20040518Response No 218 of Avista to Staff.pdf

Avista Corp.
1411 East Mission PO Box 3727
Spokane. Washington 99220-3727
Telephone [phone]
Toll Free 800-727-9170
R E eEl VE 0 .An~=~IS~JIf,=-It
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ZOOf1 tiff ' 6 Ati 9: 02 Corp.
May 17, 2004
i" iiO fUBL!C
UTiL (flES COt1MISSIOH
Idaho Public Utilities Commission
472 W. Washington St.
Boise, ill 83720-0074
1\ttn: Scott Woodbury
Deputy 1\ttomey General
Re:Production Request of the Commission Staff
in Case Nos. 1\ VU-04-01 and 1\ VU-04-
Mr. Woodbury,
I have attached an original and three copies of 1\ vista s response to Staff Data Request
No. 218.
If you have any questions, please call me at [phone].
Mike FinK
Rate i\nal yst
Enclosures
Copy: C. Ward (Potlatch)
D. Peseau (Utility Resources, Inc)
A. Yanke! (Yanke! & Assoc., Inc)
VISTA CORPORATION
RESPONSE TO REQUEST FOR INFORMATION
JURISDICTION:
Ci\SE NO:
REQUESTER:
TYPE:
REQUEST NO.
Idaho
A VU-O4-01 / A VU-O4-
IPUC
Data Request
Staff218
Di\TE PREPi\RED:
WITNESS:
RESPOND ER:
D EP AA TMENT:
TELEPHONE:
05/17/2004
Don Falkner
Ron McKenzie
Rates
[phone]
REQUEST:
In recent years the Internal Revenue Service ruled that electricity is inventoriable. i\s a result
i\vista identified and filed with the IRS past deductions (1987 to 2003) for costs previously
capitalized as fixed assets that can now be allocated to electricity inventory. Please describe in
detail the Company s implementation of this ruling including (but not limited to) the tax benefit
captured in 2003 - 2004, the tax benefit anticipated for future years, any tax reversals that would
increase future taxes above current levels, and the effect on utility operations and ratemaking.
Supplement to Production Request No. 218
In addition to the questions asked in the original request, please include in your response:
I. The effect of the accounting change on deferred income taxes.
2. The effect of any pro forma tax benefit on deferred income taxes.
3. The calculation of the reduction in deferred income taxes by a pro forma tax benefit
adjustment.
RESPONSE:
i\ vista Corp. employed tax consultants from Deloitte and Touche (D&T) to determine the
amount of tax benefit that would be available from implementing the accounting change. D&T
analyzed operations over the last 5 years and used the data to project annual overheads eligible
for reclassification going back to 1987.
The final determination by D&T was that overheads, net of previously claimed depreciation, in
the amount $116 225 218 should be reclassified as inventoriable, and hence deductible. The
2002 Federal Income Tax return, filed September 15 2003, included a deduction for the above
amount. Because i\vista Corp was in a carry forward position as a result of prior net operating
losses; none of the resulting tax benefit of$40 678 826 was utilized until 2003. The bulk of the
benefit will be realized during 2004.
The $40 678 826 tax benefit was recorded in December 2003 by debiting account 236 (taxes
payable) and crediting a group of 190 and 282 (deferred income tax) accounts. The effect of this
treatment is to create a rate base reduction beginning in the period when the tax benefits are first
utilized.
i\ttached are separate electric and gas adjustments showing the rate base reductions resulting
from pro forma tax benefit adjustments related to the tax accounting change for overheads at the
end of2003.
AVISTA UTILITIES
ELECTRIC ADJUSTMENT SUMMARY
TWELVE MONTHS ENDED DECEMBER 31, 2002
(OOO'S OF DOLLARS)
Line
No.DESCRIPTION
REVENUES
Total General Business
Interdepartmental Sales
Sales For Resale
Total Sales of Electricity
Other Revenue
Total Electric Revenue
EXPENSES
production and Transmission
Operating Expenses
Purchased Power
Depreciation and Amortization
Taxes
Total Production & Transmiss~on
Distribution
Operating Expenses
Depree ia tion
Taxes
Total Distribution
Customer Accounting
Customer Service & Information
Marketing
Administrative & General
Operating Expenses
Depreciation
Taxes
Total Admin. & General
Total Electric Expenses
Operating Income before FIT
Federal Income Taxes
Current Accrual (at 35%)
Deferred Income Taxes
Amortized ITC
SETTLEMENT EXCHANGE POWER
NET OPERATING INCOME
RATE BASE
PLANT IN SERVICE
Intangible
production
Transm~ ss ion
Distribution
General
Total Plant in Service
ACCUMULATED DEPRECIATION
ACCUM. PROVISION FOR AMORTIZATION
Total Accum. Depreciation & Amort.
