20250708Direct Andrews and Miller.pdf

11
RECEIVED
Avista Corp. July 08, 2025
1411 East Mission P.O. Box 3727 IDAHO PUBLIC
Spokane, Washington 99220-0500 UTILITIES COMMISSION
Telephone [phone]
Toll Free 800-727-9170
July 8, 2025
Commission Secretary
11331 W. Chinden Blvd
Building 8, Suite 201-A
Boise, ID 83714
RE: Case Nos. AVU-E-25-01 & AVU-G-25-01 — Testimony in Support of Stipulation and
Settlement
Dear Commission Secretary:
Enclosed for electronic filing with the Commission in the above-referenced dockets are copies of the
Company's direct Testimony in Support of Stipulation and Settlement of witnesses Ms. Andrews and
Mr. Miller. Please direct any questions related to this filing to Liz Andrews at 509-495-8601 or
liz.andrewsn avi stacorp.com.
Sincerely,
)1�- �
CL
Patrick Ehrbar
Director of Regulatory Affairs

CERTIFICATE OF SERVICE
I HEREBY CERTIFY that I have this 8th day of July, 2025, served the Testimony in support of
the Stipulation and Settlement entered into by all parties to the proceeding in Case Nos. AVU-E-
25-01 and AVU-G-25-01, upon the following parties from the last general rate filing, through
electronic mail:
Commission Staff: Clearwater Paper:
Adam Triplett Peter J. Richardson
Deputy Attorney General Richardson Adams
Idaho Public Utilities Commission 515 N. 27m Street
11331 W. Chinden Blvd PO Box 7218
Building 8, Suite 201-A Boise, ID 83702
Boise, ID 83714 Peter&richardsonadams.com
Adam.triplettgpuc.idaho. og_v
Dr. Don Reading
280 S. Silverwood Way
Eagle, ID 83616
Dreading(kmindsprin_g com
Carol.hau�(cT clearwaterpap er.com
Jamie.mcdonaldkclearwaterpaper.com
Idaho Forest Group: Walmart:
Andrew Moratzka Norman M. Semanko
Eden A. Faure Parsons Behle & Latimer
Stoel Rives LLP 800 W. Main St., Suite 1300
33 South Sixth Street, Suite 4200 Boise, ID 83702
Minneapolis, MN 55405 Nsemankogparsonsbehle.com
Andrew.moratzka(k stoel.com
Eden.fauregstoel.com Justina A. Caviglia
Patrick Ngalamulume
Jennifer S. Palmer Parsons Behle & Latimer
Stoel Rives LLP 50 East Liberty Street, Suite 750
101 S. Capitol Blvd., Suite 1900 Reno,NV 89502
Boise, ID 83702 Jcavigliakparsonsbehle.com
Jenny.palmer(a)stoel.com Pngalamulumekparsonsbehle.com
Jaime McGovern
Director, Energy Services
Walmart Inc.
2608 Southeast"J" Street
Bentonville, AR 72716
Jaime.mc og vem(kwalmart.com
/s/Athena Allen
Athena Allen
Regulatory Affairs Analyst

ANNI GLOGOVAC
COUNSEL FOR REGULATORY AFFAIRS
AVISTA CORPORATION
P.O. BOX 3727
1411 EAST MISSION AVENUE
SPOKANE, WASHINGTON 99220-3727
TELEPHONE: [phone]
[e-mail]
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE APPLICATION ) CASE NO. AVU-E-25-01
OF AVISTA CORPORATION FOR THE ) CASE NO. AVU-G-25-01
AUTHORITY TO INCREASE ITS RATES )
AND CHARGES FOR ELECTRIC AND ) DIRECT TESTIMONY OF
NATURAL GAS SERVICE TO ELECTRIC ) ELIZABETH M. ANDREWS
AND NATURAL GAS CUSTOMERS IN THE ) IN SUPPORT OF
STATE OF IDAHO ) STIPULATION
1
FOR AVISTA CORPORATION
(ELECTRIC AND NATURAL GAS)

1 I. INTRODUCTION
2 Q. Please state your name, employer, and business address.
3 A. My name is Elizabeth M. Andrews and I am employed by Avista Corporation
4 ("Company" or "Avista") as Senior Manager of Revenue Requirements in the Regulatory
5 Affairs Department, at 1411 East Mission Avenue, Spokane, Washington.
6 Q. Have you previously provided direct testimony in this Case?
7 A. Yes. I filed direct testimony and exhibits in this proceeding supporting various
8 adjustments I sponsored, that were included by Company Witness Ms. Schultz within her
9 overall electric and natural gas revenue requirement studies prepared for the Company's
10 proposed Two-Year Rate Plan effective September 1, 2025, through August 31, 2027. The
11 adjustments I supported included the following: 1) Pro Forma Wildfire Plan Expenses, 2) Pro
12 Forma Insurance Expense, 3) Pro Forma Miscellaneous Operations and Maintenance (O&M)
13 Expense, 4) Pro Forma Colstrip and Coyote Springs (CS2)Maintenance, 5)Pro Forma Colstrip
14 Regulatory Asset Additions and Amortization, and finally, 6) Pro Forma Colstrip Assets and
15 Depreciation Removal(effective 01/01/2026).i
16 In addition to the various accounting adjustments I sponsored, I discussed the
17 Company's requests to update its Wildfire and Insurance Expense Balancing Account baselines
18 to match pro formed wildfire plan and insurance expenses.
19 Q. What is the scope of this testimony?
20 A. The purpose of this testimony is to describe and support the electric and natural
1 Avista currently owns a 15%share of two coal-fired generation facilities located in Colstrip,Montana,known as
Colstrip Units 3 and 4,which have a combined capacity of about 1,480 MW, and were placed in service in 1984
and 1986. Included within the discussion of adjustments I sponsor related to Colstrip,I discussed the accounting
methodology for recovery of Colstrip costs and balances as of December 31,2025,the removal of certain Colstrip
costs effective January 1, 2026 (effective with the transfer of plant ownership of Colstrip Units 3 and 4 to
NorthWestern Energy at the end of 2025,as discussed by Company witness Mr.Kinney,and finally,the accounting
for the on-going Colstrip Regulatory amortizations.
Andrews, Di 1
Avista Corporation

I gas revenue requirement elements of the Stipulation and Settlement("Stipulation")filed on June
2 9, 2025, as well as explain why the Stipulation is in the public interest. The parties to the
3 Stipulation include the Staff of the Idaho Public Utilities Commission ("Staff'), Clearwater
4 Paper Corporation ("Clearwater"), Idaho Forest Group, LLC ("Idaho Forest"), and Walmart
5 Inc. These entities are collectively referred to as the "Settling Parties" and singularly as a
6 "Settling Party."
7 Company witness Mr. Miller discusses the non-revenue related elements of the
8 Stipulation agreed to by the Settling Parties, such as electric and natural gas Rate Spread and
9 Rate Design, as well as Fixed Cost Adjustment (FCA) authorized levels, and certain other
10 settlement components.
11 Q. Are you sponsoring any exhibits?
12 A. Yes. I am sponsoring Exhibit No. 17 which is a copy of the Stipulation and
13 appendices filed with the Commission on June 9, 2025.
14
15 IL SUMMARY OF ORIGINAL FILING
16 Q. Please describe the Company's general rate case request, as filed.
17 A. On January 31, 2025, Avista filed an Application with the Commission for
18 authority to increase revenue effective September 1, 2025, and September 1, 2026, for electric
19 and natural gas service in Idaho.The Company proposed a Two-Year Rate Plan with an increase
20 in electric base revenue of$43.0 million or 14.0%for Rate Year 1 (hereafter"RY1"), and$17.7
21 million or 5.0% for Rate Year 2 (hereafter "RY2"). With regard to natural gas, the Company
22 proposed an increase in base revenue of$8.8 million or 17.7% for RY1, and $1.0 million or
23 1.7% for RY2.
Andrews, Di 2
Avista Corporation

I Q. What are the primary factors driving the Company's need for an electric
2 and natural gas change in rates?
3 A. The primary factor driving the Company's electric and natural gas revenue
4 requirements in RY1 and RY2 is an increase in net plant investment (including return on
5 investment, depreciation and taxes, and offset by the tax benefit of interest) from that currently
6 authorized.2 For RY1 and RY2, electric net power supply expenses also contribute significantly
7 to the incremental electric revenue requirement. Other changes impacting the Company's
8 revenue requirement requests relate to proposed regulatory amortizations,incremental increases
9 in wildfire expense and insurance expense baselines, as well as increases in distribution,
10 operation and maintenance (O&M), and administrative and general (A&G) expenses for both
11 electric and natural gas operations, compared to current authorized levels.
12 Electric specific capital investments occurring prior to the rate effective period(through
13 August 31, 2025) include, among other things, upgrades to certain major generating facilities,
14 such as the Cabinet Gorge Station Service, Nine Mile Unit 3 Mechanical Overhaul and
15 Generation Operational Sustainment, in addition to other replacements and upgrades as
16 discussed by Company witness Mr. Howell. Additional electric specific capital investments
17 include investments to improve asset condition and performance and capacity on Distribution,
18 Substation and Transmission assets as discussed by Company witness Mr. DiLuciano.
19 For natural gas, specific capital investments through August 31, 2025, prior to the rate
20 effective period, include among other things, capital investments related to the Gas Facilities
2 The specific July 2024 through August 2027 pro forma capital investments undertaken by the Company to expand
and replace its generation, transmission, distribution and general facilities are discussed further by Company
witnesses Mr. Howell regarding generation/production and environmental investment, Mr. Kinney regarding the
Company's investment in Colstrip Units 3 and 4,Mr.DiLuciano regarding transmission, distribution and general
investment,Mr. Manuel regarding the costs associated with Avista's IS/IT projects,and Mr. Malensky regarding
Wildfire Plan investments.
Andrews, Di 3
Avista Corporation

