20161212Volume II; 12-02-16.pdf

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BEFORE THE IDAHO PUBLIC UT ILI TIES COMMISSION
IN THE MATTER OF THE APPLICATION
OF AVISTA CORPORATION OBA AVISTA
UTILITIES FOR AUTHORITY TO
INCREASE ITS RATES AND CHARGES FOR
ELECTRIC SERVICE IN IDAHO
CASE NO . AVU -E-16 -03
PLACE :
DATE :
BEFORE
COMMISSIONER PAUL KJELLANDER (Presiding)
COMMISSIONER ERIC ANDERSON
COMMISSIONER KRISTINE RAPER
Commission Hearing Room
472 West Washington Street
Boise , Idaho
December 2 , 2016
VOLUME II -Pages 6 -79
ORIGINAL CSB REPORTING
Certified Shorthand Reporters
Post Office Box 9774
Boise, Idaho 83 707
[e-mail]
Ph: 208-890-5198 Fax: [phone]
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Reporter:
Constance Bucy,
CSR
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A P P E A R A N C E S
For the Staff :
For Avista Corporation :
For Idaho Forest Group :
For CAPAI :
CSB REPORTING
(208) 890 -5198
Brandon Karpen, Esq.
Deputy Attorney General
472 West Washington
Boise , Idaho 83720 -0074
David Meyer, Esq.
Avista Corporation
Post Office Box 3727
Spokane Washington 99220
Dean J. Miller, Esq.
McDEVITT & MILLER
420 West Bannock Street
Boise , Idaho 83702
Brady M. Purdy, Esq.
Attorney at Law
2019 North 17th Street
Boise , Idaho 83702
APPEARANCES
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WITNESS
Elizabeth Andrews
(Avista)
Patrick Ehrbar
(Avista)
Randy Lobb
(Staff)
Christina Zamora
(CAPAI)
I N D E X
EXAMINATION BY
Mr . Meyer (Direct)
Prefiled Direct Testimony
Mr . Meyer (Direct )
Prefiled Direct Testimony
Mr . Karpen (Direct)
Prefiled Direct Testimony
Mr . Purdy (Direct)
Prefiled Direct Testimony
Commissioner Raper
E X H I B I T S
NUMBER DESCRIPTION
FOR AVISTA CORPORATION :
14 -Stipulation and Settlement in
Case No . AVU -E-16-03
Premarked
Admitted
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CSB REPORTING
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INDEX/EXHIBITS
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BOISE , IDAHO , FRIDAY , DECEMBER 2 , 2016 , 9 :30 A. M.
COMMISSIONER KJELLANDER : Well , good
morning . This is the time and place for a technical
hearing in the matter of the application of Avista
Utilities for authority to increase its rates and charges
for electric service in Idaho , Case No . AVU -E-16-03.
Commissioner Paul Kjellander and I 'll preside over
t oday 's proceedings . I 'm joined by Commissioner Eric
I 'm
Anderson to my right and Commissioner Kristine Raper to
my left . The three of us will ultimately determine the
outcome of this case once it 's fully submitted .
As you are all aware , a stipulation and
settlement has been presented to the Commission and that
that filing is the purpose of today 's proceedings . The
first order of business this morning is to take the
appearances of the parties and so what I would like to do
is begin with Avista , if we could .
MR . MEYER : Thank you . David Meyer for
Avista Corporation .
COMMISSIONER KJELLANDER : Thank you very
much and welcome to the Commission this morning . Let 's
move now to the Deputy Attorney General representing the
Commi ssi on Staff .
CSB REPORTING
(208) 890 -5198
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MR . KARPEN : Brandon Karpen representing
Commission Staff .
COMMISSIONER KJELLANDER : Good morning ,
Mr . Karpen .
MR . KARPEN : Good morning .
COMMISSIONER KJELLANDER : Let 's move to
Clearwater Paper Corporation which is represented by
Peter Richardson . They do not appear to be here . If
they do arrive , however , we will pause momentarily in the
proceedings this morning to get them officially on the
record if they do arrive . Let 's move now to the Idaho
Forest Group , LLC , Mr . Miller .
MR . MILLER : Thank you , Mr . Chairman .
Dean J . Miller on behalf of Idaho Forest Group .
COMMISSIONER KJELLANDER : I do not see
anyone here from Snake River Alliance . Likewise , if
someone does emerge this morning , we will pause briefly
to get them officially recognized in the record for being
present , and let 's move now to the Community Action
Partnership Association of Idaho .
