20080908Vol II Boise (Technical).pdf

ORIGINAL.BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE APPLICATION
OF AVISTA CORPORATION FOR THE
AUTHORITY TO INCREASE ITS RATES
AND CHARGES FOR ELECTRIC AND
NATURAL GAS SERVICE TO ELECTRIC
AND NATURAL GAS CUSTOMERS IN THE
STATE OF IDAHO
)
) CASE
)
)
)
)
)
)
NOS. AVU-E-08--01
AVU-G-08-01
BEFORE
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COMMISSIONER JIM KEMPTON (Presiding)
COMMISSIONER MARSHA SMITH
COMMISSIONER MACK REDFORD.
PLACE:Commission Hearing Room
472 West Washington Street
Boise, Idaho
DATE:August 28, 2008
VOLUME II - Pages 28 - 151
.
CSB REPORTING
Constance S. Bucy, CSR No. 187
23876 Applewood Way * Wilder, Idaho 83676
[phone] * [phone]
Email csb(iheritagewifi.com
.1
2
3 For the Staff:
4
5
6
APPEARANCES
Scott Woodbury, Esq.
Deputy Attorney General
472 West Washington
Boise, Idaho 83720-0074
For Avista Corporation:
7
8
9
David J. Meyer, Esq.
Vice President & Chief Counsel
Avista Corporation
Post Office Box 3727
Spokane, Washington 99220
10 For Potlatch Corporation: GIVENS PURSLEY LLP
by Conley E. Ward, Esq.11 Post Office Box 2720
Boise, Idaho 83702
12.13
.
For Bennett ForestIndustries:
14
15
16 For CAPAI:
McDEVITT & MILLER
by Dean J. Miller, Esq.
420 West Bannock Street
Boise, Idaho 83702
Brady M. Purdy, Esq.
Attorney at Law
2019 North 17th Street
Boise, Idaho 83702
17
18
19
20
21
22
23
24
25
CSB REPORTING
[phone]
APPEARANCES
.1 I N D E X
2
3 WITNESS EXAMINATION BY PAGE
4 Randy Lobb Mr.Woodbury ( Direct)31
(Staff)Prefiled Direct Testimony 35
5 Mr.Miller (Cross)58
Commissioner Smith 62
6 Commissioner Redford 64
Commissioner Kempton 69
7 Mr.Meyer (Cross)73
8
Kelly o.Norwood Mr.Meyer (Direct)74
9 ( Public)Prefiled Direct Testimony 77
Mr.Purdy (Cross)101
10 Mr.Miller (Cross)102
Mr.Ward (Cross)112
11 Commissioner Smith 113
Commissioner Redford 117
12 Commissioner Kempton 124.13
Teri Ottens Mr.Purdy (Direct)134
14 (CAPAI)Prefiled Direct Testimony 136
Commissioner Smith 143
15 Commissioner Kempton 145
Mr.Purdy (Redirect)148
16
17
18
19
20
21
22
23
24.25
CSB REPORTING INDEX
(208 )890-5198
.1 EXHIBITS
2
3 NUMBER DESCRIPTION PAGE
4 FOR THE STAFF:
5 101 - Stipulation in Case Nos.Premarked
AVU-E-08-01 and AVU-G-08-01 Admitted 150
6 (23 pages)
7
8 FOR BENNETT FOREST INDUSTRIES:
9 401 - Billing to the Grangeville Premarked
Mill,etc.Admitted 150
10
11
12.13
14
15
16
17
18
19
20
21
22
23
24.25
CSB REPORTING EXHIBITS
(208 )890-5198
.1 BOISE, IDAHO, THURSDAY, AUGUST 28, 2008, 1:00 P. M.
2
3
4 COMMISSIONER KEMPTON: It's 1: 00 0' clock
5 and this is the date, time and place, August the 28th,
6 and we are here for a technical and evidentiary hearing
7 on the joint motion for approval of a settlement
8 stipulation filed by Avista Utili ties and Potlatch
9 Corporation, Community Action Partnership of Idaho,
10 CAPAI, and Commission Staff as noticed in Commission
11 Order No. 30622 dated August 12, 2008; more specifically,
12 the application of Avista Corporation for the authority.13 to increase its rates and charges for electric and
14 natural gas customers in the State of Idaho as filed in
15 Commission rate cases AVU-E-08-01 and AVU-G-08-01.
16 I think everybody in here knows the
17 Commissioners by now, but by way of introduction, I'm Jim
18 Kempton. I am the Chair for the hearing today. On my
19 left is Commissioner Marsha Smith. On my right,
20 Commissioner and President of the Idaho Public Utilities,
21 Commissioner Mack Redford. The proceedings in the case
22 are being conducted in accordance with the Commission
23 jurisdiction under Title 61 Idaho Code and Commission
24 Rules of Procedure under the Idaho Administrative.25 Procedures Act 31.01.01.
CSB REPORTING
[phone]
28 COLLOQUY
.
.
20
1 The hearing, in looking around, I don't
2 see any public, per se. It is an open meeting. It is
3 not for public participation in terms of having any part
4 in the hearing process. It is a hearing for the
5 applicant and the parties granted intervention status.
6 In the matter of appearances, for Avista, Kelly
7 Norwood.
8 MR. MEYER: David Meyer.
9 COMMISSIONER KEMPTON: David Meyer.
10 Potlatch?
11 MR. WARD: Conley Ward.
12 COMMISSIONER KEMPTON: And Dennis Peseau,
13 is he here?
14 MR. MILLER: For Bennett, Dean J.
15 Miller.
16 COMMISSIONER KEMPTON: Brad Purdy.
17 MR. PURDY: Yes, along with Teri Ottens.
18 COMMISSIONER KEMPTON: Okay, and for
19 Bennett Forest Industries, Dean Miller.
MR. MILLER: And Larry Crowley, the
21 company's rate consultant is with me, also.
22 COMMISSIONER KEMPTON: Who is going to be
23 with you?
24.25
MR. MILLER: Larry Crowley, Bennett's rate
consul tant.
CSB REPORTING
[phone]
29 COLLOQUY
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1 COMMISSIONER KEMPTON: And Scott Woodbury
2 for the Commission Staff. In the way of hearing
3 procedures, the presentation order is tentatively Avista
4 followed by CAPAI, followed by Potlatch and then the
5 Idaho PUC. Bennett Lumber is an intervenor and has
6 intervenor status, but is subj ect to the restrictive
7 provisions of Commission Order No. 30622. They may ask
8 clarifying questions and cross-examination subj ect to the
9 provisions of that Order.
10 I have some indication that maybe the
11 presenters want to change the order, Avista and
12 Commission Staff. Is that a fact?
13 MR. MEYER: Yes, Chairman Kempton, we
14 visi ted beforehand and inasmuch as the Staff witness Lobb
15 is sponsoring the stipulation itself as an exhibit, it
16 might be more appropriate for him to go first if that's
17 okay.
18 COMMISSIONER KEMPTON: Okay, and then once
19 we go through that order, then rebut tal by applicant.
20 MR. MEYER: Right.
21 COMMISSIONER KEMPTON: If desired.
22 MR. MEYER: Sure.
23 COMMISSIONER KEMPTON: And the order of
24 examination of witnesses, it will be applicant and then
25 intervenors followed by Commissioners. The
CSB REPORTING
[phone]
30 COLLOQUY
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.
1 Commissioners, however, at any time may go through the
2 Chair to request to cross-examine. Marsha, Commissioner
3 Smi th, will administer the oath for the witness.
4 Are there any preliminary matters that we
5 need to discuss before we go on? Very well, then I think
6 we can begin to proceed, so, Mr. Woodbury, if you'd like
7 to call your first witness.
8 MR. WOODBURY: Thank you, Mr. Chairman.
9 Staff would call Randy Lobb.
10
11 RANDY LOBB,
12 produced as a witness at the instance of the Staff,
13 having been first duly sworn, was examined and testified
14 as follows:
15
16 DIRECT EXAMINATION
17
18 BY MR. WOODBURY:
19 Q Mr. Lobb, will you please state your full
20 name, spell your last name for the record?
21
22
A My name is Randy Lobb, L-o-b-b.
Q And for whom do you work and in what
23 capaci ty?
24.25
A I work for the Idaho Public Utilities
Commission. I am the utili ties division administrator.
CSB REPORTING
[phone]
31 LOBB (Di)Staff
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.
1 Q And in that capacity, did you direct Staff
2 members to work on the instant case of Avista' selectric
3 and natural gas rate increase and oversee the case
4 development and direct Staff in its investigation of the
5 Company's proposed rate increases?
6 A Yes, I did.
7 Q And did you also review the Company's
8 testimony and exhibits filed in this case?
9 A I did.
10 Q Were you involved in Staff preparation for
11 the public workshops conducted in Coeur d' Alene and
12 Moscow regarding this case?
13 A Pardon me, could you repeat that?
14 Q Were you involved in Staff's preparation
15 for the public workshops conducted in Coeur d' Alene and
16 Moscow regarding this case?
17 A Yes, I was.
18 Q And at those workshops, to your knowledget
19 did customers have an opportunity to hear from Staff
20 regarding the Company's application to increase rates and
21 to question Staff and representatives of the Company?
22
23
A Yes, they had the opportunity.
Q Also, in your capacity as director of the
24 utilities division, did you have primary responsibility.25 for coordinating Staff settlement negotiations with
CSB REPORTING
[phone]
32 LOBB (Di)Staff
.
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1 Avista and the intervening parties, Potlatch and the
2 Communi ty Action Partnership Association of Idaho?
3 A Yes, I did.
4 Q And have you reviewed the settlement
5 documents that have been presented and filed in this
6 case?
7 A Yes, I have.
8 Q And do the terms accurately and completely
9 reflect Staff's agreement?
10 A Yes, they do.
11 Q Am I correct in understanding that
12 Commission Staff prior to engaging in settlement
13 negotiations had through its investigation developed the
14 framework for the testimony in the case it would have
15 filed in this mattered had it been fully litigated?
16 A Yes, we did.
17 Q In answering yes, do I understand that
18 Staff has identified the proposed adjustment to the
19 Company's case in chief and determined the revenue
20 requirement and developed positions regarding the
21 Company's class cost of service, rate of return, rate
22 design, prudency of DSM expenditures and affordability
23 issues?
24.25
A Yes.
Q Have you filed testimony in support of the
CSB REPORTING
[phone]
33 LOBB (Di)Staff
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1 settlement stipulation in this case and does that
2 testimony consist of 17 pages and one exhibit, Exhibit
3 101, the stipulation with three appendices?
4 A Yes.
5 Q And do the terms of the settlement set
6 forth in the stipulation and adj ustments detailed therein
7 compare favorably to the case in chief Staff would have
8 filed?
9 A Yes, I believe so.
10 Q Is it your belief that the comprehensive
11 proposed settlement agreed to by all the parties of
12 record, excluding the late intervening Bennett Forest
13 Industries, is in the public interest, is just and
14 reasonable and should be approved by the Commission?
15 A Yes.
16 MR. WOODBURY: Mr. Chairman, I'd ask that
17 the testimony and exhibit be spread on the record and I'd
18 present Mr. Lobb for cross-examination.
19 COMMISSIONER KEMPTON: So ordered.
20 (The following prefiled testimony of Mr.
21 Randy Lobb is spread upon the record.)
22
23
24.25
CSB REPORTING
[phone]
34 LOBB (Di)Staff
.
.
1 Q.Please state your name and business address for
2 the record.
3 A.My name is Randy Lobb and my business address
4 is 472 West Washington Street, Boise, Idaho.
5 Q.By whom are you employed?
6 A.I am employed by the Idaho Public Utili ties
7 Commission as Utilities Division Administrator.
8 Q.What is your educational and professional
9 background?
10 A.I received a Bachelor of Science Degree in
11 Agricultural Engineering from the University of Idaho in
12 1980 and worked for the Idaho Department of Water
13 Resources from June of 1980 to November of 1987. I
14 recei ved my Idaho license as a registered professional
15 Civil Engineer in 1985 and began work at the Idaho Public
16 Utilities Commission in December of 1987. My duties at
17 the Commission currently include case management and
18 oversight of all technical Staff assigned to Commission
19 filings. I have conducted analysis of utility rate
20 applications, rate design, tariff analysis and customer
21 peti tions. I have testified in numerous proceedings
22 before the Commission including cases dealing with rate
23 structure, cost of service, power supply, line
24 extensions, regulatory policy and facility acquisitions..25 Q.What is the purpose of your testimony in this
NO. AVU-E-08-1/AVU-G-08-1
08/22/08 35 LOBB, R. (Di) 1
STAFF
.1 case?
2 A.The purpose of my testimony is to describe the
3 principal components of the filed Stipulation (the
4 Proposed Settlement) and to explain the rationale for
5 Staff's support.
6 Q.Please summarize your testimony.
7 A.Staff believes that the comprehensive Proposed
8 Settlement agreed to by all parties is in the public
9 interest, is just and reasonable and should be approved
10 by the Commission.
11 Staff's support is based on its review of the
12 Avista gas and electric rate case filing, a comprehensive.13 audi t of Company test year results of operations and
14 consideration of the rate case issues it intended to
15 present if this case were fully litigated.
16 The Company originally proposed a revenue
17 increase of $32.33 million for electric service and $4.7
18 million for natural gas service for an overall base rate
19 increase of 16.7% and 5.8% respectively. The Company
20 proposed a 10.80% return on equity. The Proposed
21 Settlement specifies an annual revenue requirement
22 increase of $23.16 million on the electric side and $3.88
23 million on the gas side for an overall increase of 11.98%
24 and 4. 7 %, respectively. The parties agreed to a return.25 on equity of 10.20%.
NO. AVU~E-08-1/AVU-G-08-1
08/22/08 36 LOBB, R. (Di) 2
STAFF
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1 The primary focus of Staff in its review of the
2 Company's filing was to evaluate the 2007 historic
3 resul ts of operations for gas and electric service,
4 assess the adjustments made by the Company to those test
5 year costs and develop a reasonable revenue requirement.
6 Other areas investigated included class cost of service,
7 rate design, prudency of DSM expenditures and
8 affordabili ty.
9 While Staff's comprehensive audit and review of
10 the Company's filing identified a variety of adjustments
11 to the requested increase, the overwhelming cost drivers
12 were found to be critical facility investment and the
13 rising market price of purchased electricity and natural
14 gas.
15 Staff's revenue requirement investigation
16 included a review of the Company's capital investment in
17 transmission, generation and metering, expense increases
18 in operation and maintenance, fuel and salaries. Staff
19 also evaluated test year expenditures to determine what
20 costs were known and measurable and used and useful in
21 providing service.
22 The cost of service study used by the Company
23 in this case was the same study used in the 2004 rate
24 case. While useful in assigning general revenue
25 responsibility for the customer classes, the study
NO. AVU-E~08-1/AVU-G-08-1
08/22/08 37 LOBB, R. (Di) 3
STAFF
.1 utilized stale load data and was not accurate enough to
2 make meaningful changes in class revenue contribution or
3 justify significant
4
5 /
6
7 /
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9 /
10
11
12.13
14
15
16
17
18
19
20
21
22
23
24.25
NO.AVU- E-08 - 1 /AVU-G-O 8-1 38 LOBB,R.(Di)3a08/22/08 STAFF
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1 changes in rate design. Based on its revenue requirement
2 analysis and cost of service and rate design evaluation,
3 Staff concluded that relatively few facts in this case
4 were in dispute. Staff believed that rather than face
5 the uncertainty of processing the case through a
6 contested technical hearing, customers could be best
7 served by bringing the parties together, candidly
8 discussing its case and negotiating a favorable
9 settlement of issues.
10 Recognizing also the very real impact that
11 higher gas and electric costs will have on the low income
12 customers of Avista, the Proposed Settlement includes a
13 commi tment to investigate al ternati ves to help mitigate
14 those impacts.