GAIN ON SALE OF BUILDING
DEFERRED TAXES
TOTAL RATE BASE
IDAHO
DFIT - OVERHEADS
ELECTRIC
System Washington Idaho
(9,966)
($9,966)($9.966)
(9,966)
AVISTA UTILITIES
Accumulated Deferred Taxes Related to Overheads
Electric
Balance at December 31. 2003
Alloc
Basis
Electric
System Washinqton Idaho
Distribution ($17 045 977)($10 665,497)($6 380,480)
Hydro 381,480)873 813)507 667)
Kettle Falls (276,112)(181 102)(95,010)
Kettle Falls CT (550,810)(361 276)(189 534)
Other Production (247 318)(162 216)(85 102)
Rathdrum 126,676)(738 987)(387 689)
Transmission 836 293)516,225)320 068)
Total ($27,464 666)($17,499 116)($9 965 550)
Allocation Notes:
Production/Transmission 100.000%65.590%34.410%Net electric distribution plant - AMA 100.000%62.569%37.431 %
DMF file: OverheadsDFIT Bk. xIsSheet: Elec
AVISTA UTILITIES
Accumulated Deferred Taxes Related to Overheads
Balance at December 31. 2003
Source: Acufile run
Total
System Electric Gas WPNG
California ($496,222)($496 222)
Distribution (17,045,977)($17 045 977)
Gas - Distribution 222 196)($8 222,196)
Hydro 381,480)381,480)
Kettle Falls (276 112)(276 112)
Kettle Falls CT (550,810)(550,810)
Oregon 886 386)886 386)
Other Production (247 318)(247 318)
Rathdrum 126.676)126 676)
Transmission 836,293)(3,836,293)
Total ($41 069,470)($27,464 666)($8 222 196)($5,382 608)
DMF file: OverheadsDFIT Bk. xIs
Sheet: SYS
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TWELVE
AVISTA UTILITIES
GAS ADJUSTMENT SUMMARY
MONTHS ENDED DECEMBER 31, 2002
(000 I S OF DOLLARS)
Line
No.Description
REVENUE S
Total General Business
Total Transportation
Other Revenues
Total Gas Revenues
EXPENSES
Exploration & Development
production
Ci ty Gate Purchases
Purchased Gas Expense
Net Nat. Gas Storage Trans
Total Production
Underground Storage
Operating Expenses
Depreciation
Taxes
Total Underground Storage
Distribution
Operating Expenses
Depreciation
Taxes
Total Distribution
Customer Accounting
Customer Service & Information
Sales
Administrative and General
Operating Expenses
Depreciation
Taxes
Total Admin. & General
Total Gas Expense
Operating Income before FIT
Federal Income Taxes
Current Accrual (at 35%)
Amort ITC
Deferred FIT
NET OPERATING INCOME
RATE BASE
PLANT IN SERVICE
Underground Storage
Distribution Plant
General Plant
Total Plant in Serv~ce
ACCUMULATED DEPRECIATION
Underground Storage
Distribution Plant
General Plant
Total Accum. Depreciation
DEFERRED TAXES
GAS INVENTORY
GAIN ON SALE OF BUILDING
TOTAL RATE BASE
IDAHO
DFIT - OVERHEADS
GAS
System Washington
(2,639)
($2,639)($2,639)
Idaho
(2,639)
AVISTA UTILITIES
Accumulated Deferred Taxes Related to Overheads
Gas
Balance at December 31, 2003
Alloc Gas
Basis stem Washin ton Idaho
Gas - Distribution NDP 222 196 $5,583,036 639,160
Total ($8 222 196)($5 583 036)($2 639 160)
Allocation Notes:
Net distribution plant - AMA
Gross
AID
Net
Percent
NDP
272 912 059
242 578
190,669,481
100.000%
185 314 508
55,845,482
129,469,026
67.902%
597 551 (1)
(26 397 096)(1)
61 ,200,455
32.098%
(1) Source is Gas Utility Plant (G-PL T-12A) from Results of Operations
DMF file: OverheadsDFIT Bk.xls
Sheet Gas
AVISTA UTILITIES
Accumulated Deferred Taxes Related to Overheads
Balance at December 31. 2003
Source: Acufile run
Total
Svstem Electric Gas WPNG
California ($496 222)($496,222)
Distribution (17 045 977)($17 045 977)
Gas - Distribution 222 196)($8 222 196)
Hydro 381,480)381,480)
Kettle Falls (276 112)(276 112)
Kettle Falls CT (550 810)(550 810)
Oregon 886,386)886,386)
Other Production (247 318)(247 318)
Rathdrum 126,676)126,676)
Transmission 836 293)836,293)
Total ($41 069,470)($27,464 666)($8,222 1"96)($5 382 608)
DMF file: OverheadsDFIT Bk.xls
Sheet: SYS
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