MR . PURDY : Yes , Brad Purdy representing
Community Action Partnership Association of Idaho .
COMMISSIONER KJELLANDER : It 's great to
see you and , again , welcome to all of you today . As we
move forward , are there any preliminary matters that need
CSB REPORTING
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to come before us today?
MR . MEYER : None , other than just the
parties have agreed on order of witnesses . Unless you
have a different preference , we would put our two
witnesses on first , beginning with Ms . Andrews and
Mr . Ehrbar , then Staff , Mr . Lobb , and then Zamora if that
meets your needs .
COMMISSIONER KJELLANDER : Well , I 'm afraid
that I have to tell you that that is exactly what I
wanted to do , so with that lineup , why don 't we let you
begin and proceed with Avista 's case .
MR . MEYER : Thank you . We call to the
stand Ms . Elizabeth Andrews .
ELIZABETH M. ANDREWS ,
produced as a witness at the instance of Avista
Corporation , having been first duly sworn , was examined
and testified as follows :
BY MR . MEYER :
Q
A
Q
CSB REPORTING
(208) 890 -5198
DIRECT EXAMINATION
Elizabeth Andrews , is your mic on?
Yes .
Okay , thank you . Have you prepared and
8 ANDREWS (Di)
Avista Corporation
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prefiled testimony in support of the settlement
stipulation?
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Q
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Yes , I have .
Do you have any changes to make to that?
No , I do not .
Are you also sponsoring what has been
marked as Exhibit No . 14 in support of the settlement ,
which is a copy of the settlement stipulation?
A Yes .
Q And that is a true and correct copy?
A Yes .
Q Any changes to make to your direct
testimony?
A No .
MR . MEYER : With that , I ask that her
testimony be spread as if read and that her Exhibit
No . 14 be admitted .
COMMISSIONER KJELLANDER : Without
objection , we will spread the testimony and Exhibit
No . 14 across the record as if read .
(Avista Corporation Exhibit No . 14 was
admitted into evidence .)
(The following prefiled direct testimony
of Ms . Elizabeth Andrews is spread upon the record .)
CSB REPORTING
(208) 890 -5198
9 ANDREWS (Di)
Avista Corporation
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I.INTRODUCTION
Q . Please state your name , employer and business
address .
A . My name is Elizabeth M. Andrews and I am
employed by Avista Corporation ("Company" or "Avista ") as
Senior Manager of Revenue Requirements in the State and
Federal Regulation Department , at 1411 East Mission
Avenue , Spokane , Washington .
Q . Have you previously provided direct testimony
in this Case?
A . Yes . My previous direct testimony in this
proceed ing covered accounting and financial data in
support of the Company 's need for the proposed electric
increase in rates . I explained pro formed operating
results including expense and rate base adjustments made
to actual operating results and rate base .
Q . What is the scope of this testimony?
A . The purpose of my testimony is to explain why
the Stipulation is in the public interest , as well as
describe and support the electric revenue requirement
elements of the Stipulation and Settlement
("Stipulation "), filed on October 24 , 2016 . The parties
to the Stipulation include the Staff of the Idaho Public
Utilities Commission ("Staff '), Clearwater Paper
CSB REPORTING
(208) 890 -5198
10 Andrews , Di 1
Avista Corporation
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Corporation ("Clearwater"), Idaho Forest Group , LLC
("Idaho Forest "), the Community Action Partnership
Association of Idaho ("CAPAI "), the Snake River Alliance
("Snake River ") and the Company . These entities are
collectively referred to as the "Parties ," and represent
all parties in the above -referenced cases . If the
Stipulation is approved by the Commission , it would
resolve all of the issues in the Company 's filing .
Company witness Mr . Ehrbar discusses the non -revenue
related elements of the Stipulation agreed to by the
Parties , such as electric Cost of Service , Rate Spread
and Rate Design , as well as other Stipulation components
related to the Power Cost Adjustment (PCA) and Fixed Cost
Adjustment Mechanism authorized levels and customer
service-related initiatives and programs .
Q. Are you sponsoring any exhibits?
A . Yes . I am sponsoring Exhibit No . 14 , which is
a copy of the Stipulation and Settlement filed on October
24 , 2016 , with the Commission .
Q. Please explain how the Parties arrived at the
Stipulation in this proceeding .
