20160906AVU to Staff 135.doc

AVISTA CORPORATION
RESPONSE TO REQUEST FOR INFORMATION

JURISDICTION: IDAHO DATE PREPARED: 09/01/2016
CASE NO.: AVU-E-16-03 WITNESS: Heather Rosentrater
REQUESTER: IPUC RESPONDER: David Machado/Dave James
TYPE: Production Request DEPARTMENT: State & Federal Regulation
REQUEST NO.: Staff - 135 TELEPHONE: [phone]

REQUEST:

Please refer to Heather Rosentrater Exhibit No. 7, Schedule 4, Page 86 of 88, the Business Case for Segment Reconductor & FDR Tie Program. The Business Case is illustrating an IRR of 0.00% with no business risk reduction. Additionally, the Business Case states that there is low certainty around cost, schedule and resources. Given the parameters shown in the Business Case, please explain why Avista chose to proceed with this investment. Please include in your response all customer benefits associated with this investment, alternative approaches to this investment, and justification for this investment to be included in rate base.

RESPONSE:

With regard to the justification for this business case, at a high level, this program aims to (1) relieve constraints on the distribution grid, and (2) provide adequate capacity in the event of an N-1 contingency (in urban areas only). Avista maintains a line and equipment rating scheme called Scada Variable Limit (SVL). That program allows Avista to monitor transmission and distribution assets and understand capacity on a sliding scale with regard to ambient temperature. This is an improvement over the use of seasonal ratings only, which are either too high or too low based on the prevailing ambient temperature. Avista’s engineers and planners monitor the SVL system and use that data to pinpoint line segments that are reaching their ampacity limit and circuits that lack sufficient tie capacity to pick up load during an N-1 contingency. In addition to district engineer analysis, Avista conducts a study of all circuits to determine station load actuals versus ampacity and identify the ampacity constrained and voltage limited points along the circuit. The Segment Reconductor program is focused squarely on grid capacity issues and in particular, relief of congestion.

The cause of an IRR of 0.00% in the aforementioned Business Case was an inadvertent outcome of the transition to a new business case template. In the conversion of the Segment Reconductor & FDR Tie Program business case from an old version to the new template, certain fields were not appropriately updated to reflect the previous evaluation of each field. Staff_PR_135 Attachment A represents the predecessor version of the Segment Reconductor & FDR Tie Program business case. Within this Staff_PR_135 Attachment A the IRR was defined as “>=9% & <12%.”

One of the changes between the predecessor business case template and the current business case template is that the IRR is no longer presented as a range and is, instead, presented as a discrete value, which, if not populated, defaults to 0.00%. Additionally, within the new business case template, the business risk and program risk fields default to “Business Risk Reduction – None” and “Low certainty around cost, schedule and resources,” respectively, if not adjusted. Therefore, while responding to this production request, it was identified that these fields also had not been updated with the actual evaluations for these fields but had defaulted to the “Business Risk Reduction – None” and “Low certainty around cost, schedule and resources” categories.

Staff_PR_135 Attachment B represents the current version of the Segment Reconductor & FDR Tie Program business case, which was updated to reflect the actual IRR (of 9.50%) in August 2016 (in conjunction with preparation for the 2017-2021 capital planning cycle). Also with the August update, the business risk and program risk fields were updated to reflect the current evaluations of “Business Risk Reduction >10 and <=15” and “High certainty around cost, schedule and resources.”

Page 1 of 2

Page 1 of 2