15 The Settlement
16 Q.What are the key components of the Proposed
17 Settlement?
18 A.The Proposed Settlement is attached as Staff
19 Exhibi t No. 101. The key components of the Proposed
20 Settlement include an increase in the annual electric
21 revenue requirement of $23.16 million or 11.98% and an
22 increase in the annual natural gas revenue requirement of
23 $3.88 million or 4.74%. The revenue requirement was
24 established using a return on equity of 10.20%, a debt.25 cost of 6.84% and a capital structure of 48%/52% to
produce an overall return of 8.45%.
NO. AVU~E-08-1/AVU-G-08-1
08/22/08 39 LOBB, R. (Di) 4
STAFF
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1 The negotiated adj ustments to the Company's
2 original request removed over $ 9 million from the
3 proposed electric increase through deferral of pending
4 capi tal and expense additions, removal of proformed test
5 year costs as not known and measurable or not used and
6 useful, and elimination or reduction of inappropriate or
7 unjustified costs. Nearly all of the adjustments made in
8 the natural gas revenue requirement resulted from
9 allocated adj ustments made in electric revenue
10 requirement.
11 The Proposed Settlement is based upon a 2007
12 historic test year adj usted for known and measurable
13 expense changes and maj or capital additions through 2008.
14 It also specifies the use of 2009 power supply costs in
15 the Power Cost Adj ustment (PCA) mechanism and treatment
16 of power supply costs associated with growing load
17 (retail load and revenue credit).
18 Other issues addressed in the Proposed
19 Settlement include verification of prudent DSM
20 expenditures, a uniform increase in all customer class
21 revenue except Potlatch Schedule 25P, and an increase in
22 the residential customer charge for both electric and
23 natural gas service. No other rate design changes were
24 incl uded.
25 Finally, the parties agreed to a series of
NO. AVU-E-08-1/AVU-G-08-1
08/22/08 40 LOBB, R. (Di) 5
STAFF
.1 commi tments for customers including increased low income
2 DSM funding,educational outreach for low income
3 customers
4
5 /
6
7 /
8
9 /
10
11
12.13
14
15
16
17
18
19
20
21
22
23
24.25
NO.AVU - E - 0 8 -1 / A VU -G - 0 8 -1 41 LOBB,R.(Di)5a08/22/08 STAFF
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1 and the need to address energy affordabili ty through
2 generic workshops.
3 Revenue Requirement
4 Q.How did Staff identify adj ustments to the
5 Company's case and what were the primary considerations
6 in reaching agreement on the stipulated revenue
7 requirement?
8 A.Staff identified issues in this case by
9 reviewing the Company's rate case filing and conducting a
10 comprehensive audit of Company test year results of
11 operations. Staff then identified adj ustments to the
12 Company proposed revenue requirement. The procedure used
13 by Staff in this case was the same process it uses in
14 preparing for a contested proceeding.
15 Staff then evaluated the justification for each
16 of the proposed revenue requirement adj ustments to
17 determine at what level they could be successfully
18 supported at hearing. Staff established an overall
19 revenue requirement target that it believed could be
20 achieved with reasonable and reliable certainty and then
21 negotiated identified adjustments that had debatable and
22 less compelling justification to arrive at an overall
23 revenue requirement compromise.
24 Staff's ultimate goal was to balance the needs
25 of the Company for adequate revenue while securing the
lowest reasonable rates for customers.
NO. AVU-E-08-1/AVU-G-08-1
08/22/08 42 LOBB, R. (Di) 6
STAFF
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1 Q.What type of adjustments did Staff identify and
2 how were they evaluated for settlement?
3 A.The single largest adj ustments identified by
4 Staff in this case were those determined to be not "known
5 and measurable" or not "used and useful." For example,
6 Spokane River Relicensing costs, confidentially
7 negotiated agreements and expense increases/ capi tal
8 additions beyond 2008 were all adjustments associated
9 wi th timing. Either the proj ects were incomplete or
10 future cost increases were estimated or projected.
11 Staff believed it possible that some of the
12 larger timing adj ustments could potentially be eliminated
13 or cured by the Company as proj ects and contract terms
14 were finalized by the time the case was processed through
15 hearing.
16 Q.Why was the Staff unable to identify more
17 defini ti ve adj ustments in the Company's proposed revenue
18 requirement?
19 A.The primary reason is that the Company simply
20 filed a relatively clean case and mitigated the effect of
21 many big ticket increases on which Staff has
22 traditionally focused its investigation. For example,
23 the Company proposed to include capital additions through
24 the end of 2008 and utilize a year-end 2008 rate base
25 rather than a 2008 average. The Company then offset most
NO . A VU - E - 0 8 -1 / A VU - G - 0 8 -1
08/22/08 43 LOBB, R. (Di) 7
STAFF
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1 of the resulting $29 million increase by subtracting from
2 rate base an entire year of depreciation expense and
3 adjusting for deferred taxes. The net effect of the
4 proposal was an increase in rate base of only $716,000
5 and a revenue requirement increase of less than 1%.
6 The Company also proposed to calculate power
7 supply costs based on projected 2009 loads. It then
8 reduced the base rate revenue requirement by implementing
9 a Production Property Adj ustment to reflect the fact that
10 2007 loads were used to recover costs. In addition, the
11 Company applied a hydro mitigation adj ustment to
12 purposely reduce estimated power supply costs recovered
13 through base rates. Actual costs will be tracked through
14 the PCA but only at 90% of what would have been collected
15 through base rates.
16 For natural gas service $3 million of the $3.8
17 million increase agreed to in the Proposed Settlement is
18 associated with acquisition of Jackson Prairie natural
19 gas storage and installation of Automated Meters (AMR).
20 Additional storage will provide benefits to gas customers
21 through the annual Purchase Gas Adj ustment (PGA) and AMR
22 provides significant savings in meter reading/customer
23 service expenses.
24 Finally, much has been made of executive
25 compensation. Newspaper reports cite total compensation
NO. AVU-E-08-1/AVU-G-08-1
08/22/08 44 LOBB, R. (Di) 8
STAFF
.
.
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1 for the top five Avista executives of approximately $3.6
2 million per year. The Proposed Settlement is based on
3 compensation of $1.45 million per year or only 40% of
4 total compensation. While still seemingly high, if all
5 the compensation included in rates for the top 12 Avista
6 executives were eliminated, the effect would be a rate
7 reduction of less than 0.5%.
8 Return On Equity
9 Q.What is the return on equity specified in the
10 Proposed Settlement and how was it determined?
11 A.The Proposed Settlement specifies a return on
12 equity of 10.2%. This return is certainly within the
13 range that Staff would have recommended had the issue
14 gone to hearing. A 10.2% return was approved in Avista' s
15 recent Washington settlement and is reasonable given the
16 improved financial performance of the Company and
17 improved credit rating upgrades by S&P and Moody's. It
18 also recognizes the ongoing capital requirements of the
19 Company and the need for investment grade ratings
20 ("BBB-"or higher by Standard & Poor's or "Baa-" or higher
21 by Moody's) .
22 Net Power Supply Cost
23 Q.Please explain how net power supply costs were
24 established at stipulated levels.
25 A.Staff reviewed all of the inputs and
NO. AVU-E-08-1/AVU-G-08-1
08/22/08
45 LOBB, R. (Di) 9
STAFF
.1 assumptions used by the Company in the AURORA model to
2 determine net
3
4 /
5
6 /
7
8 /
9
10
11
12.13
14
15
16
17
18
19
20
21
22
23
24.25
NO.A VU - E - 0 8 -1 / A VU - G - 0 8 -1 46 LOBB,R.(Di)9a08/22/08 STAFF
.
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1 normalized power supply costs. Because the results
2 obtained using AURORA are particularly sensitive to
3 assumptions about natural gas prices, and because gas
4 prices have been extremely volatile since the time the
5 Company performed its analysis and filed its case, Staff
6 carefully examined the effect of different gas prices by
7 performing numerous simulations using gas price forecasts
8 from many sources and forward prices for 2009. In
9 addition, because pro forma power supply costs were based
10 on forecasted 2009 loads, Staff performed numerous
11 simulations to examine the effect of different load
12 assumptions. Staff concluded that the inputs and
13 assumptions used by Avista, including those related to
14 fuel prices and loads, were reasonable.
15 Q.Could gas prices and net power supply costs
16 have been higher than those agreed to in the Proposed
17 Settlement if argued at hearing?
18 A.Possibly. While natural gas prices have
19 moderated recently, they are still higher than those used
20 by the Company in calculating net power supply costs.
21 Incorporating higher gas costs in the power supply
22 analysis at a later date could have increased net power
23 supply costs recovered in base rates.
24 Q.Why has Staff agreed to the use of 2009 loads
25 in the calculation of base power supply costs?
NO. AVU-E-08-1/AVU-G-08-1
08/22/08
47 LOBB, R. (Di) 10
STAFF
.
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1 A.Staff has agreed to the use of 2009 loads in
2 recognition that normalized power supply costs included
3 in base rates are always based on an estimate or a
4 forecast. Use of 2009 forecasted load in the calculation
5 does not make the cost any less known and measurable.
6 In addition, the Company has also included in
7 its calculation, a hydro mitigation adjustment that
8 reduces base rate power supply costs and a production
9 property adjustment that reduces base rate revenue
10 requirement for generation to serve 2009 loads. The
11 effect of these adj ustments is to shift costs from base
12 rate recovery to PCA recovery with reduced impact on
13 customers due to PCA cost sharing. The Company benefits
14 from using 2009 loads by reducing its exposure to the
15 retail revenue adjustment embedded in the PCA.
16 Q.Did Staff identify any adj ustments to the
17 Company's proposed power supply costs?
18 A.Yes. In addition to a thorough review of the
19 Company's AURORA analysis, Staff reviewed each of the
20 adjustments made to reflect contract changes between the
21 2007 test period and the 2009 pro forma period. Staff
22 determined that several adjustments to purchase contracts
23 beyond 2008 were not known and measurable. Those
24 adjustments were discussed during settlement.25 negotiations, and incorporated in an annual $735,000
reduction in the
NO. AVU-E-08-1/AVU-G-08-1
08/22/08 48 LOBB, R. (Di) 11
STAFF
.
.
1 Priest Rapids contract price recoverable in rates.
2 Cos t of Service
3 Q. What did Staff review with respect to cost of
4 service (COS) and what have the parties agreed to in the
5 Proposed Settlement with respect to class specific
6 revenue requirement?
7 A.Staff has reviewed both cost of service models
8 for electric and gas service and found that the
9 methodology did not change from the Company's last
10 general rate case filing in 2004. However, Staff noted
11 and Avista acknowledged that electric load data Used in
12 the COS was generated in the 1980s and statistically
13 updated in 1993. Therefore, given the age of the load
14 data, Staff believes the cost of service results in this
15 case should be used only as a general guideline for
16 assigning revenue responsibility.
17 While the Company has agreed to engage in new
18 load studies, the information necessary to update the
19 cost of service analysis will not be available until
20 2009. Consequently, the parties agreed to use the
21 current results to move all classes halfway to cost of
22 service as specified by the study.
23 Q.Will the increase be uniformly spread among all
24 classes?.25 A.Yes, with one exception each customer class
NO. AVU-E-08-1/AVU-G-08-1
08/22/08
49 LOBB, R. (Di) 12
STAFF
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1 will receive a uniform increase of 12.33%. Schedule 25P,
2 service to Potlatch's Lewiston plant, will receive an
3 increase of 10.36%. The 10.36% increase moves Potlatch
4 approximately halfway to cost of service similarly to
5 other classes yet maintains an energy rate that is lower
6 than the rate charged to Schedule 25 customers. The
7 parties agreed to the revenue spread in recognition that
8 Potlatch is much larger than customers served under
9 industrial Schedule 25, it has a higher load factor and
10 should pay a lower overall energy rate.
11 Q.What revenue spread is proposed for natural gas
12 customers?
13 A.The parties propose to increase all gas rate
14 schedules based on the natural gas cost of service study
15 as originally proposed by the Company. The resulting
16 revenue increase was reduced proportionally to reflect
17 the overall 4. 74% increase specified in the Proposed
18 Settlement.
19 Rate Design
20 Q.How did the Staff evaluate electric and natural
21 gas rate design and how is rate design addressed in the
22 Proposed Settlement?
23 A.Staff evaluated existing electric and natural
24 gas rate design by reviewing the cost of service study
25 and comparing current rate components to those of other
NO. AVU-E-08-1/AVU-G-08-1
08/22/08 50 LOBB, R. (Di) 13
STAFF
.1 utilities.Neither Avista nor Staff believed major
2 changes
3
4 /
5
6 /
7
8 /
9
10
11
12.13
14
15
16
17
18
19
20
21
22
23
24.25
NO.AVU-E-08- 1/AVU-G-08- 1 51 LOBB,R.(Di)13a08/22/08 STAFF
.
.
.
1 in rate design were warranted given the imprecise and
2 inaccurate nature of the Company's COS study. In
3 addition, Avista remains the only electric utility under
4 Commission jurisdiction with true residential tiered
5 rates, with a differential of 13% for usage over 600
6 kWh/month.
7 The parties agreed to an increase in the
8 monthly customer charge from $4.00 to $4. 60/month for
9 electric customers and from $3.28 to $4.00/ month for gas
10 customers. All other rate components were increased
11 uniformly to generate the required revenue. This rate
12 design represents the original Company proposal and
13 recognizes the increasing monthly costs of metering and
14 billing.
15 Q.Are there any plans to address rate design in
16 the future?
17 A.Yes. Staff and Avista have discussed adjusting
18 block size and rate differentials in the future once
19 accurate cost of service data is available. Staff and
20 Avista will also investigate whether there are economies
21 of scale (bundling of electric/gas service) that could
22 allow reduced monthly customer charges when a customer
23 takes both gas and electric service. At the very least,
24 a similar customer charge for gas and electric service
25 will be considered.
NO. AVU-E-08-1/AVU-G-08-1
08/22/08 52 LOBB, R. (Di) 14
STAFF
.1 Q.What is the effect on an average monthly
2 customer bill as a result of the Proposed Settlement?
3
4 /
5
6 /
7
8 /
9
10
11
12.13
14
15
16
17
18
19
20
21
22
23
24.25
NO.AVU- E-O 8 - 1 /AVU-G-O 8 - 1 53 LOBB,R.(Di)14a08/22/08 STAFF
.
.
.
1 A.If the Commission were to adopt the Proposed
2 Settlement, the monthly bill of a residential customer
3 using 977 kilowatt-hours per month (the average for
4 Avista customers) would increase by $ 7.89. An average
5 gas customer who uses 65 therms per month would see an
6 increase of about $4.03 per month. Proposed increases by
7 customer class and a comparison of present and proposed
8 rate components are attached in Exhibit 101 as Appendix 2
9 to the Stipulation.
10 Energy Affordabili ty
11 Q.What does the Proposed Settlement provide with
12 respect to low income issues?
13 A.In recognition that the proposed increase in
14 both electric and natural gas rates will unduly impact
15 the lowest income Avista customers, the parties have
16 agreed to two specific low income provisions. The first
17 is an increase in the annual low income weatherization
18 funding from $350,000 to $465,000. The second provision
19 calls for funding of $25,000 for state Community Action
20 agencies to provide educational assistance on energy
21 issues in conj unction with its other low income programs.
22 The increased funding required for these programs will
23 come from the existing DSM tariff rider and will not
24 require a rate increase.
25 Q.Are there any other low income provisions
NO. AVU - E - 0 8 - 1 / A VU - G- 0 8 - 1
08/22/08 54 LOBB, R. (Di) 15
STAFF
.
.
.
1 included in the Proposed Settlement?
2 A.Yes. Under the Stipulated Settlement, Avista
3 has agreed to support and actively participate in any
4 Commission-established workshops for the purpose of
5 examining issues surrounding energy affordabili ty and
6 customers' ability to pay energy bills. Staff supports
7 the idea of workshops involving all energy utili ties
8 serving Idaho and is prepared to immediately proceed upon
9 Commission approval.
10 All parties to the Proposed Settlement
11 recognize that electric and gas rates will increase as a
12 resul t of this case, with the prospect of additional rate
13 increases on the hori zon due to the Company's PCA and PGA
14 cases. Staff foresees an unrelenting and significant
15 upward pressure on rates, which unfortunately is
16 occurring during an economic downturn in the state as a
17 whole and northern Idaho in particular. The decline of
18 the mining and timber industries continues to have a
19 negative impact on small communities that have limited
20 employment opportunities beyond mines, mills, and logging
21 operations.