I Replacement (Aldyl A) and Jackson Prairie Joint Project, as well as Gas Replacement Street
2 and Highway Program, discussed by Mr. DiLuciano.
3 For power supply, on direct, as discussed in Company witness Mr. Kalich's testimony,
4 the level of Idaho's share of power supply expense effective with RY1 has increased by
5 approximately$12.2 million($29.3 million on a system basis)from the level currently included
6 in base rates. For RY2, Idaho's share of net power supply expense has increased by
7 approximately $9.5 million($26.8 million on a system basis) above RY1 levels.
8 Offsetting the increased power supply expense, as discussed by Company witness Mr.
9 Dillon within his direct testimony, is the level of Idaho's share of pro forma transmission
10 revenues which increased$5.2 million($14.0 million on a system basis)from the level currently
11 included in base rates, and increased an incremental $528,000 ($1.5 million on a system basis)
12 in RY2, versus that included in RY1.3
13 Therefore, the net change in power supply expense and transmission revenues on direct
14 resulted in an overall net increase in electric costs of approximately $7.2 million in RY1 and
15 $9.0 million in RY2.
16
17 III. SUMMARY OF SETTLEMENT STIPULATION
18 Q. Would you briefly summarize the Stipulation?
19 A. Yes. Under the terms of the Stipulation, Avista would implement revised tariff
20 schedules designed to increase annual base electric revenues by$19,487,000, or 6.3%,effective
21 September 1, 2025, and increase base revenues by $14,691,000, or 4.5%, effective September
22 1, 2026. For natural gas, the Settling Parties agree that Avista would increase natural gas base
s See Mr.Dillon's Direct Testimony,Footnotes 2 and 3.
Andrews, Di 4
Avista Corporation

I revenue by $4,580,000, or 9.2%, effective September 1, 2025, and decrease base revenues
2 $209,000, or 0.4%, effective September 1, 2026. These rate changes are designed to provide
3 retail revenues which will allow the Company the opportunity to earn the rate of return agreed
4 to in the Stipulation for RY1 and RY2.
5 As noted by Mr. Miller, effective September 1, 2025, an electric residential customer
6 using an average of 939 kilowatt hours per month would see a $6.95, or 6.7%, increase per
7 month for a revised monthly bill of$111.25. Effective September 1,2026, an electric residential
8 customer would see a$5.22, or 4.7%, increase per month for a revised monthly bill of$116.47.
9 For natural gas, effective September 1,2025, a natural gas residential customer using an
10 average of 66 therms per month would see a $4.11, or 6.8%, increase per month for a revised
11 monthly bill of$64.74. Effective September 1, 2026, a natural gas residential customer would
12 see no change in their monthly bill.
13 In determining these revenue changes, the Settling Parties have agreed to various
14 adjustments to the Company's original filing, which are summarized in the Stipulation, and
15 described further in the testimony below.
16 For cost of capital,the Stipulation calls for an overall rate of return of 7.28%,determined
17 using a capital structure consisting of 50% common stock equity and 50% debt, an authorized
18 return on equity of 9.6%, and cost of debt of 4.95%.
19 With regard to the Two-Year Rate Plan, during the September 1, 2025 — August 31,
20 2027 rate period covered by this Stipulation, Avista will not file another electric or natural gas
21 general rate case to increase base rates in which rates would go into effect prior to September
22 1, 2027. This does not apply to tariff filings authorized by or contemplated by the terms of the
23 PCA,FCA,Purchased Gas Cost Adjustment(PGA),or other miscellaneous annual/regular tariff
Andrews, Di 5
Avista Corporation

I filings.
2 Lastly, the Settling Parties agreed to certain rate spread and rate design changes as
3 described by Mr. Miller in his supporting testimony, as well as other Stipulation components
4 related to the FCA, and certain other settlement components.
5 Q. Please explain how the Settling Parties arrived at the Stipulation in this
6 proceeding.
7 A. The Stipulation is the product of settlement discussions held on May 22, 2025.
8 It represents a compromise among differing points of view, with concessions made by the
9 Settling Parties, to reach a balancing of interests. The Stipulation represents a fair, just and
10 reasonable compromise of the issues and is in the public interest. In addition, the Stipulation is
11 the end result of extensive audit work conducted through the discovery process4, including
12 various onsite and virtual conference discussions with Commission Staff, and hard bargaining
13 by the Settling Parties in this proceeding.
14 Q. Why is the Stipulation in the public interest?
15 A. The Stipulation is in the "public interest" for several reasons. The Stipulation
16 was the product of the give-and-take of negotiation that produced an "end result" that is just
17 and reasonable. In addition, it is supported by the evidence, demonstrating the need for rate
18 adjustments to provide recovery of necessary expenditures and investment, the costs of which
19 are not offset by a growth in sales margins. The Stipulation has broad-based support from a
20 variety of constituencies, including Clearwater, Idaho Forest, Walmart and Staff.
21
22 IV. ELECTRIC REVENUE REQUIREMENT
23 ELEMENTS OF THE STIPULATION
4 Avista responded to over 350 production requests(including sub-parts)from the Parties.
Andrews, Di 6
Avista Corporation

I Q. Please explain the derivation of the Electric Revenue Requirement outlined
2 in the Stipulation.
3 A. The Settling Parties agreed that electric revenue increases are necessary,
4 effective September 1, 2025 and September 1, 2026. While Avista's filing requested electric
5 revenue requirement increases of$43.0 million and$17.7 million, effective September 1, 2025
6 and September 1, 2026, respectively, the Settling Parties agreed-upon adjustments, including
7 the agreed-upon rate of return, result in recommended electric revenue increases of
8 approximately $19.5 million and $14.7 million, respectively. These increases are designed to
9 provide sufficient retail revenues for the Two-Year Rate Plan, effective September 1, 2025
10 through August 31, 2027, which would provide the Company with the opportunity to earn the
11 return agreed to in the Stipulation.
12 Q. Please explain the Settling Parties' agreement with regard to an Authorized
13 Rate of Return,including the Return on Equity.
14 A. As stated above, the Settling Parties have agreed to an overall rate of return of
15 7.28%, based on a return on equity of 9.6%, an equity component at 50% and cost of debt of
16 4.95%. By comparison, the Company's original filing requested an overall rate of return of
17 7.68%, based on a return on equity of 10.4%, an equity component of 50% and cost of debt of
18 4.95%.
19 Q. Please provide an overview of the electric revenue requirement adjustments
20 agreed to by the Settling Parties for rates effective September 1, 2025 [Rate Year 11.
21 A. The Settling Parties agreed to an electric revenue requirement effective
22 September 1, 2025, that reflects the adjustments shown below in Table No. 1:5
5 Item m. of Table No. 1 was corrected to state "add Schedule 23 DC Fast Charger Revenues" from the one as
shown in the Stipulation.
Andrews, Di 7
Avista Corporation

I Table No. 1: Electric Revenue Requirement—RY1
2 SUMMARY TABLE OF ADJUSTMENTS TO ELECTRIC REVENUE REQUIREMENT
EFFECTIVE SEPTEMBER 1,2025
3 (000s of Dollars)
Revenue
Re quire me nt Rate B as e
4 Amount as Filed: $ 42,951 $ 1,202,677
Adjustments:
5 a.) Cost of Capital $ (6,116)
b.) Remove 2026 AMA Capital Additions $ (4,715) $ (34,156)
6 c.) Remove 2026 Revenue and Expense Offsets $ 1,936
d.) Update 2024/2025 Capital Additions $ (357) $ (3,276)
7 e.) Revise wildfire Deferral Amortization $ (1,621)
f.) Revise Insurance Deferral Amortization $ (690)
g.) Remove 2026 Officer Labor Increases $ (19)
8 h.) Update Employee Incentive Expense $ (132)
i.) Remove Escalated Miscellaneous O&M Expense $ (3,399)
9 j.) Revise Colstrip Regulatory Amortization $ (364)
k.) Revise Net Power Supply Expense $ (4,611)
10 1.) Update Pro Forma Insurance Expense $ (950)
m.) Remove Property Taxes $ (1,973)
11 n.) Miscellaneous Adjustments:revise Board of Director expenses,add Schedule $ (453)
23 DC Fast Charger Revenues,revise injuries and damages,remove IS/IT
12 expense escalation,and reclassification of other administrative and general
expenses.
Adjusted Amounts Effective September 1,2025 $ 19,487 $ 1,165,245
13
14 As can be seen by a review of the individual line descriptions provided within the
15 summary table above, the adjustments accepted for settlement purposes cover a broad range of
16 revenue and cost categories, including the authorized rate of return. The individual adjustments
17 should not be viewed in isolation; rather, they should be viewed in total as part of the entire
18 Stipulation and are the result of hard bargaining and compromise.
19 Q. Would you please elaborate on the individual line items contained within
20 Table No. 1?
21 A. Yes. A description of the adjustments resulting in the electric revenue
22 requirement, effective September 1, 2025, follows.
23 Cost of Capital—(line a.) The overall revenue requirement reduction related to the cost
Andrews, Di 8
Avista Corporation