A . The Stipulation is the product of settlement
discussions held in the Commission offices on October 3 ,
CSB REPORTING
(208) 890 -5198
11 Andrews , Di 2
Avista Corporation
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2016 .1 It represents a compromise among differing
points of view , with concessions made by the Parties , to
reach a balancing of interests . As will be explained in
the Company 's testimony , the Stipulation represents a
fair , just and reasonable compromise of the issues and is
in the public interest . In addition , the Stipulation is
the end result of extensive audit work conducted through
the discovery process2 , including various on -site audit
visits by Commission Staff , and hard bargaining by the
Parties in this proceeding .
The Stipulation resolves all issues among the
Parties associated with the calculation of the Company 's
requested cost of capital , including cap ital structure
and cost components , and resolves all revenue requirement
issues . As discussed by Mr . Ehrbar , the Stipulation also
includes agreement regarding certain cost of service
issues , as well as rate spread and rate design .
1 Clearwater and Snake River were unable to attend the Settlement
Conference , but are supportive of the Stipulation and Settlement .
2 Avista responded to over 156 production requests (including
sub-parts) from IPUC Staff and other intervening parties
CSB REPORTING
(208) 890 -5198
12 Andrews , Di 3
Avista Corporation
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Q. Why is the Stipulation in the public interest?
A. The Stipulation is in the "public interest " for
several reasons . The Stipulation was the product of the
give -and -take of negotiation that produced an "end
result " that is just and reasonable . In addition , it is
supported by the evidence , demonstrating the need for
rate adjustments to provide recovery of necessary
expenditures and investment , the costs of which are not
offset by a growth in sales margins . The Settlement
enjoys broad-based support from a variety of
constituencies , including CAPAI , Clearwater , Idaho
Forest , the Snake River Alliance , and the Staff of the
Commission , representing all customers .
Q . Would you briefly summarize the Stipulation?
A . Yes . Under the terms of the Stipulation, as
discussed further by Mr . Ehrbar , Avista would implement
revised tariff schedules designed to recover additional
annual electric revenue of $6 .25 million effective
January 1 , 2017 . These rate changes are designed to
provide retail revenues necessary to allow the Company
the opportunity to earn the rate of return agreed to in
the Stipulation for the 2017 rate period .
The Parties agree to an overall base rate increase
of 2 .6% or $6 .25 million in electric annual base tariff
CSB REPORTING
(208) 890 -5198
13 Andrews , Di 4
Avista Corporation
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revenues . As noted by Mr . Ehrbar , a residential customer
using an average of 918 kilowatt hours per month would
see a $2 .64 , or 3 .1%, increase per month for a revised
monthly bill of $ 8 7 . 15 . ( See Exhibit No . 14 , Paragraph
13 , for the January 1 , 2017 percentage change in rates by
rate schedule .)
In determining this revenue increase , the Parties
have agreed to various adjustments to the Company 's
original filing , which are summarized in the Stipulation ,
and described further in my testimony below .
The Stipulation calls for an overall rate of return
of 7 .58 %, determined using a capital structure consisting
of 50 % common stock equity and 50 % debt , an authorized
return on equity of 9 .5 % and cost of debt of 5 .67 %.
Lastly, the Parties agreed to certain cost of service ,
and rate spread and rate design changes as described by
Mr . Ehrbar in his supporting testimony .
CSB REPORTING
(208) 890 -5198
14 Andrews , Di 5
Avista Corporation
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II. SUMMARY OF ORIGINAL FILING
Q . Please describe the Company 's general rate case
request , as filed .
A . On May 26 , 2016 , Avista filed an Application
with the Commission for authority to increase revenue
effective January 1 , 2017 for electric service in Idaho
by 6 .3%. If approved , the Company 's 2017 revenues for
electric base retail rates would have increased by $15 .4
million annually . By Order No . 33536 , dated June 7 , 2016 ,
the Commission suspended the proposed schedules of rates
and charges for electric service .
The Company proposed utilizing the results of its
electric cost of service study , sponsored by Company
witness Ms . Knox , as a guide to spread the overall
requested electric revenue increase by rate schedule on a
basis which : 1) moved the rates for nearly all the
schedules closer to the cost of providing service , and 2)
resulted in a reasonable range in the (net) proposed
percentage increase across the schedules . The spread of
the proposed electric increase generally resulted in the
rates of return for the various service schedules moving
approximately 25 % closer to the overall rate of return
(unity).