22 Energy affordabili ty has become a central issue
23 for many Idaho households, and utili ties are facing the
24 prospect of more customers being unable to pay their
25 energy bills in full and/or on time. Through workshops,
NO. AVU-E-08~I/AVU-G-08-1
08/22/08 55 LOBB, R. (Di) 16
STAFF
.1 the Commission can help identify issues and explore
2 possible
3
4 /
5
6 /
7
8 /
9
10
11
12.13
14
15
16
17
18
19
20
21
22
23
24.25
NO.AVU- E-O 8 -1 /AVU-G-O 8 - 1 56 LOBB,R.(Di)16a08/22/08 STAFF
.
.
19
20
21
22
23
24.25
1 solutions to anticipated problems. Staff supports this
2 undertaking and suggests that universal service, Low
3 Income Rate Assistance Plans (LIRAP) and al ternati ve rate
4 designs all be included as discussion topics in the
5 workshops.
6 Q.Does this conclude your testimony in this
7 proceeding?
8 A.Yes, it does.
9
10
11
12
13
14
15
16
17
18
NO. AVU-E-08-1/AVU-G-08-1
08/22/08 57 LOBB, R. (Di) 17
STAFF
.1
2 open hearing.)
3
4 questions?
5
6
7
(The following proceedings were had in
COMMISSIONER KEMPTON: Are there
MR. MEYER: No questions.
MR. MILLER: Yes.
COMMISSIONER KEMPTON: And would you help
8 me out again, please?
9 MR. MILLER: Dean J. Miller on behalf of
10 Bennett Forest Industries.
.
11
12
13
14
15 BY MR. MILLER:
16 Q
COMMISSIONER KEMPTON: Okay, Mr. Miller.
CROSS~EXAMINATION
Just a couple of questions. Mr. Lobb,
17 could I direct your attention to page 5 of your prefiled
22
18 testimony?
19 A I'm on page 5.
Specifically, to lines 13 through 16.
Yes.
You indicate there that the proposed
23 settlement proposes the use of 2009 power supply costs in
20 Q
24 the PCA mechanism and treatment of power supply costs.25
21 A
associated with growing retail load. Could you elaborate
CSB REPORTING
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Q
58 LOBB (X)Staff
.
.
24.25
1 to the extent you can today on what you mean by growing
2 retail load?
3 A The PCA tracks actual power supply cost
4 for both existing customers and load that grows in
5 between rate cases. My reference there is to the retail
6 load and revenue credit which is a creditor a
7 subtraction from the actual power supply cost so that the
8 PCA simply tracks weather-related costs associated with
9 the load considered in the last general rate case.
10 Q And in the current year, what is the
11 proposed PCA adj ustment or increase and as it's currently
12 proposed, when would it become effective?
13 A Could you repeat that question?
14 Q In the current year, in 2008, what is the
15 amount of the proposed PCA increase and when would it
16 become effective?
17 A I believe the proposed increase is in the
18 neighborhood of 6 percent and that is proposed to become
19 effecti ve on October 1st, and that is a -- it's made up
20 of deferrals that occurred over the last PCA year
21 beginning in October '07.
22 Q So the PCA adj ustment would take effect
23 the same day as the adjustment to base rates?
A That's the proposal.
Q As proposed. Could I direct your
CSB REPORTING
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59 LOBB (X)Staff
.
.
1 attention to page 12, lines 11 through 12?
2 A I have that.
3 Q You there indicate that electric load data
4 used in the COS, which I believe stands for cost of
5 service study, was statistically updated in 1993. Can
6 you explain what is meant by statistically updated?
7 A My understanding is that it was adj usted
8 based on the change in customer counts and load per
9 customer that occurred between 1980 and 1993, so it was
10 basically -- without going out and actually putting on
11 load meters, it was proportionally increased to reflect
12 loads in '93 rather than 1980.
13 Q And was, to your knowledge, that the last
14 time the load data has been adj usted either through
15 measurement or statistical analysis?
16 A That's my understanding.
17 Q At page 18 -- pardon me, lines 18 through
18 19 on the same page, you indicate that there will not be
19 new load data available until 2009. I wonder if you
20 think it would be a good idea to actually look at cost of
21 service in a formal proceeding when that data is
22 available.
23 A Well, the Company has indicated informally
24 that they plan to file another general rate case early.25 next year, so I think we're going to have an opportunity
CSB REPORTING
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60 LOBB (X)Staff
.
.
1 to look at that data. Hopefully, it will be completed,
2 that study, the load study, will be completed in time to
3 be incorporated into that rate case, so I think we'll
4 look at it next year one way or another.
5 Q So it is your anticipation that in the
6 next general rate case we'll have an opportunity to
7 actually look at that information?
8 A I hope so. I think it would be important
9 to update that data for the next general rate case.
10 Q Do you think it would be wi thin the
11 Commission's discretion to require that the next general
12 rate case include that information?
13 A I think that would be a reasonable thing
14 for the Commission to do.
15 Q Just one last area, Mr. Lobb. On page 14,
16 lines 13 through 23, you there discuss in general the
17 topic of rate design and at line 15 you indicate that the
18 Staff and Avista have discussed adj ustments in rate
19 design and that there are plans for future discussions.
20 i was wondering, what is the nature of those plans; that
21 is, are there any specific time lines for those
22 discussions with intended outcomes or is it still quite
23 general at this point?
24.25
A The discussions were on an informal basis.
There's nothing formally proposed in terms of looking at
CSB REPORTING
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61 LOBB (X)Staff
.
.
1 rate design outside of a rate case. The Company does
2 have a tiered rate design for residential class and
3 absent a cost of service study, I think it would have to
4 be in the context of a cost of service study that we
5 would really look at changing rate design.
6 Q And presumably, that could occur in the
7 next general rate case as well?
8 A I would anticipate that, yes.
9 MR. MILLER: Mr. Chairman, those are all
10 the questions I had. Thank you.
11 COMMISSIONER KEMPTON: Thank you,
12 Mr. Miller.
13 Commissioners? Commissioner Smith.
14
15 EXAMINATION
16
17 BY COMMISSIONER SMITH:
18 Q Just curious, Mr. Lobb, last night we had
19 a public hearing in Lewiston and there was some testimony
20 from customers who believe that it's nice that $100,000
21 more was committed to the low income DSM, but they
22 thought that was peanuts in the big picture of things and
23 they would like to see that increased and I wondered if
24 the Staff has a position on increasing that commitment..25 A We have not taken a position on whether or
CSB REPORTING
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62 LOBB (Com)Staff
.
.
.
1 not it should be higher than that. One of the things
2 that we looked at was the amount of money that other
3 companies in the state commit to low income
4 weatherization. We had a relatively large increase in
5 what Idaho Power provided for low income weatherization
6 to, I think it was, a million, two and the ratio of
7 customers to dollars committed is fairly similar for
8 Avista and Idaho Power. I think Avista' s is actually a
9 li ttle higher with this increase than Idaho Power. I
10 think it's higher, currently higher, than PacifiCorp' s
11 ratio of customers to low income weatherization dollars.
12 This money comes from the DSM tariff rider
13 and so every dollar you put towards low income DSM comes
14 from other potential DSM programs as well, so absent a
15 rate increase, you have to parcel out the money generated
16 from the tariff rider among the various DSM programs, so
17 we believed while it was reasonable to increase it, there
18 were limits on the amount of money that would be
19 available without an increase in the tariff rider.
20 Q I think that perhaps some of the people
21 who testified had the mistaken belief that this money
22 went directly to assist low income people with the
23 payment of their electric or gas bills, but that's not
24 the case, is it?
25 A No, this goes for the weatherization of
CSB REPORTING
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63 LOBB (Com)Staff
.
.
1 homes that are occupied by low income customers, so
2 assistance in helping customers pay their bills is not
3 included in this program. In fact, one of the things
4 that is included in the settlement document is a proposal
5 for a workshop to address affordabili ty and consider
6 other programs that might assist low income customers in
7 paying their bills.
8 Q Okay, because right now there's none that
9 are in the tariffs of the utility?
10 A That's right. There's no programs that
11 are recovered through rates paid by other customers.
12 COMMISSIONER SMITH: All right, thank you.
13 Thank you, Mr. Chairman.
14 COMMISSIONER KEMPTON: Commissioner
15 Redford?
16
17 EXAMINATION
18
19 BY COMMISSIONER REDFORD:
20 Q I just have a couple of questions and
21 primarily these questions may seem a little basic, but I
22 need to have the answer and I'd direct you to page 4 of
23 12 of the stipulation.
24.25
A Okay.
Q And I guess I'm going to presume that the
CSB REPORTING
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64 LOBB (Com)Staff
.
.
1 dollars represented here are Idaho's share.
2 A Yes, that's correct.
3 Q And that -- well, let's go to the first
4 item that I wanted to address. Now, what's labor
5 non-executive?
6 A Those are labor costs associated with
7 non-executi ve positions, so it would be general labor
8 costs.
9 Q Okay. We go to the next ~- next is labor
10 executive, remove 2009 executive labor expense. Would
11 this be executives who provide services directly to the
12 utili ty or to a proj ect?
13 A Yeah, these are the top executives of the
14 Company that provide services to all of the jurisdictions
15 in both gas and electric service.
16 Q Can you give me an indication why it is
17 the Staff requested that this labor executive expense be
18 deleted?
19 A Sure. The Company had proposed to include
20 estimated or forecasted or projected increases in those
21 executive labor costs in '09. The Staff was determined
22 to draw the line at '08. We believed that the '09 labor
23 cost increases, and that's what these reflect, were not
24 known and measurable and, therefore, should not be paid.25 and recovered in rates today.
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65 LOBB (Com)Staff
.
.
1 Q Okay; so that would be covered in a
2 subsequent rate case?
3 A Yes. When the Company comes in for their
4 next rate case, we will look at those costs in '09 and
5 determine whether they're appropriate.
6 Q Also, why is there a 50 percent removal of
7 the 2009 asset management expenses?
8 A This was a part of the overall
9 negotiation. The Company had, again, the Company had
10 forecasted investment in various assets in 2009. It was
11 a program that was actually begun in '08 to some extent,
12 but the '08 cash commitments, capital commitments, under
13 the asset management plan were very limited. The big
14 increase was in 2009 to make those capital improvements
15 and it was a general improvement in distribution
16 facilities based on what they believed were needed at
17 that time. The Staff believed that those were not known
18 and measurable and so we had removed those costs and
19 through negotiations, we agreed that SO percent of those
20 would be included.
21 Q Okay; so any shortfall would be made up in
22 a subsequent rate case?
23 A We would look to the Company to
24 demonstrate that they had made those capital investments.25 in a reasonable fashion in '08 and then we'd look at '09
CSB REPORTING
(208) 890~5198
66 LOBB (Com)Staff
.
.
1 capi tal investment under this asset management plan and
2 determine what costs would be appropriately included at
3 that time.
4 Q Let's go to executive incentives. I
5 presume that means bonuses and stock options?
6 A This category of costs, I think, is
7 primarily associated with targets, I believe. I'm not
8 sure about that, but the bonuses are generally stock
9 options. That sort of thing generally is not included at
10 all in this rate case and the incentives are for specific
11 targets in much the same way that incentives are paid to
12 other Company employees to meet customer service targets.
13 They pay incentives and the Staff believed that these
14 incentives were inappropriate because they didn't focus
15 enough on customer~related issues.
16 Q Okay, I just want to go one step further
17 in this miscellaneous administrative and general expenses
18 where you've decreased by 50 percent the directors and
19 officers' insurance and 50 percent of the board of
20 directors' expenses. Was that because of -- why did you
21 suggest that?
22 A Again, this was -- from the Staff
23 position, we believed that much of these costs provided
24 no benefit to the customers themselves. They were.25 benefi ts to stockholders. They were benefits to the
CSB REPORTING
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67 LOBB (Com)
Staff
.
.
21
1 board of directors and other employees of the Company,
2 but didn't have a real direct benefit to the customers
3 themselves, so we believed they were mostly
4 inappropriate. As part of the negotiating process, we
5 agreed to include some of these costs, for example, the
6 insurance for the board of directors, in rates, but it
7 was due to various groups that were removed that we
8 believed had no benefit to customers.
9 Q And then going over on the next page to
10 the summary table of adjustments to natural gas, I think
11 we've gone over them in the electric side and you've
12 provided a reason, so I won't go into that, but I just
13 want to make sure that it says 50 percent of directors
14 and officers' insurance, now, that's 50 percent of the
15 allocated amount?
16 A Yes.
17 Q Okay.
18 A Well, actually, let me put it this way:
19 It's SO percent of the total Company and then it would
20 trickle down through allocations to Idaho.
Q Well, that's for the electrical, then you
22 go back to the gas and there's another SO percent of
23 directors and officers' insurance, so does that mean that
24 there's 100 percent?.25 A No, again, it's the total amount. We took
CSB REPORTING
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68 LOBB (Com)Staff
.
.
.25
1 the total amount the Company pays on a system basis for
2 those functions and reduced those by 50 percent and then
3 that remaining 50 percent was allocated to the various
4 jurisdictions like Idaho gas and electric, so a piece of
5 that would go to the Idaho gas service and the starting
6 amount would be reduced by 50 percent and that allocated
7 portion, that savings, if you will, will flow through to
8 the gas costs allocated. I didn't say that very well,
9 but...
10 COMMISSIONER REDFORD: I don't think I
11 have any further questions.
12
13
14 EXAMINATION
15
16 BY COMMISSIONER KEMPTON:
17 Q Mr. Lobb, going back to a question that
18 Commissioner Smith addressed, consistent with the
19 hearings last night and the comments that have come in
20 and you address in your testimony, it's recognized by
21 Staff that there's a significant impact to the public,
22 the low income public especially, as we move through
23 these increasing rates that are coming about before us;
24 as an example, your fuel cost, cost of construction,
concrete, rebar, that sort of thing. Is there a date or
CSB REPORTING
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69 LOBB (Com)Staff
.
.
1 was there a time frame that you anticipated beginning
2 these discussions in the work group on means of
3 mitigating some of these impacts on low income
4 customers?
5 A We had not made any recommendations. We
6 didn't want to presuppose that the Commission would do
7 that. We're immediately ready to begin those workshops
8 if the Commission believes that that is a reasonable
9 thing to do, but we had set no time lines. Clearly, with
10 the impact of these rates for Avista and the gas trackers
11 that we have before us, Idaho Power Company's proposed
12 rate increase, we believed that it was an appropriate
13 time, this year, next month, certainly to begin
14 addressing what we might be able to do to mitigate these
15 rate increases on the lower income customers, so we
16 didn't really specify a time line. We would leave that
17 to the Commission for direction, but we're ready to go
18 whenever the Commission indicates.
19 Q In your work, in your discussions in this
20 area, is there general agreement among Staff and
21 participants in the discussions that the current
22 mitigation tools that we have may be inadequate?
23 A I don't know that there's general
24 agreement in that regard. We believe that there's.25 general agreement that we should look at that issue and
CSB REPORTING
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70 LOBB (Com)
Staff
.
.
1 see if there's things we could appropriately do or
2 determine whether or not there is sufficient programs in
3 place. I don't know that we believe that there is, but
4 there certainly wasn't any general agreement on the level
5 of inadequacy, but we certainly agreed that we should
6 look at these issues and determine if more is necessary
7 and what that might be.