I of capital reduces the overall revenue requirement for electric by $6.116 million. The agreed-
2 upon cost of capital components are shown in the table below:
3 Capital Weighted
4 Component Structure Cost Cost
5 Total Debt 50.00% 4.95% 2.48%
Common Equity 50.00% 9.60% 4.80 o
6 Total 100.00% 7.28%
7 Remove 2026 Average-of-Monthly-Average (AMA) Cgpital Additions— (line b.) This
8 adjustment removes the Company's capital additions beyond August 31, 2025, included by the
9 Company for RY1, reflecting only plant investment prior to the September 1, 2025, effective
10 date. This adjustment decreases the overall revenue requirement by $4.715 million and reduces
11 net rate base by $34.156 million.
12 Remove 2026 Revenue and Expense Offsets — (line c.) This adjustment removes the
13 revenue and O&M expense offsets beyond August 31,2025,included by the Company for RY 1.
14 This adjustment increases the overall revenue requirement by $1.936 million.
15 Update 2024/2025 Capital Additions—(line d.) This adjustment reflects updated actual
16 and pro formed 2024 and 2025 capital additions through August 31, 2025. This adjustment
17 decreases the overall revenue requirement by $357,000 and reduces net rate base by $3.276
18 million.
19 Revise Wildfire Deferral Amortization — (line e.) This adjustment revises the
20 Company's proposed amortization of its Wildfire Expense Balancing Account deferral,
21 reflecting the deferred balance from October 1, 2022 through September 30, 2024 of $6.46
22 million, from a two (2) year amortization to a four (4) year amortization. This adjustment
23 reduces the overall revenue requirement by $1.621 million. See Wildfire Expense Balancing
Andrews, Di 9
Avista Corporation

I Account discussion at Section VI. "Other Settlement Components"below.
2 Revise Insurance Deferral Amortization — (line f.) This adjustment revises the
3 Company's proposed amortization of its electric Insurance Expense Balancing Account
4 deferral, reflecting the deferred balance from September 1, 2023 through September 30, 2024
5 of $2.75 million, from a two (2) year amortization to a four (4) year amortization. This
6 adjustment reduces the overall revenue requirement by $690,000. See Insurance Expense
7 Balancing Account discussion at Section VI. "Other Settlement Components"below.
8 Remove 2026 Officer Labor Increases — (line g.) This adjustment removes the 2026
9 incremental officer labor increase proposed by the Company. This adjustment decreases the
10 overall revenue requirement by $19,000.
11 Update Employee Incentives Expense — (line h.) This adjustment revises the six-year
12 average of Employee Incentive Expense to reflect payout years 2019 through 2024. This
13 adjustment decreases the overall revenue requirement by $132,000.
14 Remove Escalated Miscellaneous O&M Expenses — (line i.) This adjustment removes
15 the escalated O&M expense pro formed by the Company. This adjustment decreases the overall
16 revenue requirement by $3.399 million.
17 Revise Colstrip Re_ug latory Amortizations — (line j.) This adjustment revises the
18 Colstrip Regulatory Amortization expense to be included over the Two-Year Rate Plan,
19 delaying recovery, but otherwise the scheduled regulatory amortization is as filed by the
20 Company beginning September 1, 2027, and described below. This adjustment decreases the
21 overall revenue requirement by $364,000.
22 Revise Net Power Supply Expense— (line k.) This adjustment revises Idaho net power
23 supply expenses as discussed below, decreasing the Idaho electric overall revenue requirement
Andrews, Di 10
Avista Corporation

I by $4.611 million. See Power Cost Adjustment (PCA) discussion described in Section VI.
2 "Other Settlement Components"below.
3 • Net Power Supply Correction. The Settling Parties agree to reflect corrections to
4 net power supply expense, from that filed by the Company, reducing system net
5 power supply expense by $11.2 million, and Idaho allocated net power supply
6 expense by$4.0 million.
7 • Palouse Wind. The Settling Parties agree to remove the cost of the Palouse Wind
8 Power Purchase Agreement("PPA") and replace it with the optimized cost of the
9 Company's other resources to determine the Company's Net Power Supply
10 Expense both in base rates and in the Power Cost Adjustment(PCA)mechanism.?
11 This adjustment decreases system net power supply expense by $1.7 million and
12 Idaho's share by $605,000 in base rates and in actual cost in the PCA.
13 • Shaping Adjustment. The Settling Parties agree to include a monthly "shaping"
14 adjustment of net power supply expenses for the period September 1, 2025
15 through August 31, 2026, to better reflect and match recovery of costs, using the
16 monthly percentage of net power supply expense reflected in RY2 (September 1,
17 2026 through August 31, 2027). This "shaping" adjustment, reflected in
18 Appendix A of Exhibit 17, has no impact on annual system or Idaho share of net
19 expenses.
20
21 Update Pro Forma Insurance Expense (line 1.) This adjustment reflects updated pro
22 formed insurance expense from that as-filed by the Company. This adjustment decreases the
23 overall revenue requirement by $950,000. See Insurance Balancing Account discussion at
24 Section VI. "Other Settlement Components"below.
25 Remove Property Taxes — (line m.) This adjustment removes property tax expense
26 beginning January 1, 2026 from base rates, consistent with the new Idaho legislation change to
27 a per kWh/per therm tax which will be individually charged on customers' bills. This adjustment
28 decreases the overall revenue requirement by $1.973 million.
6 The Palouse Wind PPA is a 30-year contract that was executed in 2011 by the Company who purchases all of its
output (105 MW nameplate capacity) and environmental attributes. The project began commercial operation in
December 2012.
This will reflect removing the contract cost and generation of the Palouse Wind PPA and replace it with the
energy dispatched from other Company resources. In RY1, September 1, 2025 through August 31, 2026, when
calculating and recording the monthly PCA impact,Avista will reduce system net actual versus authorized power
supply expense by $1.7 million (approximately $142,000 monthly) prior to applying the 90%/10% sharing
allocation,to reflect this change within the PCA.This adjustment does not impact Rate Year 2.
Andrews, Di 11
Avista Corporation

I Miscellaneous Adjustments — (line n.) This adjustment reflects the net change in
2 operating expenses and certain revenue related to: 1) removing 50% of Board of Director
3 expenses and fees ($286,000); 2) adding Schedule 23 DC Fast Charger revenue ($23,000); 3)
4 removing certain injury and damage expense from the six-year average ($4,000); 4) removing
5 escalated Information Systems/Information Technology(IS/IT)expenses($71,000); 5)removal
6 of expiring land lease ($4,000) and 6) removal of miscellaneous A&G expenses related to
7 certain credit card transactions, annual report expenses and other miscellaneous charges
8 ($65,000). The net effect of this adjustment decreases the overall revenue requirement by
9 $453,000.
10 Q. Please summarize the impact of these adjustments on the electric revenue
11 requirement agreed to by the Settling Parties effective September 1, 2025 [Rate Year 11.
12 A. The adjustments discussed above, and agreed to by the Settling Parties, reduce
13 Avista's proposed RYI electric revenue requirement increase of $43.0 million to an electric
14 revenue requirement increase of$19.5 million, resulting in an overall 6.3% electric base rate
15 increase, effective September 1, 2025. The net rate base agreed to by the Settling Parties for
16 electric services is $1.165 billion. Mr. Miller discusses the overall net bill impact to customers
17 in RYI of 6.6% effective September 1, 2025.
18 Q. Please provide an overview of the incremental electric revenue requirement
19 components agreed to by the Settling Parties effective September 1, 2026 [Rate Year 21.
20 A. The Settling Parties agreed to an incremental electric revenue increase effective
21 September 1,2026(RY2),that reflects the adjustments shown below in the excerpted table from
22 the Stipulation:
Andrews, Di 12
Avista Corporation

