valuation
or appraisal of Avista's property; and to investigate and appraise various phases
of Avista's operations.
14 (6) The Commission finds that this Docket meets the criteria of WAC 480-07-
400(2)(b)(i) and that the parties may conduct discovery pursuant to the
Commission's discovery rules in WAC 480-07-400—425.
15 (7) As required by RCW 80.04.130(4), Avista bears the burden to prove that the
proposed increases are fair,just, reasonable, equitable, and sufficient.
16 (8) Avista may be required to pay the expenses reasonably attributable and allocable
to such an investigation, consistent with RCW 80.20.020.
17 (9) After considering the Company's filing, Staff s recommendation, and for good
cause shown, the Commission suspends the tariff sheets filed by Avista on

DOCKET UE-240891 PAGE 4
ORDER 01
October 31, 2024, but allow the proposed rates to become effective on January 1,
2025, on an interim basis, subject to refund, pending the Commission's final
determination in this Docket.
ORDER
THE COMMISSION ORDERS:
18 (1) The tariff revisions Avista Corporation d/b/a Avista Utilities, filed on October 31,
2024, and proposed rates are allowed on an interim basis effective January 1,
2025, as set forth in paragraph 8 of this Order.
19 (2) The Commission will hold hearings at such times and places as may be required.
20 (3) Avista Corporation d/b/a Avista Utilities must not change or alter the tariffs filed
in these Dockets during the suspension period unless authorized by the
Commission.
21 (4) The Commission will institute an investigation of Puget Sound Energy's books,
accounts, practices, activities, property, and operations as described above.
22 (5) The parties may conduct discovery pursuant to the Commission's discovery rules
in WAC 480-07-400-425.
23 (6) Avista Corporation d/b/a Avista Utilities shall pay the expenses reasonably
attributable and allocable to the Commission's investigation consistent with RCW
80.20.020.
24 (7) The Commission retains jurisdiction over the subject matter and Avista
Corporation d/b/a Avista Utilities to effectuate the provisions of this Order.

DOCKET UE-240891 PAGE 5
ORDER 01
DATED at Lacey, Washington, and effective December 19, 2024.
WASHINGTON UTILITIES AND TRANSPORTATION COMMISSION
DAVID W. DANNER, Chair
ANN E. RENDAHL, Commissioner
MILTON H. DOUMIT, Commissioner