8 Q Part of the workshop effort; right?
9 A Yes.
10 Q On page 8, starting at line 24, towards
11 the bottom of the page and extending over through line 7
12 on page 9, you go into a discussion on executive pay,
13 which was also something that was hot on the minds of not
14 only some of the people in the hearing last night, but
15 also the information that we've had come in on public
16 comments. Could you explain when we get down to the 0.5
17 percent, is there information in the files that we have
18 received to date that would allow us to estimate what
19 that. 5 percent would equate to in terms of dollars and
20 cents on an average residential ratepayer's bill? It's
21 on line 7.
22 A There isn't anything that would allow
23 there's nothing in the record that would allow the
24 Commission to make that calculation, other than the .5.25 percent and so basically what you could do is apply that
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71 LOBB (Com)Staff
.1 .5 percent, perhaps, to the Appendix 2 of the
2 stipulation, Exhibit 101, and I think you could come up
3 with a fairly good approximation of what the impact of
4 compensation, of including compensation for all 12 of the
5 top executives, would be on a customer's monthly bill, a
6 residential customer's bill, if they used 977
7 kilowatt-hours, so Appendix 2 of Exhibit 101 would be
8 where you would start. You could calculate the monthly
9 average bill of a residential customer of 977
10 kilowatt-hours and I believe that cost would be about
11 $72.00 a month and then a .OOS percent would be about
12 $.36..13 Q So not to put too fine a point on it, if
14 you were to address this in terms of orders of magnitude,
15 perhaps, it would be in your estimation less than 50
16 percent -- less than $.50 on any given residential
17 customer using 977 kilowatts of power?
18 That's right, and that assumes that the
19 top 12 executives of the Company are paid nothing, not
20 just an increase, they would get no salary at all
21 collected through rates and it would be less than $.50 a
22 month out of the $72.00.
23 Q And so if you add in the 40 percent that's
24 actually included in the rate base, it would even be.25 lower than this; is that correct or incorrect? On line
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(208) 890-S198
72 LOBB (Com)Staff
.
.
1 3, you talk about the proposed settlement is based on
2 compensation of 1.45 million per year or only 40 percent
3 of total compensation, and I don't know whether that's --
4 that's for the top five?
5 A That's for the top five, so it's really
6 not directly comparable.
7 COMMISSIONER KEMPTON: Right. I don't
8 have any more questions.
9 MR. MEYER: Mr. Chairman, may I just have
10 a quick follow-on clarifying question as a result of
11 Bennett Industries' question?
12 COMMISSIONER KEMPTON: Go ahead.
13
14 CROSS-EXAMINATION
15
16 BY MR. MEYER:
17 Q Mr. Lobb, did I understand you to testify
18 that if a new load study were available and completed in
19 time for the Company's next rate filing that it should be
20 presented at that time?
21 A I would hope that it would be presented
22 with the Company's general rate case in 2009. I know
23 that the Company has indicated that the cost of service
24 study would be completed in 2009, the new load data would.25 be collected and could be incorporated in a 2009 filing.
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73 LOBB (X)Staff
.
.
20
21
1 Now, whether or not it would be available in time for an
2 early 2009 general rate case filing, I don't know, but I
3 would certainly like to see that load data incorporated
4 into the general rate case filing.
5 MR. MEYER: I'll just probably take this
6 up again with Mr. Norwood when he takes the stand. I
7 just want the record to be clear on the timing on any
8 such study. Thank you.
9 COMMISSIONER KEMPTON: Okay, thank you.
10 (The witness left the stand.)
11 COMMISSIONER KEMPTON: Mr. Meyer.
12 MR. MEYER: Yes. I call to the stand the
13 Avista witness, Mr. Kelly Norwood.
14
15 KELLY O. NORWOOD,
16 produced as a witness at the instance of Avista
17 Corporation, having been first duly sworn, was examined
18 and testified as follows:
19
DIRECT EXAMINATION
22 BY MR. MEYER:
23 Q Mr. Norwood, for the record, would you
24 please state your name and your position?.25 A Yes, Kelly O. Norwood. I'm the vice
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74 NORWOOD (Di)
Avista Corporation
.
.
1 president of state and federal regulation for Avista
2 Utilities.
3 Q And as such, have you prepared and
4 prefiled testimony in support of that stipulation?
5 A Yes, I have.
6 Q And if I were to ask you the questions
7 that appear in that prefiled testimony, would your
8 answers be the same?
9 A Yes, they would.
10 Q Any further corrections to make to that?
11 A No.
12 Q Just one clarifying item before I ask for
13 this to be spread. During the exchange with Staff
14 wi tness Lobb, there was some discussion about the
15 availabili ty of the cost of service study as it might
16 dovetail with or a load study as it might dovetail with
17 the Company's next filing. Could you give an update on
18 the status of when that would be available?
19 A Yes. We're actually in the process right
20 now of finalizing the selection of the meters that would
21 have -~ hourly meters installed and that will be later
22 this year, which means it will take a year from that
23 point in time to collect the data, which means it will be
24 late' 09 before we actually have the new data that we.25 would be able to roll into a cost of service study.
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75 NORWOOD (Di)
Avista Corporation
.
.
20
21
22
23
24.25
1 As we discussed that issue in our
2 settlement discussions, we talked about the new study
3 that was coming, but we didn't talk a lot about the
4 timing t so unfortunately, we didn't have a lot of
5 discussion about that and that's why in this settlement
6 agreement what you have is a uniform percentage spread of
7 the rate adj ustment because that information wasn't
8 available.
9 MR. MEYER: Very well. With that,
10 Mr. Chairman, I'd ask that Mr. Norwood's testimony be
11 spread on the record as if read.
12 COMMISSIONER KEMPTON: Thank you,
13 Mr. Meyer. It will be and I'm going to hold the question
14 for later for myself.
15 (The following prefiled testimony of
16 Mr. Kelly Norwood is spread upon the record.)
17
18
19
CSB REPORTING
[phone]
76 NORWOOD (Di)
Avista Corporation
.
10
1 I . INTRODUCTION
2 Q.Please state your name, employer and business
3 address.
4 A.My name is Kelly O. Norwood and I am employed
5 as the Vice-President of State and Federal Regulation for
6 Avista Utilities ("Company" or "Avista"), at 1411 East
7 Mission Avenue, Spokane, Washington.
8 Q.Would you briefly describe your educational
9 background and professional experience?
A.Yes. I am a graduate of Eastern Washington
11 Uni versi ty with a Bachelor of Arts Degree in Business
12 Administration, maj oring in Accounting. I joined the.13 Company in June of 1981. Over the past 27 years, I have
14 spent approximately 16 years in the Rates Department with
15 involvement in cost of service, rate design, revenue
16 requirements and other aspects of ratemaking. I spent
17 approximately 11 years in the Energy Resources Department
18 (power supply and natural gas supply) in a variety of
19 roles, with involvement in resource planning, system
20 operations, resource analysis, negotiation of power
21 contracts, and risk management. I was appointed
22 Vice-President of State & Federal Regulation in March
23 2002.
.24
25
Q.What is the scope of your pre-filed testimony
in this proceeding?
77 Norwood, Di 1
Avista Corporation
.
.
.
1 A.The purpose of my testimony is to describe and
2 support the Stipulation, filed on August 7, 2008 between
3 the Staff of the Idaho Public Utili ties Commission
4 (" Staff"), Potlatch Corporation (" Potlatch"), Community
5 Action Partnership Association of Idaho ("CAPAI"), and
6 the Company, which, if approved by the Commission, would
7 resolve all issues in the Company's filing. These
8 entities are collectively referred to as the "Parties,"
9 and represent all parties in the above-referenced cases.
10 The Stipulation is the product of settlement
11 discussions held in the Commission offices on July 31,
12 2008, which was attended by representatives of all
13 Parties. The Stipulation between the Parties resolved
14 all issues associated with the calculation of the
15 Company's requested cost of capital, including capital
16 structure and cost components, and resolved all revenue
17 requirement, rate spread and rate design issues.
18 The Stipulation represents a compromise among
19 differing points of view. Concessions were made by all
20 Parties to reach a balancing of interests. As will be
21 explained in the following testimony, the Stipulation
22 represents a fair, just and reasonable compromise of the
23 issues and is in the public interest.
24 Q.Please explain how the Parties arrived at the
25 Stipulation in this proceeding.
78 Norwood, Di 2
Avista Corporation
.
10
1 A.The Stipulation is the end result of extensive
2 audi t work conducted through the discovery process and
3 hard bargaining by all Parties in this proceeding. I
4 would like to express my appreciation to all Parties
5 involved in this proceeding for their efforts in arriving
6 at this Stipulation and to this Commission for your
7 willingness to hear this matter promptly, in light of the
8 proposed October 1 effective date.
9 Q.Would you briefly summarize the Stipulation?
A.Yes. As part of the Stipulation, Avista will
11 be allowed to implement revised tariff schedules designed
12 to recover $23,163,000 in additional annual electric.13 revenue and $3,878,000 in additional annual natural gas
14 revenue, which represent an 11.98% and 4.7% increase in
15 electric and natural gas annual base tariff revenues,
16 respectively. In determining these revenue increases,
17 the Parties have agreed to various adj ustments to the
18 Company's filing, which are summarized in the
19 Stipulation.
20 The Stipulation calls for an overall rate of
21 return of 8.45%, determined using a capital structure
22 consisting of 47.94% common stock equity and 52.06%
23 long-term debt, an authorized return on equity of 10.20%
24 and the cost of debt of 6.84%..25 The Stipulation also addresses accounting
79 Norwood, Di 3
Avista Corporation
.
10
11
12.13
14
15
16
17
18
19
20
21
22
23
24.25
1 treatment of certain costs, including the Spokane River
2 Relicensing
3 /
4
5 /
6
7 /
8
9
80 Norwood, Di 3a
Avista Corporation
.
.
1 costs, Confidential Litigation costs, Montana Riverbed
2 Li tigation costs and revenues associated with the sale of
3 Carbon Financial Instruments. The accounting treatment
4 of these items will be discussed in more detail later in
5 my testimony.
6 As part of the Stipulation, the funding level
7 of the existing low-income Demand Side Management
8 programs would be increased, and funding would be
9 provided to assist in low-income outreach and education
10 concerning conservation.
11 II. HISTORY OF FILING
12 Q.Please describe the Company's general rate case
13 request, as filed.
14 A.On April 3, 2008, Avista filed an Application
15 wi th the Commission for authority to increase revenue
16 from electric and natural gas service in Idaho by 16.7%
17 and 5.8%, respectively. If approved, the Company's
18 revenues for electric base retail rates would have
19 increased by $32.3 million annually; Company revenues for
20 natural gas service would have increased by $4.7 million
21 annually.
22 The Company proposed to spread the electric
23 revenue increase based on an equal percentage to each
24 service (rate) schedule and proposed to raise the monthly.25 electric residential basic charge to $4.60 from the
81 Norwood, Di 4
Avista Corporation
.
11
12.13
14
15
16
17
18
19
20
21
22
23
24.25
1 current $4.00 charge. The Company proposed to move
2 natural gas customer class rates of return approximately
3 one-half way to unity
4 /
5
6 /
7
8 /
9
10
82 Norwood, Di 4a
Avista Corporation
.
.
.
1 and proposed to raise the natural gas residential basic
2 charge to $4.00 from the current $3.28. The Company also
3 proposed to discontinue Schedules 121 and 122, High
4 Annual Load Factor Large General Service.
5 Q.What are the primary factors causing the
6 Company's request for an electric rate increase in this
7 filing?
8 A.The Company's last general rate case in Idaho
9 was based on 2002 test year data. The current filing is
10 based on a 2007 test year. The Company's electric
11 request is driven by changes in various operating cost
12 components, but primarily power supply costs, plant
13 investment or rate base growth associated with
14 generation, transmission and distribution plant and by
15 various hydro relicensing efforts impacting the Utility.
16 The level of Idaho's share of power supply
17 expense has increased by approximately $33.4 million
18 ($94.3 million on a system basis) from the level
19 currently in base rates. This significant increase in
20 power supply expense over the expense currently reflected
21 in base rates is based on numerous factors, including
22 higher retail loads, reduced hydro generation, increased
23 fuel costs, increased Mid-Columbia purchases, and
24 increased transmission expense.
25 Gross plant additions of approximately $236.5
83 Norwood, Di 5
Avista Corporation
.
.
20
21
22
23
24.25
1 million (Idaho allocation) are driven primarily by
2 increases in investments in distribution plant which was
3 $107.2 million
4 /
5
6 /
7
8 /
9
10
11
12
13
14
15
16
17
18
19
84 Norwood, Di 5a
Avista Corporation
.
.
.
1 from 2002 to 2007, mainly due to customer growth and the
2 inclusion of the AMR proj ect investment. Intangible and
3 production plant increased by $27.6 million in that same
4 time period, related to the hydro relicensing and
5 compliance efforts by the Company. In addition to the
6 hydro relicensing and compliance efforts, increases of
7 $82.6 million for additional production and transmission
8 investment and $ 19.1 million for general plant have
9 increased overall gross plant.
10 Q.What are the primary factors driving the
11 Company's request for a natural gas rate increase?
12 A.The Company's natural gas request is driven by
13 changes in various operating cost components, but
14 primarily the addition of the Jackson Prairie expansion
15 and the completion of the Advanced Meter Reading
16 proj ects, both planned for completion in the fourth
17 quarter of 2008. This causes an increase in the fixed
18 costs of providing natural gas service to customers.
19 III. ELEMNTS OF THE STIPULATION
20 Q.Please explain the derivation of the Electric
21 and Natural Gas Revenue Requirements outlined in the
22 Stipulation.
23 A.The Parties agreed that Avista will reduce its
24 electric revenue increase request to reflect the
25 adjustments shown on the Table on Page 4 to the
Stipulation. While
85 Norwood, Di 6
Avista Corporation
.
.
20
1 Avista's filing requested an electric revenue requirement
2 increase of $32.3 million, the adjustments, including the
3 agreed-upon rate of return, reduce this amount by
4 approximately $9.2 million, resulting in a recommended
5 electric revenue requirement increase of $23.1 million.
6 Similarly, as shown on the table on Page 5 to the
7 Stipulation, while the Company requested a natural gas
8 revenue requirement increase of $4.7 million, the
9 agreed-upon adj ustments serve to reduce this amount by
10 $0.8 million, resulting in a recommended gas revenue
11 requirement increase of $3.9 million.
12 As can be seen by a quick review of the
13 indi vidual line descriptions, the adj ustments accepted
14 for settlement purposes cover a broad range of revenue
15 and cost categories, including the authorized rate of
16 return. The individual adj ustments should not be viewed
17 in isolation; rather, they should be viewed in total as
18 part of the entire Stipulation, and are the result of
19 hard bargaining and compromise.
Q.Please explain the Parties' agreement in
21 regards to an Authorized Rate of Return, including the
22 Return on Equity.
23 A.The Parties have agreed to a revenue
24 requirement which produces an overall rate of return of.25 8.45%, based on a return on equity of 10.2% and an equity
86 Norwood, Di 7
Avista Corporation
.1 componen tat 47.94%.By comparison,the Company's
2 original filing
3
4 /
5
6 /
7
8 /
9
10
11
12.13
14
15
16
17
18
19
20
21
22
23
24.25
87 Norwood,Di 7a
Avista Corporation
.
.
.
1 requested an overall rate of return of 8.74%, a return on
2 equity of 10.8% and an equity component of 47.94%. The
3 cost of debt of 6.84% and long-term debt component of
4 52.06% included in the original filing was agreed to in
5 the Stipulation.
6 Q.What is the proposed effective date of the
7 Stipulation?
8 A.The Parties have requested implementation of
9 the Stipulation on October 1, 2008. This proposed
10 effective date is an integral part of the Stipulation
11 that was part of the negotiated resolution of all of the
12 issues.
13 Q.Please explain the accounting treatment related
14 to the Spokane River Relicensing costs.
15 A.The Company included the processing costs
16 associated with its Spokane River relicensing efforts,
17 which expenditures included actual life-to-date costs
18 from April 2001 through December 31, 2007, and 2008 pro
19 forma expenditures through December 31, 2008.(See
20 Company witness Andrews' Direct Testimony at page 32.)
21 Although the Company anticipates receiving a final
22 license from the Federal Energy Regulatory Commission
23 ("FERC") in the near future, that has yet to occur. The
24 relicensing costs will remain in CWIP (Construction Work
25 in Progress) and the Company will continue to accrue
88 Norwood, Di 8
Avista Corporation
.