I Table No. 2: Electric Revenue Requirement—RY2
2
EFFECTIVE SEPTEMBER 1,2026
3 (000s of Dollars)
Revenue
Re quire me nt Rate B as e
4 Rate Base Amount Effective September 1,2025 $ 1,165,245
Incremental Revenue Adjustment to September 1,2025 Rate Change
5 (see Table No. 1):
a.) Add Incremental Capital and Expenses:
6 i. Net Power Supply Expense and Transmission Revenue $ 13,567
ii AMA 2026 Capital Additions $ 4,715 $ 34,156
7 iii. Miscellaneous Capital Adjustments $ (143) $ (1,720)
iv. Property Tax Expense $ (784)
V. 2026 Union/Non-Union Labor Increase $ 1,281
8 vi. Employee Benefits $ 320
vii 2026 Growth Revenue and O&M Offsets $ (1,921)
9 viii Revise Colstrip/CS2 Major Maintenance Expense $ (1,511)
ix. Remove Colstrip Depreciation Expense $ (986)
10 X. Revise Excess Deferred Income Tax(EDIT) $ 153
September 1,2026 Incremental Revenue Adjustment and Rate Base
11 Amount(above September 1,2025 Rate Change -see Table No.1) $ 14,691 $ 1,197,681
12 Q. Please elaborate on the individual line items contained within Table No. 2.
13 A. A description of the adjustments resulting in the electric revenue requirement,
14 effective September 1, 2026 for RY2, follows.
15 Add Incremental 2025/2026 Related Capital and Expenses to RY2
16 (incremental above RYI) — (line a.) This item includes certain incremental increases in 2025
17 and 2026 related to capital and expenses in RY2, above RYI levels, as follows:
18 • Net Power Supply Expense and Transmission Revenue — (line i.) Includes power
19 supply expense and transmission revenues (net power supply expense) above the
20 RYI level,to reflect RY2 net power supply expenses,as-filed by the Company,after
21 including the adjustment for the Palouse Wind PPA. This adjustment increases
22 overall Idaho electric revenue requirement by $13.567 million in RY2, above RYI
23 levels. See Power Cost Adjustment (PCA) discussion described in Section VI.
Andrews, Di 13
Avista Corporation

I "Other Settlement Components"below.
2 • AMA 2026 Capital Additions—(line ii.) Includes capital additions from September
3 1, 2025 through August 31, 2026 on an AMA basis, prior to the RY2 September 1,
4 2026, effective date. This adjustment increases the overall revenue requirement by
5 $4.715 million and increases net rate base by $34.156 million.
6 • Miscellaneous Capital Adjustments — (line iii.) This adjustment removes a level of
7 capital investment from the level filed by the Company, to reflect the net impact of
8 projects that will not be completed as pro formed September 1,2025 through August
9 31, 2026. This adjustment decreases the overall revenue requirement by $143,000
10 and reduces net rate base by $1.72 million.
I • Property Tax Expense — (line iv.) Removes the remaining property tax expense
12 included in RY1 (balance associated with September 1, 2025 —December 31, 2025
13 expense). This adjustment decreases the overall revenue requirement by $784,000.
14 • 2026 Union/Non-Union Labor Increases—(line v.)Includes the 2026 union and non-
15 union labor increases. This adjustment increases the overall revenue requirement by
16 $1.281 million.
17 • Employee Benefits—(line vi.)Includes 2026 incremental employee benefit expenses
18 above RYI levels. This adjustment increases the overall revenue requirement by
19 $320,000.
20 • 2026 Growth Revenue and O&M Offsets—(line vii.) Reflects the 2026 incremental
21 revenue associated with 2026 growth capital and reduction in O&M expense,
22 associated with the inclusion of 2026 capital investment. This adjustment decreases
23 the overall revenue requirement by $1.921 million.
Andrews, Di 14
Avista Corporation

I • Revise Colstrip/CS2 Major Maintenance Expense — (line viii.) Revises the
2 Colstrip/CS2 Major Maintenance expense level included in RY1 to reflect the
3 revised expense for RY2. This adjustment reflects the revised amortization of
4 Colstrip and CS2 deferred expenses and the revised, CS2 only, system maintenance
5 expense baseline of $12,350,250 effective January 1, 2027.8 This adjustment
6 decreases the overall revenue requirement by $1.511 million.
7 • Remove Colstrip Depreciation Expense — (line ix.) Reflects the removal of the
8 remaining Colstrip depreciation expense included in RY1, to reflect the transfer of
9 the Company's ownership of Colstrip Units 3 and 4 to NorthWestern Energy
10 effective January 1, 2026, as discussed by the Company in its direct case. This
11 adjustment decreases the overall revenue requirement by $986,000.
12 • Revise Excess Deferred Income Tax (EDIT) — (line x.) Adjusts the electric EDIT
13 amortization expense to reflect the level of EDIT amortization expense expected in
14 the twelve-month period September 1, 2026 through August 31, 2027, incremental
15 to RY1 levels. This adjustment increases the overall revenue requirement by
16 $153,000.
17 Q. Please summarize the impact of these adjustments on the electric revenue
18 requirement agreed to by the Settling Parties effective September 1, 2026 [Rate Year 21.
19 A. The adjustments discussed above, and agreed to by the Settling Parties, reduces
20 Avista's RY2 electric revenue requirement of$17.7 million to$14.7 million,resulting in a 4.5%
a The Settling Parties agree to revise the system CS2/Colstrip Maintenance Expense Baseline from $20,352,021
established in AVU-E-15-07, to a system CS2 Maintenance Expense Baseline, only, of$12,350,250 effective
January 1,2027.The existing mechanism,prior to September 1,2027,will continue to track the changes in Colstrip
maintenance expense that will occur through December 31,2025,after which will expire,and inclusion of the CS2
major overhaul occurring in 2026.
Andrews, Di 15
Avista Corporation

I electric base rate increase, effective September 1, 2026. The net rate base agreed to by the
2 Settling Parties for electric is $1.198 billion. Mr. Miller discusses the overall net bill impact of
3 4.6%to customers in RY2 effective September 1, 2026.
4
5 V. NATURAL GAS REVENUE REQUIREMENT ELEMENTS
6 OF THE STIPULATION
7
8 Q. Please explain the derivation of the Natural Gas Revenue Requirement
9 outlined in the Stipulation.
10 A. The Settling Parties agreed that natural gas revenue changes are necessary,
11 effective September 1,2025 and September 1,2026.While Avista's filing requested natural gas
12 revenue requirement increases of$8.8 million and $983,000, effective September 1, 2025 and
13 September 1, 2026, respectively, the Settling Parties agreed-upon adjustments, including the
14 agreed-upon rate of return, result in a natural gas revenue increase of $4,580,000 effective
15 September 1,2025,and a natural gas revenue decrease of$209,000 effective September 1,2026.
16 These changes in revenue are designed to provide sufficient retail revenues for the Two-Year
17 Rate Plan, effective September 1, 2025 through August 31, 2027, which would provide the
18 Company with the opportunity to earn the return agreed to in the Stipulation.
19 Q. Is the Authorized Rate of Return,including the Return on Equity the same
20 as that explained above for electric?
21 A. Yes. Consistent with that for electric, the Settling Parties have agreed to an
22 overall rate of return of 7.28%, based on a return on equity of 9.6%, an equity component at
23 50% and cost of debt of 4.95%.
24 Q. Please provide an overview of the natural gas revenue requirement
25 adjustments agreed to by the Settling Parties for rates effective September 1, 2025 [Rate
Andrews, Di 16
Avista Corporation

I Year 1].
2 A. The Settling Parties agreed to a natural gas revenue requirement effective
3 September 1, 2025, that reflects the adjustments shown below in the excerpted table from the
4 Stipulation:
5 Table No. 3: Natural Gas Revenue Requirement—RY1
6 SUMMARY TABLE OF ADJUSTMENTS TO NATURAL GAS REVENUE REQUIREMENT
EFFECTIVE SEPTEMBER 1,2025
,7 (000s of Dollars)
Revenue
Requirement Rate Base
8 Amount as Filed: $ 8,803 $ 236,902
Adjustments:
a.) Cost of Capital $ (1,205)
b.) Remove 2026 AMA Capital Additions $ (460) $ (4,178)
c.) Remove 2026 Revenue and Expense Offsets $ 754
10 d.) Update 2024/2025 Capital Additions $ (4) $ (29)
e.) Revise Williams Pipeline Outage Deferral Amortization $ (1,453)
11 £) Remove 2026 Officer Labor Increases $ (5)
g.) Update Employee Incentive Expense $ (35)
h.) Remove Escalated Miscellaneous O&M Expense $ (708)
12 i.) Update Pro Forma Insurance Expense $ (155)
j.) Remove Property Taxes $ (836)
13 k.) Miscellaneous Adjustments:revise Board of Director expenses,revise injuries $ (117)
and damages,remove IS/IT expense escalation,and reclassification of other
administrative and general expenses.
14 Adjusted Amounts Effective September 1,2025 $ 4,580 $ 232,695
15 Q. Would you please elaborate on the individual line items contained within
16 Table No. 3?
17 A. Yes. A description of the adjustments resulting in the natural gas revenue
18 requirement, effective September 1, 2025, follows.
19 Cost of Capital—(line a.)As previously described(see above). This adjustment reduces
20 the overall revenue requirement by $1.205 million.
21 Remove 2026 AMA Capital Additions — (line b.) This adjustment removes the
22 Company's capital additions beyond August 31, 2025, included by the Company for RY1,
23 reflecting only plant investment prior to the September 1, 2025, effective date. This adjustment
Andrews, Di 17
Avista Corporation