CSB REPORTING
(208) 890 -5198
15 Andrews , Di 6
Avista Corporation
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The Company also requested an electric residential basic
charge increase from $5 .25 to $6 .25 .
Q . What are the primary factors driving the
Company 's need for an electric increase?
A. The primary factor driving the Company 's
proposed electric revenue increase in 2017 , representing
approximately 77 % of the Company 's request , is an
increase in net plant investment . Specific capital
investments over the period 2016-2017 include , among
other things , upgrades to certain major generating
facilities , such as the Nine Mile Rehabilitation project ,
the Little Falls Powerhouse Redevelopment , and the Post
Falls South Channel Gate Replacement projects discussed
by Company witness Mr . Kinney .
For 2017 , approximately 12 % of the Company 's
requested increase relates to increas es in net power
supply expenses . The increase in net power supply
expense mainly relates t o the expiration of a capacity
sales agreement with Portland General Electric on
December 31 , 2016 , increasing overall net power supply
costs , as explained by Company witness Mr . Johnson .
CSB REPORTING
(208) 890 -5198
16 Andrews , Di 7
Avista Corporation
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III. REVENUE REQUIREMENT ELEMENTS OF THE STIPULATION
Q . Please explain the derivation of the Electric
Revenue Requirement outlined in the Stipulation .
A . The Parties agreed that an electric revenue
increase is necessary , effective January 1 , 2017 . While
Avista 's filing requested a 2017 electric revenue
requirement increase of $15 .4 million , the Parties
agreed-upon adjustments , including the agreed -upon rate
of return , result in a recommended electric revenue
increase o f $6 .25 million . The increase is designed to
provide sufficient retail revenues for the 2017 rate
period , which would provide the Company with the
opportunity to earn the return agreed to in the
Stipulation .
Q . Please explain the Parties ' agreement with
regard to an Authorized Rate of Return , including the
Return on Equity .
A . The Parties have agreed to an overall rate of
return of 7 .58 %, based on a return on equity of 9 .5 %, an
equity component at 50 % and cost of debt of 5 .67 %. By
comparison , the Company 's original filing requested an
overall rate of return of 7 .78 %, a return on equity of
9 .9 %, an equity component of 50 % and cost of debt of
5 .67 % .
CSB REPORTING
(208) 890 -5198
17 Andrews , Di 8
Avista Corporation
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Q. Please provide an overview of the revenue
requirement adjustments agreed to by the Parties .
A. The Parties agreed to a revenue requirement
that reflects the adjustments shown below in the
exce r pted table from the Stipulation :
Table No. 1: Electric Revenue Requirement
SUMMARY TABLE OF ADJUSTMENTS TO ELECTRIC REVENUE REQUIREMENT
EFFECTIVE JANUARY 1, 2017
(OOOs of Dollars)
Revenue
Requirement Rate Base
Amount as Filed:
Adjustments:
a.) Cost of Capital
b.) Revise Net Rate Base
c.) Revise Deferred Debits and Credits to Refl::ct Corrected 2016 Balances
d.) Remove 2017 Non-Unbn Labor Expenses
e.) Update 2016 Employee Benefit Costs
1) Add Nine Mile Investment Tax Credit
g.) Remove Offx:er Incentives
b.) Remove 2015 Storm Costs
i.)
j.)
Move Palouse Wind to PCA
Miscellaneous A&G Adjustments: Board of Director Expenses, Reallocation of
Legal Expenses, Expired Leases and Inch.ision of O&M Savings
Adjusted Amounts Effective January I, 2017
$
$
$
$
$
$
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15,433 $ 754,636
(2,471)
(1,329) $ (740)
(62) $ 107
(310)
1,221
(162)
(171)
(1,057)
(4,509)
(333~
6,250 $ 754,003
As can be seen by a review of the individual line
desc r ipt i ons provided within the summary table above , the
adju s tments accepted for settlement purposes cover a
broad range of revenue and cost categories , including the
authorized rate of return . The individual adjustments
should not be viewed in isolation ; rather , they should be
viewe d in total as part of the entire Stipulation , and
are the result of hard bargaining and compromise .
CSB REPORTING
(208) 890 -5198
18 Andrews , Di 9
Avista Corporation
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Q . Would you please elaborate on the individual
line items contained within Table No . 1?
A . Yes . A description of the adjustments
resulting in the electric revenue requirement , effective
January 1 , 2017 , follows .