.
20
21
22
23
24
. 25
1 AFUDC until issuance of the license, at which time the
2 relicensing costs will be
3
4 /
5
6 /
7
8 /
9
10
11
12
13
14
15
16
17
18
19
89 Norwood, Di 8a
Avista Corporation
.
.
1 transferred to plant in service and depreciation will
2 begin to be recorded. The Parties have agreed to defer
3 as a regulatory expense item (in Account 186 ~
4 Miscellaneous Deferred Debits) on the Company's balance
5 sheet depreciation associated with Idaho's share of the
6 aforementioned relicensing costs and related protection,
7 mi tigation, or enhancement expenditures, until the
8 earlier of twelve (12) months from the date of the
9 issuance of the license or the conclusion of Avista' s
10 next general rate case ("GRC"), together with a carrying
11 charge on the deferral, as well as a carrying charge on
12 the amount of relicensing costs not yet included in rate
13 base. The carrying charge for deferrals and rate base
14 not yet included in establishing rates would be the
15 customer deposit rate at that time (presently 5%).
16 Q.Please explain the accounting treatment related
17 to the Confidential Litigation costs.
18 A.Company witness Andrews describes the
19 confidential litigation at pages 32 and 33 of her
20 pre-filed direct testimony (unredacted). Inasmuch as
21 that matter is still pending and has yet to be finally
22 resolved, but is expected to reach resolution in the near
23 future, the Parties have agreed to defer as a regulatory
24 expense item (in Account 186 - Miscellaneous Deferred.25 Debi ts) on the Company's balance sheet depreciation
90 Norwood, Di 9
Avista Corporation
.1 associated with Idaho's share of the aforementioned costs
2 wi th a carrying charge on the deferral
3
4 /
5
6 /
7
8 /
9
10
11
12.13
14
15
16
17
18
19
20
21
22
23
24.25
91 Norwood,Di 9a
Avista Corporation
.
11
1 as well as a carrying charge on the amount of costs not
2 yet included in rate base for subsequent recovery in
3 rates. The carrying charge will be the customer deposit
4 rate (presently 5%). This deferral, together with a
5 carrying charge, will continue until the earlier of
6 twel ve (12) months from the date of resolution of the
7 litigation or until the conclusion of Avista' s next
8 general rate case (GRC).
9 Q.Please explain the treatment of the Montana
10 Riverbed Litigation costs.
A.On November 1, 2007, Avista filed an
12 Application with the Commission (Case No. AVU-E-07-10).13 requesting an accounting order authorizing deferral of
14 settlement lease payments and interest accruals relating
15 to the recent settlement of a lawsuit in the State of
16 Montana over the use of the riverbed related to the
17 Company's ownership of the Noxon Rapids and Cabinet Gorge
18 hydroelectric proj ects located on the Clark Fork River.
19 The Commission, in its Order No. 30492, authorized the
20 deferral of settlement lease payments and delayed a
21 decision on interest, until the matter was addressed in
22 this general rate filing. The Parties have agreed to the
23 Company's requested amortization of costs, together with
24 recovery of accrued interest on the Idaho share of.25 deferrals at the customer deposit rate (presently 5%) .
92 Norwood, Di 10
Avista Corporation
.
.
.
1 Q.Please explain the accounting treatment related
2 to the revenues associated with the sale of Carbon
3 Financial Instruments (CFIs).
4 A.On May 22, 2008 Avista filed a request with the
5 Commission (Case No. AVU-E-08-2) to defer the revenues
6 associated with the sale of Carbon Financial Instruments
7 (CFIs) on the Chicago Climate Exchange. The Company's
8 Application was approved on August 5, 2008 in Order No.
9 30610. Idaho's share of the revenues, net of expenses,
10 from the CFI sales is $850,571. These dollars will be
11 amortized over a two-year period beginning in the
12 calendar month of the effective date of new retail rates
13 resul ting from this Stipulation, with a carrying charge
14 on the unamortized balance at the customer deposit rate.
15 The revenue requirement included in this Stipulation has
16 been reduced for the CFI revenues, in order to flow these
17 benefi ts through to customers.
18 Q.Please describe the low-income portion of the
19 Stipulation.
20 A.There are three areas the Company addressed in
21 the Stipulation, as follows:
22 (a.) Low-Income DSM Funding - At present, $350,000
23 per year is provided to Idaho service (CAP) agencies for
24 proposed funding of low-income Demand-Side Management
25 (DSM). The Parties agree to increase the annual level offunding to
93 Norwood, Di 11
Avista Corporation
.
.
.
1 $465,000 for such programs (which includes administrative
2 overhead). The continuation and level of such funding
3 will be revisited in the Company's next general rate
4 filing.
5 (b.) Funding for Outreach for Low- Income
6 Conservation - The Parties agree that annual funding in
7 the amount of $25,000 will be provided to Idaho (CAP)
8 agencies for the purpose of underwriting the dedication
9 of agency personnel to assist in low-income outreach and
10 education concerning conservation. The dollars will be
11 funded through the DSM Tariff Rider (Schedules 91 and
12 191), and will be in addition to the $465,000 of
13 Low-Income DSM Funding. The continuation and level of
14 such funding will be revisited in the Company's next
15 general rate filing.
16 (c.) Establishment of Generic Workshops - Avista
17 agrees to support and actively participate in any
18 Commission-established workshops for the purpose of
19 examining issues surrounding energy affordabili ty and
20 customers' ability to pay energy bills with respect to
21 all jurisdictional utili ties. As part of this process,
22 Avista agrees to explore the feasibility of establishing
23 a Low-Income Rate Assistance Program (LIRAP), or similar
24 program, to assist low-income residential customers in
25 Idaho.
94 Norwood, Di 12
Avista Corporation
.1 Q.Does the Company have other programs in place
2 to mitigate the impacts on customers of the proposed rate
11
12
. 13
14
15
16
17
18
19
20
21
22
23
24
. 25
3 increase?
4
5 /
6
7 /
8
9 /
10
95 Norwood, Di 12a
Avista Corporation
.1 A.Yes. Avista Utili ties offers a range of
2 programs to help customers who have difficulty paying
3 their energy bills. Some programs are in cooperation
4 wi th local Idaho community action agencies, who are
5 specialized in targeting assistance where it is most
6 needed. We are very aware of the impacts energy costs
7 have on our customers.
8 Programs designed to assist customers include:
9 Energy efficiency programs. Avista Utili ties
offers energy efficiency services to electric10 and natural gas residential, commercial, and
industrial customers.
11
12 Proj ect Share. Proj ect Share is a voluntary
program allowing customers to donate funds that
are distributed through community action
agencies to customers in need. In addition to
the customer and employee contributions of
$ 8 8, 910 in Idaho, Avista shareholders
contributed $50,000 to the program in 2007.
.13
14
15
16
17
Comfort Level Billing. The Company offers the
option for customers to pay the same bill
amount each month of the year by averaging
their annual usage.18
19
20
Payment arrangements. The Company's Contact
Center Representatives work with customers to
set up payment arrangements to pay energybills.21
22
23
CARES program. Customer Assistance Referral
and Evaluation Services provides assistance to
special-needs customers through access to
specially trained (CARES ) representatives who
provide referrals to area agencies and churches
for help with housing, utili ties, medical
assistance, etc.
24.25
96 Norwood, Di 13
Avista Corporation
.1
2
3
4 /
5
6 /
7
8 /
9
10
11
12.13
14
15
16
17
18
19
20
21
22
23
24.25
Customer service automation. Customers are
able to access Avista' s Interactive Voice
Response system (IVR) for automated
transactions to enter their own payment
arrangements, listen to outage
97 Norwood, Di 13a
Avista Corporation
.1 messages and conduct other business such as
obtaining account balances and requesting a
duplicate bill.2
3
4 iv. RATE SPRE & RATE DESIGN
5 Q.How did the Stipulation address rate spread?
6 A.Appendix 2 of the Stipulation shows the impact
7 on each service schedule of the agreed-upon electric and
8 natural gas increases. The proposed electric revenue
9 increase of $23,163,000 represents an overall increase of
10 11.98% in base rates, and with one exception, is spread
11 on a uniform percentage basis to all schedules. Schedule
12 25P (for Potlatch's Lewiston plant), however, will.13 receive an increase of 10.36%, in order to reflect a
14 Schedule 25P rate that is no higher than the tailblock
15 rate of Schedule 25. With this change, the relative rate
16 of return for Schedule 25P would move approximately
17 one-half way toward unity, more consistent with the
18 movement of other service schedules. All other schedules
19 will receive a 12.33% increase.
20 The spread of the increased natural gas revenue
21 requirement of $3,878,000 is set forth in Appendix 2 of
22 the Stipulation, and represents an overall increase of
23 4.7% in base rates. It reflects a reduction to what the
24 Company had proposed by way of an increase for each of.25 the gas
98 Norwood, Di 14
Avista Corporation
.
.
1 service schedules proportional to the reduction in the
2 overall increase.
3 Q.What is the basis of the Stipulation relating
4 to the rate design?
5 A.The Parties agree to changes in the electric
6 customer and demand charges as set forth in the Company's
7 filing, and summarized in Appendix 2 of the Stipulation.
8 This includes an increase in the residential monthly
9 basic charge from $4.00 to $4.60. The energy rates
10 wi thin each electric service schedule are increased by a
11 uniform percentage.
12 Wi th respect to natural gas rate design, the
13 Parties agree to apply the increase in rates within each
14 service schedule in the same manner as proposed by the
15 Company. The monthly basic charge for the residential
16 schedule will increase from $3.28 to $4.00, as proposed
1 7 by the Company.
18 V. CONCLUSION
19 Q.What is the effect of the Stipulation?
20 A.The Stipulation represents a negotiated
21 compromise on a variety of issues among the Parties.
22 Thus, the Parties have agreed that no particular party
23 shall be deemed to have approved the facts, principles,
24 methods, or theories employed by any other in arriving at.25 these stipulated provisions, and that the terms
99 Norwood, Di 15
Avista Corporation
.
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1 incorporated should not be viewed as precedent setting in
2 subsequent proceedings except as expressly provided.
3 Q.In conclusion, why is this Stipulation in the
4 public interest?
5 A.This Stipulation strikes a reasonable balance
6 between the interests of the Company and its customers,
7 including its low-income customers. As such, it
8 represents a reasonable compromise among differing
9 interests and points of view.
10 The Parties have agreed that the Company has
11 demonstrated need for a revenue requirement increase for
12 both its electric and natural gas customers. The
13 Stipulation provides for recovery of these costs. In the
14 final analysis, however, any settlement reflects a
15 compromise in the give-and-take of negotiations. The
16 Commission, therefore, has before it a Stipulation that
17 is supported by sound analysis and supporting evidence,
18 the approval of which is in the public interest.
19 Q.Does this conclude your pre-filed direct
20 testimony?
21
22
23
24.25
A.Yes, it does.
100 Norwood, Di 16
Avista Corporation
.1
2 open hear ing . )
3
(The following proceedings were had in
COMMISSIONER KEMPTON: Are there any
4 questions from intervenors? Mr. Purdy.
5 MR. PURDY: Than k you, Mr. Cha i rman .
.
6
7
8
9 BY MR. PURDY:
10 Q
CROSS-EXAMINATION
Good afternoon, Mr. Norwood.
Good afternoon.
Do you have in front of you the
13 stipulation that is the subject matter of this
18 A
11 A
I do.
Would you please turn to page 8 of 12 of
17 the stipulation itself?
12 Q
I'm there.
And specifically, I would ask you to look
20 at section 14, customer-related issues.
21
22
14 proceeding?
15 A
Yes.
Just as a point of clarification, the
23 second sentence in that first paragraph there states that
16 Q
24 the parties agree to increase the annual level of funding.25
19 Q
to 465,000 for low income weatherization which includes
CSB REPORTING
[phone]
A
Q
101 NORWOOD (X)
Avista Corporation
.1 administrati ve overhead. Now, is it the Company's
2 position that $100,000 of this $115,000 increase will go
3 to actual program measures and the other 15,000 will go
4 to administration of the program?
5 A That's correct. That's the nature of the
6 discussions that we had as we developed this document, so
.
18
7 yes.
8
9 you.
10
11
12
13
14
15
16
17
19 BY MR. MILLER:
20
21
22
Q
A
Q
MR. PURDY: And that's all I have. Thank
MR. WARD: Potlatch has no questions.
COMMISSIONER KEMPTON: Any questions?
MR. WARD: No questions. Thank you.
MR. MILLER: Mr. Chairman, I have one.
COMMISSIONER KEMPTON: Mr. Miller.
MR. MILLER: Thank you, Mr. Chairman.
CROSS-EXAMINATION
Hello, Mr. Norwood.
Hi.
Could I direct your attention to page 5,
23 lines 23 through 25, and page 6, lines 1 through 2 of
24 your testimony?.25 A I'm on page 5.
CSB REPORTING
[phone]
102 NORWOOD (X)
Avista Corporation
.
.
1 Q In general, I think you indicate that
2 gross plant additions were driven primarily by investment
3 and distribution plant which in turn resulted from
4 customer growth.
5 A That is one component that's listed here.
6 There are a number of others that we identify.
7 Q With respect to that one, which I think
8 you identify as 236 million, in general terms, how would
9 you describe growth on the Avista system since the last
10 rate case? Has it been uniform across customer classes
11 or have some classes grown more than others? I'm just
12 looking for a general description based on your general
13 knowledge.
14 A I have not seen that data to be able to
15 tell you whether one class has grown more quickly than
16 another class, so I'm not able to answer that for you.
17 Q Let me direct your attention to page 14 of
18 your testimony, lines 9 through 20.
19 A I'm there.
20 Q And there you indicate that Potlatch
2 1 receives a smaller increase than other Schedule 25
22 customers in order to reflect a Schedule 25P rate that is
23 no higher than the tailblock of rate schedule -- the
24 tailblock rate of Schedule 25. Can you elaborate on why.25 that's a desirable result?
CSB REPORTING
[phone]
103 NORWOOD (X)
Avista Corporation
.
.
.
1 A Yes. As we looked at the cost of service
2 for Potlatch and the Schedule 25 customers, it's not just
3 looking at a single tailblock rate, but it's looking at
4 the cost to serve Potlatch and the cost to serve other
5 Schedule 25 customers versus the revenue that we're
6 collecting from each of those customers, and what the
7 cost of service study showed was that the Schedule 25P,
8 Potlatch, under our original proposal would have caused
9 them to pay proportionately more than the other Schedule
10 25 customers, so by making this adjustment as is
11 indicated here, and we've moved all the schedules
12 approximately halfway toward unity, meaning that they are
13 moving, all the schedules are moving, closer to paying
14 what their cost of service is, by making this adjustment,
15 it puts Potlatch in the same position of their revenues
16 being moved the same distance, one-half way toward unity
17 and so in that sense, it's more equitable for all
18 schedules by doing that, and the reference to the
19 tailblock being no higher than the tailblock of Schedule
20 25 is just another reference point that indicates that
21 this movement of one-half way to unity is a proper thing
22 to do, so it's just another measuring stick that we used.
23 Q In his testimony, Mr. Lobb indicated that
24 the cost of service study incorporate
25 A I'm sorry, Mr. Miller, I've got a fan
CSB REPORTING
[phone]
104 NORWOOD (X)
Avista Corporation
.
.
.
1 blowing here and I can barely hear you.
2 Q I'll try and get that corrected.
3 A Thank you.
4 In Mr. Lobb' s testimony, he indicated thatQ
5 the cost of service study relying as it does on quite
6 stale load data is useful only as a general guide for
7 allocating cost responsibilities. I guess I was just
8 curious whether in your opinion the cost of service study
9 was accurate enough to support this sort of an
10 adjustment.