I decreases the overall revenue requirement by $460,000 and reduces net rate base by $4.178
2 million.
3 Remove 2026 Revenue and Expense Offsets — (line c.) This adjustment removes the
4 revenue and O&M expense offsets beyond August 31,2025,included by the Company for RYL
5 This adjustment increases the overall revenue requirement by $754,000.
6 Update 2024/2025 Capital Additions—(line d.) This adjustment reflects updated actual
7 and pro formed 2024 and 2025 capital additions through August 31, 2025. This adjustment
8 decreases overall revenue requirement by $4,000 and reduces net rate base by $29,000.
9 Revise Williams Pipeline Outage Deferral Amortization — (line e.) This adjustment
10 revises the Company's proposed amortization of its Williams Pipeline Outage deferral,
11 reflecting the deferred balance including interest of $6.4 million, from a two (2) year
12 amortization to a four (4) year amortization. This adjustment reduces the overall revenue
13 requirement by $1.453 million.
14 Remove 2026 Officer Labor Increase — (line f.) This adjustment removes the 2026
15 incremental officer labor increase proposed by the Company. This adjustment decreases the
16 overall revenue requirement by $5,000.
17 Update Employee Incentive Expense — (line g.) This adjustment revises the six-year
18 average of Employee Incentive Expense to reflect payout years 2019 through 2024. This
19 adjustment decreases the overall revenue requirement by $35,000.
20 Remove Escalated Miscellaneous O&M Expenses — (line h.) This adjustment removes
21 the escalated O&M expense pro formed by the Company. This adjustment decreases the overall
22 revenue requirement by $708,000.
23 Update Pro Forma Insurance Expense — (line i.) This adjustment reflects updated pro
Andrews, Di 18
Avista Corporation

I formed insurance expense from that filed by the Company. This adjustment decreases the
2 overall revenue requirement by $155,000. See Insurance Balancing Account discussion at
3 Section VI. "Other Settlement Components"below.
4 Remove Property Taxes — (line j.) This adjustment removes property tax expense
5 beginning January 1, 2026 from base rates, consistent with the new Idaho legislation change to
6 a per kWh/per therm tax which will be individually charged on customers'bills.This adjustment
7 decreases the overall revenue requirement by $836,000.
8 Miscellaneous Adjustments — (line k.) This adjustment reflects the net change in
9 operating expenses related to: 1) removing 50% of Board of Director expenses and fees
10 ($76,000); 2) removing certain injury and damage expense from the six-year average ($7,000);
11 3)removing escalated IS/IT expenses ($15,000);4)removal of expiring land lease($1,000) and
12 5) removal of miscellaneous A&G expenses related to certain credit card transactions, annual
13 report expenses and other miscellaneous charges ($18,000). The net effect of this adjustment
14 decreases the overall revenue requirement by $117,000.
15 Q. Please summarize the impact of these adjustments on the natural gas
16 revenue requirement agreed to by the Settling Parties effective September 1, 2025 [Rate
17 Year 1].
18 A. The adjustments discussed above, and agreed to by the Settling Parties, reduce
19 Avista's proposed RY1 natural gas revenue requirement increase of$8,803,000 to $4,580,000,
20 resulting in an overall 9.2%natural gas base rate increase, effective September 1, 2025. The net
21 rate base agreed to by the Settling Parties for natural gas services is $232.7 million. Mr. Miller
22 discusses the overall net bill impact to customers in RY1 of 5.4%beginning September 1, 2025.
23 Q. Please provide an overview of the incremental natural gas revenue
Andrews, Di 19
Avista Corporation

I requirement components agreed to by the Settling Parties effective September 1, 2026
2 [Rate Year 21.
3 A. The Settling Parties agreed to an incremental natural gas revenue decrease
4 effective September 1, 2026 (RY2), that reflects the adjustments shown below in the excerpted
5 table from the Stipulation:
6 Table No. 4: Natural Gas Revenue Requirement—RY2
7 SUMMARY TABLE OF ADJUSTMENTS TO NATURAL GAS REVENUE REQUIREMENT
EFFECTIVE SEPTEMBER 1,2026
(000s of Dollars)
8 Revenue
Requirement Rate Base
9 Rate Base Amount Effective September 1,2026 $ 232,695
Incremental Revenue Adjustment to September 1,2025 Rate Change
(see Table No.3):
10 a.) Add Incremental Capital and Expenses:
i. AMA 2026 Capital Additions $ 465 $ 4,178
11 ii. Property Tax Expense $ (350)
R 2026 Union/Non-Union Labor Increase $ 360
iv. Employee Benefits $ 85
12 V. 2026 Growth Revenue and O&M Offsets $ (769)
September 1,2026 Revenue Adjustment and Rate Base
13 Amounts(below September 1,2025 Rate Change-see Table No.3) $ (209) $ 236,873
14 Q. Please elaborate on the individual line items contained within Table No. 4.
15 A. A description of the adjustments resulting in the natural gas revenue requirement,
16 effective September 1, 2026 for RY2, follows.
17 Add Incremental 2025/2026 Related Capital and Expenses to RY2
18 (incremental above or below RYI)—(line a.) This item includes certain incremental changes in
19 2025 and 2026 related to capital and expenses in RY2, above or below RYI levels, as follows:
20 • AMA 2026 Capital Additions — (line i.) Includes capital additions from September 1,
21 2025 through August 31, 2026 on an AMA basis, prior to the RY2 September 1, 2026,
22 effective date. This adjustment increases the overall revenue requirement by $465,000
23 and increases net rate base by $4.178 million.
Andrews, Di 20
Avista Corporation

1 • Property Tax Expense—(line ii.)Removes the remaining property tax expense included
2 in RY1 (balance associated with September 1, 2025 — December 31, 2025 expense).
3 This adjustment decreases the overall revenue requirement by $350,000.
4 • 2026 Union/Non-Union Labor Increases — (line iii.) Includes the 2026 union and non-
5 union labor increases. This adjustment increases the overall revenue requirement by
6 $360,000.
7 • Employee Benefits — (line iv.) Includes 2026 incremental employee benefit expenses
8 above RY1 levels. This adjustment increases the overall revenue requirement by
9 $85,000.
10 • 2026 Growth Revenue and O&M Offsets — (line v.) Reflects the 2026 incremental
11 revenue associated with 2026 growth capital and reduction in O&M expense, associated
12 with the inclusion of 2026 capital investment. This adjustment decreases the overall
13 revenue requirement by $769,000.
14 Q. Please summarize the impact of these adjustments on the natural gas
15 revenue requirement agreed to by the Settling Parties effective September 1, 2026 [Rate
16 Year 21.
17 A. The adjustments discussed above, and agreed to by the Settling Parties, reduces
18 Avista's RY2 natural gas revenue requirement of$983,000 to an overall decrease of$209,000,
19 resulting in a 0.4% natural gas base rate decrease, effective September 1, 2026. The net rate
20 base agreed to by the Settling Parties for natural gas is $236.9 million. Mr. Miller discusses the
21 overall net bill impact to customers in RY2, effective September 1,2026, is a decrease of 0.2%.
Andrews, Di 21
Avista Corporation

I VI. OTHER SETTLEMENT COMPONENTS
2 Q. Please discuss the "Other Settlement Components" starting at page 15 of
3 the Stipulation?
4 A. The Settling Parties agreed to a number of "Other Settlement Components"
5 which are discussed below, with the exception of electric and natural gas Cost of Service, Rate
6 Spread and Rate Design, FCA authorized levels, and certain other settlement components
7 agreed to, which are discussed by Mr. Miller.
8 Q. Please explain the settlement terms relating to the Power Cost Adjustment
9 (PCA) authorized level of expenses.
10 A. The new level of power supply revenues, expenses, retail load and Load Change
11 Adjustment Rate resulting from the September 1, 2025 (Rate Year 1) and September 1, 2026
12 (Rate Year 2) settlement revenue requirement, for purposes of monthly PCA mechanism
13 calculations, are detailed in Appendix A, pages 1 (Rate Year 1) and 2 (Rate Year 2) of the
14 Stipulation (Exhibit No. 17). The Settling Parties agree to the following (see Stipulation
15 paragraphs 7k., 8a.i., and 11):
16 i. Authorized Net Power Supply. The Settling Parties agree to reflect corrections to net
17 power supply expense, from that filed by the Company, reducing system net power
18 supply expense in Rate Year 1 by $11.2 million, and Idaho allocated net power supply
19 expense by $4.0 million. For Rate Year 2, authorized net power supply includes power
20 supply expense and transmission revenues (net power supply expense) above the Rate
21 Year I level,to reflect Rate Year 2 net power supply expenses, as-filed by the Company,
22 after including the adjustment for the Palouse Wind PPA. This adjustment increases
23 overall Idaho electric revenue requirement by $13.6 million in Rate Year 2, above Rate
Andrews, Di 22
Avista Corporation

I Year I levels.
2 ii. Palouse Wind. The Settling Parties agree to remove the cost of Palouse Wind9 Power
3 Purchase Agreements ("PPA") and replace it with the optimized cost of the Company's
4 other resources to determine the Company's Net Power Supply Expense both in base
5 rates and in the Power Cost Adjustment(PCA) mechanism.10 This adjustment decreases
6 system net power supply expense by $1.7 million and Idaho share by $605,000.
7 iii. Shaping Adjustment. The Settling Parties agree to include a monthly "shaping"
8 adjustment of net power supply expenses for the period September 1, 2025 through
9 August 31, 2026, to better reflect and match recovery of costs, using the monthly
10 percentage of net power supply expense reflected in Rate Year 2 (September 1, 2026
11 through August 31, 2027). This "shaping" adjustment, reflected in Appendix A, has no
12 impact on annual system or Idaho share of net expenses.
13 Q. Please discuss the settlement components agreed to by the Settling Parties
14 related to the Company's Wildfire O&M Expense Balancing Account and Wildfire
15 Resiliency Plan.
16 A. At paragraph 13 of the Stipulation, the Settling Parties agreed to revise the two-
17 way Wildfire O&M Expense Balancing Account authorized "base" level to $5.740 million
18 annually, effective September 1, 2025. The incremental balance deferred, beyond the existing
19 deferred balance as of September 30, 2024 being amortized over a 4-year period in this
9 The Palouse Wind PPA is a 30-year contract that was executed in 2011 by the Company who purchases all of its
output (105 MW nameplate capacity) and environmental attributes. The project began commercial operation in
December 2012.
io This will reflect removing the contract cost and generation of the Palouse Wind PPA and replace it with the energy
dispatched from other Company resources. In Rate Year 1, September 1, 2025 through August 31, 2026, when
calculating and recording the monthly PCA impact,Avista will reduce system net actual versus authorized power
supply expense by $1.7 million (approximately $142,000 monthly) prior to applying the 90%/10% sharing
allocation,to reflect this change within the PCA.This adjustment does not impact Rate Year 2.
Andrews, Di 23
Avista Corporation

I proceeding (discussed earlier), will be included for review and recovery in future general rate
2 cases.
3 At paragraph 14 of the Stipulation, the Settling Parties agreed to the following Wildfire
4 Resiliency Plan(WRP) changes:
5 (a) The Company agrees to submit a plan to Commission Staff for review and prior to
6 the next annual update that details how the Company identifies, selects, and evaluates
7 projects as least-cost least-risk for:
8 i. How and when the Company considers/selects line rebuilding within
9 the WRP (consistent with Senate Bill 1183 3(b),(e)).
10 ii. How and when the Company considers/selects undergrounding lines
11 within the WRP (consistent with Senate Bill 1183 3(b),(e)).
12 (b) List all pilot projects within the WRP and include the current status of the pilot and
13 explain how the Company is evaluating least-cost solutions.
14 (c) Add a section to the WRP where it explains how the Company addressed Staffs
15 recommendations to the WRP and discuss other high-level major updates/changes to the
16 WRP since the last filed version.
17
18 Q. Please discuss the settlement component agreed to by the Settling Parties
19 regarding the Insurance Expense Balancing Account.
20 A. The Settling Parties agree to revise the two-way electric and natural gas
21 Insurance Expense Balancing Account authorized annual "base" levels to $8.611 million for
22 electric and $954,000 for natural gas, effective September 1, 2025. The incremental balance
23 deferred, beyond the existing deferred balance as of September 30, 2024 being amortized over
24 a 4-year period for electric and over a 2-year period for natural gas,in this proceeding(discussed
25 earlier), will be included for review and recovery in future general rate cases.
26 Q. Please discuss the settlement component agreed to by the Settling Parties
27 related to Regulatory Amortizations.
28 A. At paragraph 16 of the Stipulation, the Settling Parties agreed to the Regulatory
29 Amortizations as filed by the Company, reflecting a two-year amortization, with the exception
30 of the Wildfire Expense Balancing Account Deferral amortization, the electric Insurance
Andrews, Di 24
Avista Corporation

I Expense Balancing Account Deferral amortization, and the Williams Pipeline Outage Deferral
2 amortization, which the Settling Parties agree to revise from a two-year amortization to a four-
3 year amortization, as discussed above. These regulatory balances and agreed to amortizations
4 include the following new regulatory amortizations, as discussed in Ms. Schultz's direct
5 testimony at pages 43 to 47:
6 1) Montana Riverbed Lease Agreement Re u�ry Asset — The Montana Riverbed
7 Lease Agreement deferred Idaho electric balance of$573,093 is to be amortized over
8 two years at $286,547 annually. This regulatory asset relates to Avista Case No. AVU-
9 E-23-06 (Order No. 35921 dated September 13, 2023) which allowed the Company to
10 defer, without a carrying charge, Idaho's Share of the interest expenses associated with
11 the Montana Riverbed Lease Agreement in FERC Account No. 182.3. See Schultz, pg.
12 44, lines 1-7.
13
14 2)Wildfire Resiliency/Wildfire Balancing Re u�ry Asset—The Wildfire Resiliency
15 expense deferred Idaho electric balance of$6,455,187 is to be amortized over four years
16 at $1,613,797 annually. As part of the Settlement Stipulation approved by the
17 Commission in the Company's 2023 general rate case, Case No. AVU-E-23-01 (Order
18 No. 35909 dated August 31, 2023), the Settling Parties agreed and the Commission
19 approved to amortize the Company's two Wildfire Regulatory Deferred Asset balances
20 (1) Wildfire Resiliency Plan Expense Deferral and (2) Wildfire Expense Balancing
21 Account Deferral,over four years beginning September 1,2023. This regulatory balance
22 represents the incremental Idaho Wildfire Expense Balancing Account deferred electric
23 costs as of September 30, 2024, totaling approximately $6.5 million. The deferred
24 balance will continue to accrue additional wildfire expense deferrals over time. See
25 Schultz,pg. 44, line 8 —pg. 45, line 1.
26
27 3) Insurance Expense Regulatory Asset— The Insurance Expense deferred electric and
28 natural gas regulatory asset balances of$2,747,972 (electric) and$121,575 (natural gas)
29 are to be amortized for recovery over four years for electric at $686,993 annually and
30 amortized for recovery over two years for natural gas at $60,787 annually. As part of
31 the Settlement Stipulation approved by the Commission in the Company's 2023 general
32 rate case, Case Nos. AVU-E-23-01 and AVU-G-23-01 (Order No. 35909 dated August
33 31,2023),the Company was approved a two-way Insurance Expense Balancing account
34 to defer the difference in actual insurance expense, up or down, from the authorized
35 "base" level of insurance expense. The deferred balance will continue to accrue
36 additional insurance expense deferrals over time. See Schultz,pg. 45, lines 2-12.
37
38 4) Depreciation Expense Re ul�atory Liability — The Depreciation Expense deferred
39 Idaho electric and natural gas regulatory liability balances of$2,032,567 (electric) and
40 $549,506 (natural gas) are to be amortized for rebate over two years at $1,016,283
41 (electric) annually and$274,753 (natural gas) annually. As part of the Company's 2023
Andrews, Di 25
Avista Corporation

I Depreciation Study, Case Nos. AVU-E-23-02 and AVU-G-23-02 (Order No. 36020
2 dated December 8, 2023), the Company was ordered to defer the difference in Idaho
3 electric and natural gas depreciation expense reflected in base rates, beginning
4 September 1,2023,versus actual depreciation expense recorded on the Company's book
5 of record, as a result of the approved change in depreciation rates becoming effective
6 January 1, 2024, until a change in base rate occurs reflecting the overall revised
7 depreciation rates in the Company's next general rate case. See Schultz, pg. 45, lines
8 13-18 and pg. 46, lines 1-5.
9
10 5) Williams Pipeline Outage Regulatory Asset— The Williams Outage deferred Idaho
11 natural gas regulatory asset balance of$6,396,467 is to be amortized for recovery over
12 four years at $1,599,117 annually. On November 8, 2023, Avista filed for deferred
13 accounting treatment in Case No. AVU-G-23-08 related to a"dig in" event causing the
14 Williams Northwest Pipeline (Williams)to shut down on the afternoon of November 8,
15 2023. As detailed in the Company's request, which was approved by the Commission
16 in Order 36059 dated January 12, 2024, on November 8, 2023, Avista was notified that
17 Williams, an interstate pipeline operator who transports natural gas from supply basins
18 to the Company's distribution system gate stations, experienced a "dig in" by a third
19 party. That dig in caused Williams to shut down its 12-inch pipeline, thereby ceasing
20 delivery of natural gas to Avista's distribution system in the Pullman/Moscow and
21 Lewiston/Clarkston general vicinities. This critical service was severely disrupted by
22 the incident, which resulted in one of the largest natural gas outages in United States'
23 history, affecting approximately 35,500 customers and causing significant financial
24 harm to Avista due to our emergency response. See Schultz, pg. 46, lines 6-19.
25
26 The net amortization of the new regulatory assets and liabilities listed above for items
27 1)—5) result in an annual amortization expense agreed to by the Settling Parties of$1,571,053
28 for Idaho electric and $1,385,151 for Idaho natural gas over the Two-Year Rate Plan.
29 Q. Please discuss the settlement component agreed to by the Settling Parties
30 related to the Colstrip Regulatory Assets and Accounting.
31 A. At paragraph 17 of the Stipulation, the Settling Parties agree to the Colstrip
32 Regulatory Amortizations and accounting adjustments as filed by the Company and described
33 in my direct testimony at pages 16-24. The Colstrip Re ug latory Amortization as filed by the
34 Company, reflects the approved treatment by the IPUC to recover Avista's investment in the
35 Colstrip Units 3 and 4 generating facilities after reflecting an accelerated depreciation rate of
Andrews, Di 26
Avista Corporation