11 A For some of the schedules the answer would
12 be no, but for Schedule 25 and Schedule 25P, we actually
13 have hourly meters on all those customers because they
14 are large customers and so we have all of that data, so
15 as you develop the rates within that class of 25, 25P,
16 you do have good data to assess the cost for each of
17 those customers.
18 Q And is that data in the workpapers that
19 are filed in this case?
20 A You would look in Mr. Hirschkorn' s
21 testimony and exhibits for any information that we have
22 provided related to that. Otherwise, we had quite a bit
23 of discussion through the settlement talks and exchanged
24 some information there which supported this result
25 here.
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105 NORWOOD (X)
Avista Corporation
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20
1 Q If that data is not included anywhere in
2 the case, would the Company be willing to provide it to
3 its customer Bennett Forest Industries to allow Bennett
4 to do further analysis for future cases?
5 MR. MEYER: May I ask a clarifying
6 question? In connection with a subsequent filing the
7 Company might make? I think that's how you at least
8 ended your question.
9 MR. MILLER: Yes, we would not seek to
10 disrupt the results of this case, but in preparation for
11 another case, it sounds like it would be useful data to
12 have.
13 MR. MEYER: We would be happy to provide
14 whatever information we have.
15 MR. MILLER: Thank you.
16 COMMISSIONER KEMPTON: Mr. Miller, does
17 that complete your questioning?
18 MR. MILLER: One or two more.
19 COMMISSIONER KEMPTON: Go ahead.
Q BY MR. MILLER: I direct your attention to
21 Appendix 2 of the settlement agreement and this is just
22 another curiosity question, essentially.
23
24.25
A I'm there.
Q There I think we can see that Schedule 25
has a tiered energy rate structure.
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106 NORWOOD (X)
Avista Corporation
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1 A I'm sorry,what page are you on?
Q Appendix 2 of the settlement agreement.
A And what page?You must be on page 2?
Q Yes,sir,page 2 of 4.
A Okay.
Q And this is just a curiosity question,
2
3
4
5
6
7 there we see that Schedule 25 has a tiered energy rate
8 structure and Schedule 25P has a flat rate or a
9 non-tiered energy rate structure, and I was just curious
10 about the rate design philosophy that leads to a
11 different tariff structure for 25 and 25P.
12 A In general terms, if you look at Schedule
13 25P, that schedule is set up for one customer because of
14 the uniqueness of that customer and so you design the
15 demand and energy charges to recover the costs associated
16 wi th serving that customer. On Schedule 25, that
17 schedule is designed for multiple customers and so you
18 work towards designing rates, in this case with multiple
19 blocks, to as closely as possible reflect the cost of
20 service for a number of customers who may use a different
21 amount of energy, so a larger Schedule 25 customer would
22 move into the second block and that would more closely
23 reflect the cost to serve that customer versus a smaller
24 Schedule 25 customer.
25 Q I previously distributed what's been
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107 NORWOOD (X)
Avista Corporation
.1 marked as Exhibit 401. Is that on your table there?
2 A I have a copy of, yes, Exhibit 401.
3 Q And I've distributed this to the
4 Commissioners and the parties and I believe that Bennett
5 sent a copy of this schedule to the Company yesterday for
6 its review prior to the hearing today.
7 A That's correct.
s Q And this schedule is designed to
9 illustrate on an annualized basis the rate impact to
10 Bennett of the combined base rate increase and the
11 combined PCA -- combined with the proposed PCA rate
12 increase; is that your understanding of it?.13 A I don't believe that that's what it shows
14 and let me explain what I mean. We have -- in looking at
15 this document, what it shows is a comparison of the new
16 rates that would be effective for Bennett versus the
17 billing for the calendar year 2007 and so if we want to
18 compare the increase that will be effective for Bennett,
19 increase to rates, increase to bills effective October
20 1st if these adjustments are approved by the Commission,
21 then you would want to compare the current annual bill
22 for Bennett versus the new annual bill for Bennett
23 beginning in October, and by picking up 2007, during the
24 first nine months of 2007, the rates were different than.25 the last three months of 2007, and so you'll end up with
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ios NORWOOD (X)
Avista Corporation
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1 a percentage which in this case is 22.56 percent, which
2 the current increase we're talking about and proposing is
3 less than what this reflects and it's because the rates
4 in early '07 were lower than what they are today.
5 Q I recognize that you could use different
6 time periods to make the comparison. You could do it on
7 a 12 months annual basis or you could do it on an October
8 to October basis and I think your criticism is this does
9 it on a 12-month calendar basis, not October to October;
10 is that roughly --
11 A It really depends on what you want to
12 measure. If you want to measure the 2009 bill versus
13 2007 bill, then I believe this is an appropriate
14 calculation. If you want to measure the increase that
15 would be effective if these proposals are approved, it
16 would be less than this.
17 Q What would be the magnitude of the
18 difference?
19 A The increase, if you take a look at
20 current rates versus the proposed rates for the general
21 case, the rate would go up 11.5 percent. If you included
22 the proposed PCA increase which is separate from this
23 proceeding if it were to be approved and you were to add
24 that to the PCA, it would be 19.2 percent is what we
25 calculate.
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109 NORWOOD (X)
Avista Corporation
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1 So either way it's a substantial rateQ
2 increase from a customer' s perspective?
3 Either way there will be an increase,A
4 that's correct.
5 And from the customer's perspective ofQ
6 what it can expect its annual energy --
7 A I'm sorry, again, I can't hear you.
8 Q I'm sorry, I keep drifting away from the
9 microphone. From the customer's perspective of what it
10 can expect to pay in the next calendar year, Exhibit 401
11 is an accurate reflection of that, assuming the same
12 levels of consumption?
13 A Yes, down to line 13, that's correct.
14 Q Right. With all due respect and sympathy
15 for the low income people and the need for mitigation
16 with respect to that group, what programs does Avista
17 have in place to mitigate rate impacts for larger
18 customers?
19 A What we have is a number of energy
20 efficiency programs for our industrial customers and many
21 of our customers do take advantage of that. We have
22 engineers in our DSM department that will go to their
23 si te and work with them to identify cost saving measures
24 and we've actually done quite a bit of that for a number
25 of Idaho industrial customers in the past year or two.
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110 NORWOOD (X)
Avista Corporation
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1 Q Would you happen to know specifically what
2 you've done for Bennett Forest Industries?
3 A I do not, but we'd be happy to work with
4 you if you have opportunities to save energy.
5 Q All right, thank you. Going back again to
6 page 5 where you discuss plant additions and investments
7 in distribution plant, do you know how Avista allocates
8 distribution plant to its Schedule 25 customers; that is,
9 is it directly assigned or allocated on some other
10 basis?
11 A My understanding is that to the extent it
12 can be identified on a per customer basis, it's directly
13 assigned; otherwise, it would be allocated.
14 Q I don't suppose you happen to know how
15 it's done with respect to Bennett Forest Industries.
16 A I do not, but Mr. Hirschkorn is in the
17 room and he might be able to provide further guidance on
18 that.
19 MR. MILLER: That would be helpful, thank
20 you. Now I'm finished, Mr. Chairman.
21
22
23
.25
MR. WARD: Mr. Chairman?
COMMISSIONER KEMPTON: Yes.
MR. WARD: May I ask a couple of questions
24 in light of the questions Mr. Miller just asked and the
answers he got?
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111 NORWOOD (X)
Avista Corporation
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20
.
1 COMMISSIONER KEMPTON: Mr. Ward, the
2 question was
3 MR. WARD: I'd like to ask a couple of
4 questions. I passed originally, but after Mr. Miller's
5 questions, I'd like to ask a couple of questions.
6 COMMISSIONER KEMPTON: Go ahead.
7
8 CROSS-EXAMINATION
9
10 BY MR. WARD:
11 Q Mr. Norwood, I don't expect you to have
12 these numbers on the tip of your tongue, but Mr. Miller
13 asked you some questions comparing the rates for Schedule
14 25 and Schedule 25P which is, of course, Potlatch. Is it
15 true that the tailblock differential between those two
16 rates is very tiny?
17 A Yes, it is.
18 Q Do you recall about nil?
19 A Yes, it is.
Q Secondly, are you aware of the relative
21 size of Potlatch compared to Schedule 25 -- let me ask it
22 a different way. Is it true that Potlatch alone is
23 almost three times the size of all of Schedule 25
24 customers?
25 A Yes, that's my understanding. In fact,
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112 NORWOOD (X)
Avista Corporation
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20
21
22
1 Potlatch's load, I believe, is 100 average megawatts
2 which is about a third of our total load in the State of
3 Idaho.
4 Q Right, and is Potlatch a very high load
5 factor customer?
6 A Yes, they are.
7 Q And is it generally true that costs are
8 lower to serve larger high load factor customers as
9 compared to smaller lower load factor customers?
10 A When it comes to the use of distribution
11 facili ties as an example or in the case of a high load
12 factor where you have to have less capacity installed,
13 then the answer would be yes.
14 MR. WARD: Thank you. That's all I had,
15 Mr. Chairman.
16 COMMISSIONER KEMPTON: Mr. Ward. Any
17 questions? Commissioner Smith.
18 COMMISSIONER SMITH: Thank you very much,
19 Mr. Chairman.
EXAMINATION
23 BY COMMISSIONER SMITH:
24.25
Q Mr. Norwood, it's my recollection that the
Company was engaged for some time in putting some kind of
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113 NORWOOD (Com)
Avista Corporation
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1 new meter technology in their customers' premises; is
2 that correct?
3 A That's correct.
4 Q Could you update us on the status of
5 that?
6 A Yes. Beginning in 2005, we began to
7 change out the existing analog meters into digital meters
8 and, also, those meters include the technology for us to
9 be able to read the meters through a fixed network
10 automatically or through a power line carrier technology
11 so that we would be able to eliminate the meter readers.
12 The initial stage was to change out all the meters and we
13 are essentially done changing out all the meters, so for
14 those power line carrier meters, those are now read
15 without a meter reader or anyone driving around to read.
16 Once the meters were installed, rather than having reader
17 meters by foot, we would have a van that would drive
18 around and collect the reads and they could read probably
19 ten times the number of reads that someone by foot could.
20 What we're finishing up right now, our
21 original proposal was to install this over the four-year
22 period 2005 through 2008 and we are in the stage right
23 now of wrapping up the installation of the remaining
24 fixed network which will basically receive the radio
25 signals to collect that data so that we will be able to
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114 NORWOOD (Com)
Avista Corporation
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1 have our monthly information available without meter
2 readers. Now, the technology also provides the
3 opportuni ty to collect hourly data from these meters and
4 so that step, the next step, then, would be to develop
5 software and facilities to be able to store all of that
6 data.
7 If you can imagine 100,000 customers times
8 8,000 data points per year, it's a lot of data, so once
9 we get the system up and running, the next step would be
10 to store that data, process that data and be able to
11 provide more information to our customers at some point
12 down the road in terms of hourly use of information.
13 Q And it occurred to me that with this
14 technology, maybe we need to rethink our price structure
15 wi th regard to customers. Maybe we need to be thinking
16 about time of use pricing or critical peak pricing.
17 A The technology that we put in place does
18 provide the opportunity to work toward that. There will
19 be a couple of things we'll need to do before we get
20 there. One is, as I mentioned, be able to store the
21 data, process the data. Secondly, our current billing
22 system is not set up to be able to bill customers on a
23 heavy load, light load, you know, in that manner, so
24 there would need to be work on both our billing system as
25 well as the processing of data, but that is something
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115 NORWOOD (Com)
Avista Corporation
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1 that is possible down the road with the system that we
2 have in place.
3 Q Well, in my experience here it seems that
4 utili ty billing systems are sometimes the biggest
5 impediment to any move forward. I don't know if that's
6 been your experience.
7 A In the EEI meetings that I've attended,
8 tha t 's a common theme, that they're expens i ve and appear
9 to be an impediment, but that's something that we'll have
10 to work on down the road.
11 Q Thank you. Last night at our public
12 hearing we had a couple of customers be unhappy with the
13 quali ty of their service in terms of the number of
14 outages. Do you have any outage data for Culdesac or
15 Sti tes or generally the quality of the service people are
16 getting?
17 A We follow that data continuously and we
18 have reports every month and, unfortunately, I don't have
19 it in front of me. I did make a note of the individuals
20 that have had outages, in reference to outages last
21 night, so we will follow up to check to see if there's
22 anything unusual there for those individuals, but
23 generally speaking, our outage record is actually very
24 good, and I think we see that in the customer
25 satisfaction ratings that we have and the most recent
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116 NORWOOD (Com)
Avista Corporation
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1 ratings that we've had is 96 percent of the customers
2 that are doing business with us are very satisfied.
3 Q Okay, well, let's see if four percent are
4 all located in one community, because maybe overall it
5 looks good, but if you dig down, there are problem areas
6 and I'd appreciate it if you could get back to me on
7 that.
8 A We'll follow up on those individuals that
9 spoke last night.
10 COMMISSIONER SMITH: Thank you,
11 Mr. Chairman.
12 COMMISSIONER KEMPTON: Mr. Redford.
13
14 EXAMINATION
15
16 BY COMMISSIONER REDFORD:
17 Q Mr. Chairman, Mr. Norwood, I think it's
18 important for the record to reflect that a misconception
19 by many customers is that the Idaho customers are forced
20 to pay for the total costs of the Company and/or they
21 have to share the burden or they don't share the burden
22 and I think it's important for you to explain to me and
23 to the record what is your corporate structure, if I
24 might? For that, you have Avista Corporation and I have
25 seen in different places you have Avista Utility
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117 NORWOOD (Com)
Avista Corporation
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1 Corporation or division, what is it?
2 A Yes, as we are currently structured,
3 Avista Corporation is Avista Utilities; in other words,
4 the Avista Utili ties is an operating division of the
5 corporation, but it's one and the same. Under Avista
6 Corporation and under Avista Utili ties, we also have a
7 separate holding company that's called Avista Capital and
8 under Avista Capital, we have Advantage IQ, and we used
9 to have Avista Energy which we sold last year, but all of
10 the dollars, whether it's investment or expenses for
11 Avista Capital, stays over there under that corporation
12 and so there's no subsidy.
13 To the extent any services like payroll is
14 provided by Avista Corp. to Avista Capital, those dollars
15 are charged to Avista Capital. That information is
16 available for this Staff and parties to look at to verify
17 that it's appropriate. Otherwise, our customers are
18 paying for just the cost to provide service to them
19 provided by Avista Utilities.
20 Q Do your corporate officers provide any
21 services to Advantage or the holding company?
22 A They do and what we do there is we
23 identify the amount of time that the officers spend on
24 these subsidiaries and those dollars are then directly
25 assigned to those subsidiaries, and again¡ that's
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118 NORWOOD (Com)
Avista Corporation
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1 available for audit by the parties participating in the
2 case, so customers are not paying for that.
3 Q So when you do your calculations in
4 support of a rate case, first of all, you make a
5 determination of what the allocation is from the two
6 companies; is that correct?
7 A Actually, when we put our numbers
8 together, we don't even pick up the Avista Capital
9 numbers at all. They're accounted for separately, so we
10 exclude those, so then we just start with the Avista
11 Utilities numbers and to the extent in the example of the
12 officers, we'll take the dollars for the time they spent
13 on subsidiaries and we exclude those and so you'll see
14 those in our workpapers and even things like the issue of
15 incenti ves and bonuses came up earlier, what we do is we
16 actually exclude any of the bonuses or incentives for
17 officers that are related to earnings of the corporation
18 or earnings of the utility and we exclude those, so we
19 don't even include those in our request for the rate
20 case, so as customers, you know, respond and they see the
21 dollars being paid to officers, what they don't
22 understand is the maj ori ty of those dollars are not being
23 included in the rates that they're paying and so it's
24 important for them to understand that.
25 Q Have you done any public relations, made
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119 NORWOOD (Com)
Avista Corporation
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1 any public relations efforts to put in layman's terms, if
2 you can, that the customers are not burdened with all
3 those costs?