1 2027.11 This adjustment also reflects the Company's proposal to include the pro forma Colstrip
2 capital additions for 2024 and 202512, and include this investment in the Colstrip Regulatory
3 Asset for recovery over its authorized remaining amortization period (approximately 28
4 years).13 Finally, the Colstrip Regulatory Amortization reflects the changes to reflect the
5 transfer of ownership to NorthWestern Energy (NWE) as discussed below. The effect of the
6 change in the amortization expense of the Colstrip Regulatory Asset (including the agreed-to
7 adjustment for the two-year period only) discussed above at page 11, increases the Colstrip
8 Regulatory Amortization expense recovered from $728,000 to approximately $783,000
9 annually over the Two-Year Rate Plan.
10 I also discuss the adjustments included in the Company's direct filing over the Two-
11 Year Rate Plan, and agreed-to by the Settling Parties, to reflect the transfer of ownership by
12 Avista to NorthWestern Energy (NorthWestern) of its Colstrip Unit 3 and 4 investment,
13 effective December 31,2025. These adjustments reflect the impact of removing the net Colstrip
14 investment (gross plant, offset by accumulated depreciation (A/D)) and depreciation expense
15 effective January 1, 202614 from net plant in RY1 and RY2 due to the transfer of the Colstrip
16 plant to NWE, and recording (moving) the unrecovered net plant balance for Colstrip assets
17 expected at December 31, 2025, to the Colstrip Regulatory Asset, for amortization over the
18 remaining life of the Colstrip Regulatory Asset (approximately 28 years). Therefore, in RY1,
19 these adjustments reduce(credits)gross plant$84.4 million,reduces(debits)A/D$72.0 million,
11 Recovery treatment of Avista's investment in the Colstrip Units 3 and 4 generating facilities and Colstrip
Regulatory Asset per Commission prior Order 34276 in Case No.AVU-E-18-03,and Order 35156 Case No.AVU-
E-21-03.
"Company witness Mr. Kinney described the Colstrip 2024—2025 capital additions within his direct testimony
and exhibits(See Kinney direct and Exhibit No. 6, Schedule 7Q.
13 See Colstrip Regulatory Amortization Adjustment above at page 11.
14 This has the effect of removing 8 months in RYI, i.e.,January 2026—August 2026, of the September 2025 —
August 2026 rate period,and the remaining 4 months in RY2,i.e.,September 2026—December 2026.
Andrews, Di 27
Avista Corporation

I and increases the Colstrip Regulatory Asset$12.4 million(net of gross plant and A/D). In RY2,
2 these adjustments remove the remaining gross plant of $36.2 million, reduces (debits) A/D
3 $30.4 million, and increases the Colstrip Regulatory Asset $5.8 million (net of gross plant and
4 A/D).
5 In addition, this adjustment removes existing Colstrip depreciation expense from the
6 Two-Year Rate Plan included in current rates on existing pre-2018 investment, effective
7 January 1, 2026 (or 8 months in RY1 and the remaining 4 months in RY2), reducing overall
8 depreciation expense over the Two-Year Rate Plan by $3.0 million.15
9 Finally,to reflect the transfer of the Colstrip plant to NorthWestern, effective December
10 31, 2025, the Company will have to remove certain other Colstrip balances, such as land or
11 inventory balances that exist as of December 31,2025,including FERC Account 154.400(Plant
12 Materials and Supplies - Colstrip) and FERC Account 151.120 (Fuel Stock Coal — Colstrip).
13 These balances are not amortized or depreciated, and therefore do not currently impact expense,
14 and have not been reflected in the balances discussed above, as the inventory balances, for
15 example, will vary throughout the year and therefore are unknown at this time. The Company
16 will be allowed to net its Colstrip asset/liability accounts removed from its books of record,
17 including land and inventory balances(just as it will net the actual gross plant and A/D balances)
18 at December 31, 2025, and transfer the overall total to the Colstrip Regulatory Asset as
19 described above, which will true-up the Colstrip Regulatory Asset with actual balances versus
"As noted above,Order 34276 in Case No.AVU-E-18-03,required Avista to maintain the current level of Idaho's
share of depreciation expense on Colstrip Units 3 and 4 annually currently being recovered from customers. This
reflected depreciation on Colstrip plant investment through December 31,2017. Depreciation on the existing plant
investment through December 31, 2017 reflected accelerated depreciation to recover this investment through
December 31,2027.With the transfer of ownership,this results in unrecovered net plant(plant investment through
December 31, 2017) as of December 31, 2025, of $5.9 million. Rather than recover this amount through
depreciation expense January 1,2026 through December 3,2027,this unrecovered net plant investment is a portion
of the amount moved to the Colstrip Regulatory Asset ($12.4 million) effective January 1, 2026, and amortized
over the remaining 28-year amortization period.
Andrews, Di 28
Avista Corporation

I those approved in this case. The Company will then true-up the Colstrip Regulatory Asset
2 balance and amortization of the adjusted balance in its next general rate case, reflecting all
3 components. The remaining incremental amount to be amortized,not included in this case,will
4 not be material on an annual basis.
5 Q. Please discuss the settlement component agreed to by the Settling Parties
6 related to the Capital Projects Included in Rates.
7 A. At paragraph 18 of the Stipulation, the Settling Parties agree that the capital
8 projects that have transferred to plant as of January 31, 2025 are deemed prudent, and those
9 capital additions that transfer after that date may still be reviewed for further prudence in the
10 Company's next general rate case.
11 Q. Please discuss the settlement component agreed to by the Settling Parties
12 related to the Capital Documentation.
13 A. At paragraph 19 of the Stipulation, Avista agrees to meet with Staff and other
14 interested parties within nine months of the final order of this rate case to discuss supporting
15 documentation for capital additions that the Company will include in its next general rate case,
16 including documentation for projects agreed-to in this settlement, but which can still be
17 reviewed as noted in the "Capital Projects Included in Rates"provision above.
18
19 VII. CONCLUSION
20 Q. In conclusion,why is this Stipulation in the public interest?
21 A. This Stipulation strikes a reasonable balance between the interests of the
22 Company and its customers, including its residential, commercial and industrial customers. As
23 such, it represents a reasonable compromise among differing interests and points of view. The
Andrews, Di 29
Avista Corporation

I terms of the Stipulation represent electric and natural gas base rate changes designed to provide
2 necessary retail revenues over the Two-Year Rate Plan from September 1,2025 through August
3 31, 2027. The Settling Parties have agreed that the Company has demonstrated the need for the
4 revenue changes for its electric and natural gas operations, thus providing recovery of its costs
5 over the Two-Year Rate Period. In the final analysis, any settlement reflects a compromise in
6 the give-and-take of negotiations. The Commission has before it a Stipulation that is supported
7 by sound analysis and supporting evidence, the approval of which is in the public interest.
8 Q. Does this conclude your direct testimony?
9 A. Yes, it does.
Andrews, Di 30
Avista Corporation

ANNI GLOGOVAC
COUNSEL FOR REGULATORY AFFAIRS
AVISTA CORPORATION
P.O. BOX 3727
1411 EAST MISSION AVENUE
SPOKANE, WASHINGTON 99220-3727
TELEPHONE: [phone]
[e-mail]
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE APPLICATION ) CASE NO. AVU-E-25-01
OF AVISTA CORPORATION FOR THE ) CASE NO. AVU-G-25-01
AUTHORITY TO INCREASE ITS RATES )
AND CHARGES FOR ELECTRIC AND ) DIRECT TESTIMONY
NATURAL GAS SERVICE TO ELECTRIC ) OF JOSEPH D. MILLER
AND NATURAL GAS CUSTOMERS IN THE ) IN SUPPORT OF
STATE OF IDAHO ) STIPULATION
FOR AVISTA CORPORATION
(ELECTRIC AND NATURAL GAS)