4 A Yes. We've done it in a couple of ways.
5 One is we've put together fact sheets that we'll go
6 around to our local newspapers, Spokesman Review,
7 Coeur d' Alene Press, Journal of Business and we'll have
8 just sit-down sessions with them to explain to them
9 what's in rates and what's not, and one example that we
10 gave to them is when you look at the compensation for the
11 top five officers as has been referenced earlier, less
12 than 30 percent of the compensation, at least for '07,
13 was included in rates when you exclude the other pieces
14 and incentives and others that's excluded.
15 Another way that we've explained it is the
16 way that was discussed earlier today by Mr. Lobb and that
17 is if you take all of the salaries for all of the
18 officers that's included in rates, it's about one-half of
19 one percent of a customer's bill, and as Mr. Lobb
20 mentioned earlier, for a customer using about 1,000
21 kilowatt-hours, their bill is going to be about $70.00,
22 so it's about $.35 per month is what they'd be paying and
23 that would be for the total compensation for all the
24 officers, not just the part that, you know, they would be
25 paying them zero as Mr. Lobb mentioned earlier.
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120 NORWOOD (Com)
Avista Corporation
.1 Q Also, there's a perception, I believe, by
2 some Idaho customers that notwithstanding your Washington
3 operations, the Idaho customers are paying for everything
4 and that, of course, is not correct. Did you do any
5 educational or PR work as far as trying to explain that
6 Idaho is only paying for itself?
7 A We've had some discussions with that with
8 the media, probably less than other topics, but it is
9 important for customers to know that. You know, we
10 operate our generating system, our hydro plants, our
11 thermal plants and all of our purchases, we aggregate
12 them into a one system and then we allocate those to.13 Washington and Idaho based on the energy needs of the
14 customers in each state, so Idaho customers are only
15 paying for the amount of energy that's needed to serve
16 them.
17 Q I think we all know that. I'm hoping that
18 through public information you might let the customers
19 know that. I think it's very important. We've had so
20 many comments about the officers' compensation and that
21 the stockholders need to take a bigger hit and so on and
22 while I realize that it's pretty difficult to explain all
23 the intricacies of the utility business, I think it's
24 important that they know what the dynamics of the numbers.25 are a little bit and I know that's a tough job to do, but
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121 NORWOOD (Com)
Avista Corporation
.1 the more you can do with it the better you can serve the
2 public.
3 A Okay, I'll take that back and we'll work
4 on that.
5 Q One question that was asked, I believe,
6 before was public meetings with regard to low income
7 users. Has the Company got any preliminary plans on how
8 to structure such a program? We've just gotten a number
9 of comments that say, you know, I'm on a fixed income and
10 it's either turn my lights on or turn my heater on or buy
11 the medicine, and while there's a certain amount of puppy
12 in some of those, I think that everybody is feeling that.13 crunch and if you combine the PCA and the general rate
14 increase, you're talking about 20 percent, 19 or 20
15 percent, and in that regard, do you have any forward
16 thinking on how you would structure something like
17 that?
18 A I have a couple of thoughts on that. One
19 is, obviously, a place to start and think about is some
20 programs that are already in place and so it's worth
21 thinking about a program we have in Oregon and Washington
22 where it's called the low income rate assistance program
23 where we have a tariff rider in place here in Idaho and
24 in Washington, and in Washington what we do is we just.25 increase the tariff rider a little bit and right now it's
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122 NORWOOD (Com)
Avista Corporation
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23
24
. 25
1 about a half percent of revenue. We collect those
2 dollars and that provides additional funding for those
3 having the greatest need in terms of paying their bill
4 wi th a similar program in Oregon. Now, I'm not saying
5 that to say that's what we should do here, but it's
6 something to look at as we look towards some kind of
7 workshop.
8 There may be other ways to accomplish
9 that, also. The other thought is that in terms of where
10 to go from here, I think it would be good to have some
11 kind of workshop or forum to discuss this and it would
12 probably be better to have it sooner rather than later.
13 If we come up with a program that might need to be
14 addressed in the legislature in some way, it would
15 probably be good to figure that out before this next
16 session which would allow us to accommodate that, so
17 those are just some preliminary thoughts.
18 COMMISSIONER REDFORD: Thank you. I have
19 no further questions.
20
21
22
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Avista Corporation
.1 EXAMINATION
2
3 BY COMMISSIONER KEMPTON:
4 Q Mr. Norwood, first of all, just coming
5 back with the topic that you were just on, I think that
6 would be advantageous in terms of having a work group
7 meet early enough that information can come back in a
8 format that the legislature can look at, because I think
9 fundamentally, it's a legislative problem. It's
10 certainly a part of the industry's problem in their face
11 with the consumers, but at the same time, I think
12 meaningful steps, I mean really significant steps to.13 handle issues that are developing in our economy right
14 now as they relate to low income consumers on the power
15 side is a legislative issue, and sometimes what is done
16 by working groups on the outside can format the structure
17 of the legislative review of those issues and how
is legislation is developed, so I would encourage that kind
19 of an effort.
20 Did I understand earlier that you are
21 going to file another rate case in the early part of
22 2009?
23 A We don't have definite plans, but based on
24 the changes in costs that we're seeing, we would expect.25 to file sometime in early '09.
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124 NORWOOD (Com)
Avista Corporation
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1 Q I think that one of the issues that we
2 have in this general rate case now and has been addressed
3 in the settlement is the issue of having a complete cost
4 of service. I think if I were the general public and I
5 were looking at another rate case coming in without the
6 cost of service issue being addressed, and by that, I
7 mean having the cost of service defined in all aspects
8 necessary for an analytical development of the rate case
9 decision, I think I would be pretty angry about that and
10 find it a little disconcerting that you're thinking of a
11 proposal for a rate case in the first part of the year
12 and not being able to solve the cost of service issue
13 until later, maybe much later, in 2009.
14 I don't know that there's an answer to the
15 point that I'm making. I'm not asking you for an answer
16 because an answer isn't relevant at this point from
17 Avista, but I will say that the Commission responds to
18 the concerns of not only the public but the legislature
19 and a host of outside influences in making decisions
20 about going into rate cases and how we function in that
21 environment and I agree with Staff, PUC Staff, in this
22 case, in their expectation, their hope, that there will
23 be a rate case that comes out with the cost of service
24 being included in it in sufficient detail that it
25 actually can suffice as a fully formatted cost of service
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125 NORWOOD (Com)
Avista Corporation
.1 with the analytical data included. There was a
2 A May I respond if you're going on to
3 another?
4 Q Please do.
5 A In terms of cost of service, a cost of
6 service study will be provided and we have data to
7 provide that. A new load study is what we are working on
8 and that data will not be available until the end of '09.
9 That load study will provide information that will be a
10 fine-tuning of the cost of service study, so the
11 information that you have in front of you, the load study
12 information is dated, but that doesn't mean it's bad data.13 or that it's not representative of the cost to serve
14 customers, so this load study is going to be more of a
15 fine-tuning as opposed to a maj or shift in dollars,
16 whether it be across customer classes or wi thin
17 schedules, so I wouldn't view this as something that's a
18 maj or problem that's before us right now. It's a
19 fine-tuning.
20 The other point that I think is important
21 to consider as we roll into '09 is that when we filed
22 this case, it had been four years since we had a case and
23 as we look to '09, we would expect any rate adjustment to
24 be much smaller than what we're dealing with now..25 Another point to consider is that as we reset the base on
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126 NORWOOD (Com)
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1 power supply costs for the PCA adj ustment, we would
2 expect that the PCA rate would go down as we roll into
3 '09, so there may be an opportunity as we file a case in
4 ' 09 to adj ust the base rates, but not have an overall
5 price increase to customers because you're able to reduce
6 the PCA rate, so I'm hoping that as we roll into '09,
7 we'll all take a look at what the circumstances are so
8 that everyone's needs can be accommodated, and I can't
9 make promises today to you, but I think the math would
10 probably provide the opportunity, unless we have a really
11 bad water condition or something bad goes wrong, the
12 potential to have a very small or possibly no rate
13 adj ustment in '09 with a rate case.
14 Q Thank you, and your points are well taken.
15 I would just simply note that I certainly as one of the
16 Commission members and I imagine the Commission as a
17 whole will depend on your good judgment in the balance
18 between those as to the advisability of submitting a rate
19 case early on. All of those things are players. We all
20 understand the factors that are involved in them.
21 A May I?
22 Q Just a moment. In relation to what
23 Commissioner Redford mentioned, the costs are going up
24 for the utilities, there's no question about that and we
25 acknowledge that. They're also going up for the
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127 NORWOOD (Com)
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1 consumers. I don't care whether it's large power loads
2 or whether it's low income customers, these costs are
3 going up exponentially, and in the structuring that we
4 have where we have staggered times when additional rates
5 are applied to those customers, it becomes discouraging
6 to them in trying to plan how they are going to manage
7 their own budgets, and I think it's important as we go
8 through this that we not forget that and that's my pointt
9 I think, more than anything else in the consideration of
10 the next rate case, we need to have the best information
11 available from the utility when it comes in.
12 We can work the issues, Staff can
13 certainly work the issues. I would just prefer not to
14 have another rate case like this from any of the
15 utili ties where we're making statistical estimates of a
16 workable cost of service study; in other words, where
17 we're substituting statistical analysis for actual data
18 collected. I think both in forecasting and in using
19 statistics to try and move forward and keep things moving
20 for the industry, I think those are one-time exercises
21 that you don't want to do again if you can help it,
22 especially when we're moving toward now the process of
23 filing annually on rate cases and it looks like that may
24 be where we're going.
25 I don't mean to pontificate and I'm not
CSB REPORTING
(208) 890~5198
128 NORWOOD (Com)
Avista Corporation
.1 suggesting that there's any issue afoot of when you file
2 your next rate case, that's entirely your discretion, but
3 these issues embedded inside the rate cases I think are
4 fundamentally important to the Commission in their
5 evaluation of a rate case when it comes in and you asked
6 for a comment.
7 A I don't disagree with you that all these
8 issues are important and that's why we're doing a new
9 study to begin with here. In terms of another case next
10 year, if there were a circumstance where we were not
11 allowed for some reason to file in '09 before we had a
12 study done, I would be very concerned about the response.13 from Wall Street. We are right now for S&P at the lowest
14 of the investment grade ratings. We just got the
15 investment grade back and if for some reason we were not
16 allowed to file, I would be very concerned about the
17 reaction to that, especially if there's an opportunity to
18 file and have little or no impact to customers.
19 Q Mr. Norwood, I don't think the Commission
20 would ever stand in the way of allowing the filing. You
21 were mentioning a few minutes ago some of the interface
22 that you have with the news media and with the general
23 public. Last July you filed a second quarter net income
24 report that came out about the end of July, I think,.25 right at the end, and a day later the Spokesman Review
CSB REPORTING
[phone]
129 NORWOOD (Com)
Avista Corporation
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1 came out with an article that said that your profits had
2 jumped 72 percent. I'm sure you were excited about that
3 in the sense of the earnings that you had just made
4 overnight. I asked counsel in the PUC to send that out
5 to the intervenors for review. I don't imagine there
6 will be too much comment on that from other intervenors,
7 but I would like your point of view on that particular
8 article. We've had a lot of comments, I can't tell you
9 how many comments we've had on the fact that your profits
10 are so high.
11 A Let me first start with the 72 percent
12 increase in earnings that was referenced in the article.
13 What we're talking about there is the second quarter of
14 '08 versus the second quarter of 2007. In 2007, that is
15 the quarter where we recorded the sale of Avista Energy
16 and a loss associated with the sale of Avista Energy of
17 $12 million, and so for that one quarter the earnings for
18 2007 were abnormally low because of that and, of course,
19 that's a subsidiary and the customers don't pay those
20 costs, but it's part of the Avista Corporation umbrella,
21 so when earnings are reported, it's reflected, so in
22 2008, we have earnings that are closer to normal, to
23 where they should be, so when you have a loss for last
24 year versus something closer to normal, you're going to.25 see a bigger increase in the earnings.It doesn't mean
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130 NORWOOD (Com)
Avista Corporation
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1 that we earned too much. It just means a big increase.
2 The other thing that I think most
3 customers don't know or understand is that if you look at
4 our earnings for 2007, the whole year 2007, the utility
5 earned 5.2 percent return on equity and in this state and
6 in Washington and Oregon, we're allowed to earn about 10
7 percent return on equity and we earned on an actual basis
8 5.2. Avista Corporation earned 4.2 percent return on
9 equity, so we underearned a lot during 2007 and all this
10 information is public information, and for this year,
11 2008, we, in the earnings release, we published earnings
12 guidance and that guidance is for $1.20 per share for the
13 utility on the low end and $1.40 on the upper end. If we
14 were to earn $ 1.20, that would be a 7.2 percent return on
15 equi ty for the utility, still well below the 10 percent
16 that we're authorized to earn. Even if we earned at the
17 upper end of $ 1.40, it would be an 8.5 percent return on
18 equi ty, and so we are in a situation right now where our
19 costs are going up faster than what our revenues are and
20 so even though we have some of these price increases,
21 we're still not recovering our costs and that goes to the
22 concern that Wall Street sees is if we don't work towards
23 earning closer to that allowed return, investors are
24 going to go someplace else and there's more risk
25 associated with our bond rating, so all of this is a
CSB REPORTING
[phone]
131 NORWOOD (Com)
Avista Corporation
.
.
1 balancing, as you know, and, unfortunately, customers
2 don't see all of this information, and as we go out and
3 do these table talks with the Spokesman Review and Coeur
4 d' Alene Press and Lewiston Tribune, we've been down to
5 them, also, and Journal of Business, we talk with them
6 about this information.
7 Some of it gets out to our customers, but
8 not a lot of it, unfortunately, but we're trying to do
9 more of that so that customers understand that when we
10 see an increase in earnings reported, it doesn't mean
11 we're earning too much. It really means we're getting
12 closer to where we should be and I hope that helps a
13 little bit.
14 Q Mr. Norwood, would you draw a distinction
15 between earnings and profit?
16 A Yes, let me break it down this way: We
17 have roughly $2 billion of assets that we're using right
18 now to serve our customers and that's Washington, Idaho
19 and Oregon and that's net assets. About half of that is
20 financed with debt, borrowings from banks, bonds and that
21 sort of thing. The other billion dollars is financed
22 through equity, investors that lend us money, and in both
23 cases with debt and equity, on the debt side, they expect
24 to get their interest payment and so we collect that and.25 pay that and they get their interest first. On the
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132 NORWOOD (Com)
Avista Corporation
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1 equi ty side, the other billion, they also expect to get a
2 return and they get that through the dividends and,
3 hopefully, some growth in the stock price, so what
4 customers see in the newspaper as earnings or profit, I
5 think some of them sometimes think that that's extra
6 money that the Company made that lines someone' s pocket,
7 but the reality is that profit or earnings is the
8 interest component that we really owe the investor,
9 ei ther through the dividend or the return that they
10 should get so they continue to buy our stock so we can
11 continue to build the assets and maintain the assets, so
12 the profit or earnings is really the interest piece for
13 the investor and if that return is not attractive enough,
14 they'll take their money someplace else.
15 COMMISSIONER KEMPTON: I don't have any
16 further questions.
17 COMMISSIONER KEMPTON: Mr. Meyer?
18 MR. MEYER: No redirect, thank you.
19 COMMISSIONER KEMPTON: Thank you,
20 Mr. Norwood.
THE WITNESS: You're welcome.
(The witness left the stand.)
COMMISSIONER KEMPTON: Mr. Purdy.
MR. PURDY: Yes, thank you. Mr. Chairman,
Communi ty Action calls Teri Ottens.
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[phone]
133 NORWOOD (Com)
Avista Corporation
.
.
1 TERI OTTENS,
2 produced as a witness at the instance of the Community
3 Action Partnershiip Association of Idaho, having been
4 first duly sworn, was examined and testified as follows:
5
6 DIRECT EXAMINATION
7
8 BY MR. PURDY:
9 Q Ms. Ottens, have you previously prefiled
10 direct testimony in this case consisting of five pages of
11 narrative?
12 A I have.
13 Q And are there any exhibits to your
14 testimony?
15 A There are not.
16 Q All right, do you have any changes or
17 modifications that you'd like to make to your testimony
18 as currently prefiled?
19 A I do. A minor modification on page 3,
20 line 17, there was a little bit of careless wording here.
21 I stated that Idaho ranks No. 4 in the nation with the
22 highest energy burdens. That makes it sounds like we're
23 No. 4 from the bottom, we're actually No. 4 from the top,
24 and I wanted to strike that. It doesn't change the fact.25 that we still have a large energy burden gap and that
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134 OTTENS (Di)
CAPAI
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1 needs to be made up.
2 Q All right; so that we're clear, you would
3 strike the sentence beginning on page 17 and I'll read
4 it, II Idaho ranks No. 4 in the nation II I'm sorry, page
5 3, line 17, II Idaho ranks No. 4 in the nation with the
6 highest energy burdens. II And that's the end of your
7 deletion?
8 A Correct.
9 Q And again, you don't believe that that
10 substantively alters any of the remainder of your
11 testimony?
12 A No, it does not.
13 Q All right. With that modification if I
14 were to ask you the questions contained in your direct
15 testimony today, would your answers be the same?
16 A Yes, they would.
17 MR. PURDY: All right, I have no
18 addi tional direct. Thank you.
19 (The following prefiled testimony of
20 Ms. Teri Ottens is spread upon the record.)
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135 OTTENS (Di)
CAPAI
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I. INTRODUCTION
Q: Please state your name and business address.
A: My name is Teri Ottens. I am the Policy
Director of the Community Action Partnership Association
of Idaho headquartered at 5400 W. Franklin, Suite G,
Boise, Idaho, 83705.
Q: On whose behalf are you testifying in this
proceeding?
A: The Community Action Partnership Association of
Idaho ("CAPAI") Board of Directors asked me to present
the views of an expert on, and advocate for, low income
customers of AVISTA on behalf of CAPAI. CAPAI' s
Participation in this proceeding reflects our
organization's view that low income people are an
important part of AVISTA' s customer base, and that these
customers will be adversely impacted by the proposed
changes to the Company's electric service schedules.
CAPAI is an association of Idaho's six
Communi ty Action Partnerships, the Community Council of
Idaho and the Canyon County Organization on Aging,
Weatherization and Human Services, all dedicated to
promoting self-sufficiency through removing the causes
and conditions of poverty in Idaho's communi ties.
Communi ty Action Partnerships ("CAPs ") are
private, nonprofit organizations that fight poverty.
DIRECT OF TERI OTTENS 136 2
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Each CAP has a designated service area.
CAPS, every county in Idaho is served.
Combining all
CAPS design their
various programs to meet the unique needs of communi ties
located wi thin their respective service areas. Not every
CAP provides all of the following services, but all work
wi th people to promote and support increased
self-sufficiency. Programs provided by CAPS include:
employment preparation and dispatch, education assistance
child care, emergency food, senior independence and
support, clothing, home weatherization, energy
assistance, affordable housing, health care access, and
much more.
Q: Have you testified before this Commission in
other proceedings?
/
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/
DIRECT OF TERI OTTENS 137 2a
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A: Yes, I have testified on behalf of CAPAI in
numerous cases involving PacifiCorp, Idaho Power Company,
AVISTA, and United Water. CAPAI participated, on behalf
of low income customers, in the recent remote metering
proposal by AVISTA and in the negotiations that followed.
Q: Why has CAPAI intervened in this particular
proceeding?
A: CAPAI is concerned that the combined proposed
increases in fees and rates will add to the already
unwieldy energy cost burden that low income families in
Idaho face. This is of significant importance to
AVISTA's low-income Idaho customers and those who must
provide services to them.
According to the Department of Commerce in the
State of Idaho, 12.6% of the State's population, when
using the 2006 Census data, falls within federal poverty
guidelines and an additional 12.4 % fall wi thin the state
guidelines set at 150% of poverty levels. The 2006
Census reveals that those living in poverty are
categorized as 8.7% elderly, 15.1% children, 9.8% all
other families, 28.5% single mothers and 26.4% all
others.
According to the Department of Energy, the
"affordability burden" for total home energy is set
nationwide at 6% of gross household income and the burden
DIRECT OF TERI OTTENS 138 3
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for home heating is set at 2% of gross household income.
There is a gap of over $74.7 million between what
Idahoans can afford to pay (based on federal standards)
for energy in 2007 and what they actually paid.
Currently the LIHEAP program sends approximately $12.2
million (for energy assistance, weatherization and
administration) to Idaho.
Q: How do these increases proposed by AVISTA
directly impact its low-income customers?
A. Due to AVISTA' s lack of low income data
tracking CAPAI cannot precisely answer this question.
However we believe that this rate increase, coming on top
of past recent increases and the recent cost of living
increases in food and fuel will have a significant
/
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/
DIRECT OF TERI OTTENS 3a139
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impact upon our customers. Already, without this
increase, the CAP serving AVISTA terri tory has seen an
approximate 25% increase in calls for assistance. The
addi tional burden caused by an over 16% increase in
utili ty rates will only increase the needs of those in
poverty or on the edge.
Q. What does CAPAI feel could assist this customer
base?
A. One of the programs that help low income
customers to reduce their utility bill is the highly
successful weatherization program. This program allows
the CAP to provide energy efficiency measures to a home
that not only reduces their utility bill but is a long
term solution in keeping the utility costs under control.
We believe that increasing this program to allow for
weatherization of more low income homes would be highly
desirable (currently only 10% of the homes receiving a
LIHEAP benefit are weatherized). The proposed settlement
agreement proposing an additional $100,000 for this
program incorporates this proposal. While this falls
short of bridging the gap between need and resources it
is a commendable step by AVISTA in addressing this gap.
A second program that has been tied to
weatherization is the provision of energy efficient
education. Currently only those homes qualifying for
DIRECT OF TERI OTTENS 4140
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weatherization assistance currently receive such
education. The expansion of energy efficiency education
to more low income homes receiving LIHEAP would help
those homes to reduce their energy burden, thereby
reducing their individual bill amounts. As mentioned,
currently only 10% of homes receiving LIHEAP receive this
education. Consequently the company has agreed to fund a
low income energy conservation education program in the
amount of $25,000 annually which CAPAI believe to be a
highly effective mechanism for reducing energy demand,
thereby providing system-wide benefit to all ratepayers.
Finally, CAPAI believes that the low income
problem is larger than the AVISTA terri tory.
Consequently, CAPAI strongly urges this Commission to
initiate a separate and
/
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/
DIRECT OF TERI OTTENS 4a141
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generic proceeding involving all utili ties to address
solutions in serving this vulnerable population.
Q. Are you comfortable that these issues have been
addressed in the settlement agreement negotiated with
AVISTA?
A. Yes, we feel that AVISTA has responded in a
posi ti ve manner to our concerns and has worked out a
settlement agreement to address these. We look forward
to further dialog concerning future solutions.
Q: Does that conclude your testimony?
A: Yes it does.
DIRECT OF TERI OTTENS 142 5
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1 (The following proceedings were had in
2 open hearing.)
3 COMMISSIONER KEMPTON: Are there any
4 cross-examinations from the intervenors?
5 MR. MEYER: No questions.
6 COMMISSIONER KEMPTON: Commissioners?
7 Commissioner Smith.
8
9 EXAMINATION
10
11 BY COMMISSIONER SMITH:
12 Q This may be unfair, Teri, but we have
13 occasionally heard from customers in a public hearing
14 that they feel that the general body of residential
15 ratepayers, and most especially low income, are not
16 adequately represented in the settlement process and that
1 7 it was kind of a secret, closed process and, therefore,
18 their concerns weren't adequately considered in the
19 settlement process and I was wondering if you could give
20 us your views on the settlement process and how open it
21 is and whether residential ratepayers are adequately
22 represented through that process.
.
23 We're the Community Action PartnershipA
24 Association of Idaho and we represent the six CAPs around
25 the state as well as two other organizations. The CAP
CSB REPORTING
[phone]
143 OTTENS (Com)
CAPAI
.
.
.
1 that is served by Avista is the Community Action
2 Partnership. They're located in Lewiston with offices in
3 Coeur d' Alene. Those are the people on the ground that
4 not only administer LIHEAP, but also the weatherization
5 program and, frankly, deal with customers that can't pay
6 their bill on a daily basis. As part of the settlement,
7 we drew in their staff and we even talked to their staff
8 on the ground who are out there actually talking to the
9 low income customers that they serve and the settlement
10 was made with their input in mind, the input of the CAP
11 and their staff.
12 I'm not sure I can answer the question on
13 whether it was a secret negotiation or not. We recognize
14 that in this particular proceeding that there were some
15 limitations and we are looking forward to a timely
16 setting, we hope, of a workshop or work session in which
17 we can get more of the issues on the table and maybe some
is issues that can more address their concerns than could be
19 addressed in this particular rate case.
20 And finally, these people seem to belongQ
21 to an organization I CAN .
22 A Uh-huh.
23 Q Can you explain the difference between
24 that and the CAP?
25 Yes. The Idaho Community Action NetworkA
CSB REPORTING
[phone]
OTTENS (Com)
CAPAI
144
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1 is an entirely separate nonprofit organization that also
2 represents low income in the State of Idaho, and I think
3 that they're excellent in that they mobilize their forces
4 and I think that they're at almost every single one of
5 the hearings that you have. The Community Action
6 Partnership is a nonprofit national association. We were
7 created by federal law and we were created to help
8 administer federal low income programs, and while we are
9 pri vate non-profits, we have government contracts to
10 administer those federal and in some cases statewide
11 programs.
12 COMMISSIONER KEMPTON: Okay, does that
13 finish your testimony, then?
14 THE WITNESS: If there's no more
15 questions.
16
17 EXAMINATION
18
19 BY COMMISSIONER KEMPTON:
20 I have one other question. My questionQ
21 was the same basically as Commissioner Smith's because,
22 you know, I've experienced ICAN in many ways during some
23 of my past job experiences and that affiliation seems to
24 be to me in the environment we're in now where they have
25 basically the same kind of interests that you do,
CSB REPORTING
[phone]
OTTENS (Com)
CAPAI
145
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1 al though you're federally chartered, is there competition
2 in that interface? Is there a sense that one does not
3 necessarily work to the advantage of the other? It's
4 certainly the sense we got last night.
5 A Well, there's a couple of differences
6 between ICAN and us and one of the differences is that
7 one, we're on the ground actually administering the
8 programs. ICAN does not administer any programs, so in
9 some cases I think that ICAN might have less of an
10 insight on what some of the restrictions might be when
11 you're negotiating, when you -- and even the restrictions
12 at the federal and state levels and their programs and
13 what they will allow.
14 The second thing is that we were a lot
15 like ICAN in that we showed up at hearings a lot up until
16 about three years ago and suddenly realized that unless
17 we were intervenors and actually took an active part and
18 actually laid out some resources to take an active part
19 in this process that we may not have as great an impact
20 and I know that ICAN has intervened in some cases. I
21 know in most cases they rely on testimony, but I think
22 that their relationship is a little bit different with
23 the people that they represent.
24 The settlement in this case is not ideal
25 for us, it's not ideal for the low income. Obviously,
CSB REPORTING
[phone]
146 OTTENS (Com)
CAPAI
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1 the question was asked earlier, could we use more
2 weatherization money, of course, we could. Could we use
3 more LIHEAP money, of course, we could, but once again,
4 during the negotiations, we understood the restrictions.
5 We understood right away weatherization money comes from
6 a different tariff that's not even on the table for
7 discussion during these proceedings, and we have worked
8 for the last three years with legislators to get them in
9 the frame of mind where they might be open to some other
10 legislative changes that may help the utili ties better
11 mitigate the impacts on our low income customers and to
12 us, that's one of the more important things that is
13 coming out of this settlement, and we would like to urge
14 the Commissioners to set a work session as soon as
15 possible. I'd like to see something early October
16 because we need time after that as Commissioner Kempton
17 mentioned to get our legislators on board and ready for
18 maybe some legislative suggestions in January.
19 COMMISSIONER KEMPTON: Thank you.
20 MR. PURDY: Mr. Chairman, may I ask one
21 follow-up question?
22 COMMISSIONER KEMPTON: Mr. Purdy.
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CSB REPORTING
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147 OTTENS (Com)
CAPAI
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1 REDIRECT EXAMINATION
2
3 BY MR. PURDY:
4 Q This might also require some unfair
5 speculation on your part, but given the stipulation's
6 proposed generic proceeding this fall, Ms. Ottens, do you
7 percei ve perhaps an opportunity for Community Action to
8 have a more expansive representation depending upon the
9 outcome of that proceeding and an ability to greater
10 represent a greater populous, a more diverse populous of
11 low income customers in north Idaho?
12 A Clarification, Community Action as in
13 Communi ty Action Partnership or Community Action Network?
14 Q I'm sorry, Community Action Partnership
15 Association.
16 A Yes, I actually do. Not only would we not
17 just pull in the one CAP that's being affected by this
18 case, we can pull in all the CAPs. We already have built
19 a partnership with ICAN, AARP, some of the other groups
20 that represent low income customers and they certainly
21 would be, I think, at the table with us in making their
22 thoughts known on what the solutions might be to the low
23 income issues.
24.25
MR. PURDY: All right, thank you.
COMMISSIONER KEMPTON: Okay, thank you.
CSB REPORTING
[phone]
OTTENS (Di)
CAPAI
148
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1 THE WITNESS: Thank you.
2 (The witness left the stand.)
3 COMMISSIONER KEMPTON: Mr. Ward, you've
4 been the most patient of all, I think, of the intervenors
5 certainly today. Do you have anything that you would
6 like to add?
7 MR. WARD: Mr. Chairman, we did not in the
8 interest of saving some expenses prepare a witness today,
9 but I would just like to make as a representation of
10 counsel my statement that Potlatch is in full support of
lIthe agreement, the settlement and stipulation. We also
12 agree with Mr. Lobb' s characteri zation that this was one
13 of the cleaner filings I've seen in a long time. That's
14 a little bit more than Randy said, but I think both the
15 Staff and the intervenors are aware of that, so I think
16 it made settlement particularly appropriate here. There
17 just wasn't a lot of things to litigate and with that,
18 I'll simply repeat my conclusion that this settlement is
19 just and reasonable.
20 COMMISSIONER KEMPTON: Thank you.
21 Mr. Meyer?
22 MR. MEYER: I have nothing further. Thank
23 you.
24 MR. MILLER: Just one thing, Mr. Chairman,
25 we'd move for the admission of Exhibit 401.
CSB REPORTING
[phone]
149 COLLOQUY
.1
2
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4 accepted.
COMMISSIONER KEMPTON: To accept 401?
MR. MILLER: In the record, yes.
COMMISSIONER KEMPTON: Yes, it will be so
5 (All exhibits previously marked for
6 identification were admitted into the record.)
7 COMMISSIONER KEMPTON: There being no more
8 business to bring before the Commission, this hearing is
9 adj ourned.
10 (The Hearing adjourned at 2: 40 p.m.)
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150 COLLOQUY
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1 AUTHENTICATION
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4 This is to certify that the foregoing
5 proceedings held in the matter of the application of
6 Avista Corporation for the authority to increase its
7 rates and charges for electric and natural gas service to
8 electric and natural gas customers in the State of Idaho,
9 commencing at 1: 00 p.m., on Thursday, August 28, 2008, at
10 the Commission Hearing Room, 472 West Washington Street,
11 Boise, Idaho, is a true and correct transcript of said
12 proceedings and the original thereof for the file of the
13 Commission.
14 Accuracy of all pre filed testimony as
15 originally submitted to the Reporter and incorporated
16 herein at the direction of the Comission is the sole
17 responsibili ty of the submitting parties.
18
19
S. BUCY
Shorthand Reporte
CSB REPORTING
[phone]
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COLLOQUY151