1 I. INTRODUCTION
2 Q. Please state your name, employer, and business address.
3 A. My name is Joseph D. Miller and I am employed as the Senior Manager of Rates
4 and Tariffs for Avista Utilities ("Company" or "Avista"), at 1411 East Mission Avenue,
5 Spokane, Washington.
6 Q. Have you previously filed direct testimony in this proceeding?
7 A. Yes.My testimony in this proceeding covered the spread of the proposed electric
8 and natural gas revenue increase among the Company's general service schedules. My
9 testimony also described the changes to the rates within the Company's service schedules.
10 Q. What is the scope of this testimony?
11 A. The purpose of my testimony is to describe and support the non-revenue
12 requirement portions of the Stipulation and Settlement ("Stipulation"), filed on June 9, 2025
13 between the Staff of the Idaho Public Utilities Commission ("Staff"), Clearwater Paper
14 Corporation("Clearwater"),Idaho Forest Group,LLC("Idaho Forest"),and Walmart Inc. These
15 entities are collectively referred to as the "Settling Parties" and singularly as a"Settling Party."
16 In my testimony I will explain the Stipulation components related to Rate Spread and Rate
17 Design, and certain "Other Settlement Components" as outlined in the Stipulation.
18 Q. Are you sponsoring any exhibits?
19 A. No,I am not. Company witness Ms. Schultz is sponsoring Exhibit No. 17,which
20 is a copy of the Stipulation filed on June 9, 2025, with the Commission.
21
22 II. RATE SPREAD & RATE DESIGN
23 Q. Please explain the settlement terms relating to electric and natural gas cost
Miller, Di 1
Avista Corporation

I of service.
2 A. In this case, for electric operations, the Company prepared an electric cost of
3 service analysis that incorporated, among other things, a system load factor peak credit method
4 of classifying production costs, allocating 100%of transmission costs to demand, and allocating
5 transmission costs on a twelve-month coincident peak allocation factor. The Parties do not agree
6 on any particular cost of service methodology.
7 In recognition,however,that certain rate schedules are generally above their relative cost
8 of service, the Settling Parties agree that Schedule 25P should receive 25%, Street and Area
9 Lights 75%, Schedules 1 and 25 100%, Schedules 21/22 and 31/32 125%, and Schedules 11/12
10 105% of the overall percentage base rate changes.
11 For natural gas,the Settling Parties agreed to apply the margin increase on September 1,
12 2025 to Schedule 101. The margin decrease on September 1, 2026 will be applied evenly to
13 Schedules I11/112 and 146.
14 Q. How did the Stipulation address rate design?
15 A. For settlement purposes, the Settling Parties agreed to the rate design changes
16 proposed by the Company in my direct testimony for the September 1, 2025, and September 1,
17 2026, base rate increases except for certain basic charges and volumetric rates. The basic
18 charges for Schedules 1, 11/12, 31/32 and 101 will remain at current levels. For Schedule 11,
19 the volumetric increase will only be applied to Block 2 for Rate Year 1, and the increase in Rate
20 Year 2 will be applied on a uniform % basis. Appendix F provides a summary of the current
21 and revised rates and charges (per the Stipulation) for electric and natural gas service.
22 Q. What is the effect on retail rates, by rate schedule, of the proposed
23 settlement?
Miller, Di 2
Avista Corporation

I A. Table No. 1 and No. 2 reflect the agreed-upon percentage increases by schedule
2 for electric service:
3 Table No. 1 -Electric Change for Rate Year 1
4 Effective September 1, 2025 (Rate Year 1)
Increase in Base Increase in
5 Rate Schedule Revenue Billing Revenue
6 Residential Schedule 1 6.3% 6.7%
General Service Schedules 11/12 6.6% 6.7%
7 Large General Service S chedules 21/22 7.9% 8.0%
Extra Large General S ervice Schedule 25 6.3% 6.5%
8 Clearwater Paper Schedule 25P 1.6% 1.6%
Pumping Service Schedules 31/32 7.9% 8.0%
9 Street&Area Lights Schedules 41-48 4.8% 4.6%
Overall 6.3% 6.6%
10
11 Table No. 2 -Electric Change for Rate Year 2
12 Effective September 1, 2026 (Rate Year?)
13 Increase in Base Increase in
Rate Schedule Revenue Billing Revenue
14 Residential Schedule 1 4.5% 4.7%
General Service Schedules 11/12 4.7% 4.8%
15 Large General Service Schedules 21/22 5.5% 5.6%
Extra Large General Service Schedule 25 4.5% 4.6%
16 Clearwater Paper S chedule 25P 1.2% 1.2%
Pumping Service Schedules 31/32 5.5% 5.6%
17 Street&Area Lights Schedules 41-48 3.4% 3.3%
18 Overall 4.5% 4.6%
19 Table No.3 and No.4 reflect the agreed-upon percentage changes by schedule for natural
20 gas service:
21
Miller, Di 3
Avista Corporation

I Table No. 3 —Natural Gas Change for Rate Year 1
2 Effective September 1, 2025 (Rate Year 1)
Increase in Increase in
3 Rate Schedule Margin Revenue Billing Revenue
4 General S eivice S chedule 101 11.1% 6.7%
Large General Service Schedules 111/112 0.0% 0.0%
5 hitenq)t. Sales Service Schedules 131/132 0.0% 0.0%
Trairsportation S ervice S chedule 146 0.0% 0.0%
6 Overall 9.2% 5.4%
7 Table No. 4 —Natural Gas Change for Rate Year 2
8 Effective September 1, 2026 (Rate Year 2)
9 Increase in Increase in
Rate Schedule Margin Revenue Billing Revenue
10 General Service Schediile 101 0.0% 0.0%
Large General S eivice S chedules 111/112 -2.5% -1.1%
11 Intet7upt. Sales Service Schedules 131/132 0.0% 0.0%
Transportation S eivice S chedule 146 -2.5% -2.6%
12 Overall -0.4% -0.2%
13 Q. What are the residential bill impacts if the Commission approves the
14 Settlement Stipulation?
15 A. Effective September 1,2025, an electric residential customer using an average of
16 939 kilowatt hours per month would see a $6.95, or 6.7%, increase per month for a revised
17 monthly bill of$111.25. Effective September 1, 2026, an electric residential customer would
18 see a$5.22, or 4.7%, increase per month for a revised monthly bill of$116.47.
19 Effective September 1, 2025, a natural gas residential customer using an average of 66
20 therms per month would see a $4.11, or 6.8%, increase per month for a revised monthly bill of
21 $64.74. Effective September 1, 2026, a natural gas residential customer would see no change
22 in their monthly bill.
23
Miller, Di 4
Avista Corporation

1 III. OTHER ELEMENTS OF THE STIPULATION
2 Q. Please explain the other settlement terms agreed to by the Settling Parties.
3 A. Certain of the other settlement terms are described below I:
4 • Hourly Class Cost of Service. At paragraph 20,Avista agrees to meet with Staff and
5 other interested parties, prior to the next general rate case, to discuss conducting an
6 hourly class cost of service study that could be included in the next general rate case
7 or when it can feasibly do so, given the need for a fully deployed AMI system.
8 • Export Credit Rate. At paragraph 21, Avista agrees to meet with Staff and other
9 interested parties within six months of the final order of this rate case to discuss the
10 Company conducting a study to quantify the costs and benefits of on-site generation
11 to determine an appropriate value for exports, the Export Credit Rate.
12 • Idaho Forest Group. At paragraph 22,Avista agrees to meet with Idaho Forest Group
13 within six months of the final order of this rate case to discuss opportunities related
14 to energy efficiency, demand response, on-site generation opportunities, conjunctive
15 billing, or any other utility-related issues.
16 • Weather Normalization. At paragraph 23, while Staff supports the Company's
17 weather normalization methodology used in this case, the parties agree to meet and
18 confer prior to the Company's next general rate case to evaluate the use of a 20-year
19 rolling average methodology (and not using the complete actual test year data in
20 regression modeling). The meeting will discuss Staff s preference that the regression
21 model include actual data up to the end of the test year included in the rate case filing,
22 instead of stopping at the end of the most recent calendar year. Discussion should
' For additional"Other Settlement Components"agreed-to by the Parties, see the Direct Testimony in Support
of the Stipulation sponsored by Ms. Schultz.
Miller, Di 5
Avista Corporation

I also address the model and it being adjusted outside of the timeframe of the data used
2 to create it.
3 • Ald. 1�pe Replacement. At paragraph 24, Avista agrees to meet with Staff and
4 other interested parties within six months of the final order of this rate case to discuss
5 potential mechanisms to speed up replacement of Aldyl-A pipe, and other priority
6 pipe replacement, for public safety.
7 Q. Please explain the settlement terms relating to the authorized base for the
8 Electric and Natural Gas Fixed Cost Adjustment Mechanism.
9 A. The new level of baseline values for the electric and natural gas fixed cost
10 adjustment mechanism resulting from the September 1, 2025 and September 1, 2026 settlement
11 revenue requirement are detailed in the Stipulation as follows:
12 • Appendix B—2025 Electric FCA Base
13 • Appendix C—2026 Electric FCA Base
14 • Appendix D—2025 Natural Gas FCA Base
15 • Appendix E—2026 Natural Gas FCA Base
16 Q. Does this conclude your direct testimony?
17 A. Yes, it does.
Miller, Di 6
Avista Corporation