Cost of Capital -(l ine a .) The overall revenue
requirement reduction related to the cost of capital
reduces the overall rev enue requirement for electric by
$2 .471 million . The agreed-upon cost of capital
components are shown in Table No . 2 below :
Table No. 2: Cost of Capital
Capital
Component Structure Cost Wei~hted Cost
Debt 50% 5.67% 1 2.83% ..... --.~~·. --·-----· ···--·-··""'-·····-· -1---........ ····-----..... -·--.~--------1· ... ·--· __ ., ........ ,~~·-·"·-~· ·······-········-+-... ,-.v.--.. --,,~--·-¥· -··''" ----~ ·-. ··--··-
Connnon F.quity_ i 50% ' 9.50% l 4.75%
Total 100% 7.58%
Revise Net Rate Base -(line b.) The 2016 electric
capital additions were updated by Avista to reflect
adjustments for updated information , including , for
example , the increase in overall cost of the Nine Mile
Hydroelectric Capital Project completed in 2016 . The
Parties also agreed to remove rate base adjustments
proposed by the Company associated with certain Plant
Held For Future Use , as well as 2017 capital additions .
Adjusting for the related impact on depreciation expense ,
CSB REPORTING
(208) 890 -5198
19 Andrews , Di 10
Avista Corporation
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as well as accumulated depreciation (A/D) and accumulated
deferred federal income taxes (ADFIT), associated with
these adjustments , resulted in an overall reduction to
rate base of $740 ,000 , and reduced revenue requirement of
$1 .329 million .
Revise Deferred Debits and Credits to reflect
corrected 2016 Balances -(line c .) Deferred debits and
credits regulatory balances and amortizations were
adjusted to reflect the correct 2016 amortization expense
and regulatory balances as of December 31 , 2016 , rather
than the 2017 expense and regulatory balances as proposed
by the Company . This adjustment decreases the overall
revenue requirement by $62 ,000 and increases rate base by
$107 ,000 .
Remove 2017 Non -Union Labor Expenses -(lined .)
This adjustment removes the 2017 incremental non -union
labor increases related to increases approved by the
Board of Directors for 2017 for its non -union ,
non -executive employees . This adjustment reduced the
electric revenue requirement by $310 ,000 .
Update 2016 Employee Benefit Costs -(line e .)
Employee benefit costs include costs associated with
pension and medical insurance and post -retirement
expenses included in the Company 's direct filing .
CSB REPORTING
(208) 890 -5198
20 Andrews , Di 11
Avista Corporation
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Pension expense was determined in accordance with
Accounting Standard Codification 715 (ASC -715) by an
independent actuarial firm , Towers Wats on , whi c h is
reviewed by the Company 's outside accounting firm
annually for reasonableness and comparability to other
c ompanies .3 Medical insurance and p os t -r etiremen t
expense includes costs ass oc iated with the empl o yee a n d
retiree medical plans and the FAS 106 expense , whi c h
records the costs associated with p o st -retirement
medical . 4 This adjustment reflects upda t ed information ,
and reflects employee benefits at a 2016 expense level .
This adjustment increased the electric revenue
requirement by $1 .221 million .
Add Nine Mile Investment Tax Credit -(line f .) This
adjustment includes the amortization o f the investment
tax credit benefit associated with the Nine Mile
Redevelopment upgrade project on Units 1 and 2 . This
3 In October 2013 , the Company revised its defined benefit pension
plan such that , as of January 1 , 2014 , the plan is no longer offered
to its non -union employees hired or rehired by Avista on or after
January 1, 2014 . A defined contribution 40l(k) plan replaced the
defined benefit pension plan for all non -union employees hired or
rehired o n or after January 1 , 2014 .
4 In October 2013 the Company revised i ts health care benefit plan
for non -union employees hired or rehire d on or after January 1, 2014 .
Upon reti r ement the Company will no longer provide a contribution
towards his or her medical premiums . The Company will provide access
to the retiree medical plan , but the non -union employees hired or
rehired on or after January 1 , 2014 , wi ll pay the full cost of
premiums upon retirement .
CSB REPORTING
(208) 890 -5198
21 Andrews , Di 12
Avista Co rpo ration
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adjustment reduces the electric revenue requirement by
$162 ,000 .
Remove Officer Incentives -(line g .) This
adjustment reflects the removal of all officer incentives
included in the Company 's original filing . This
adjustment reduced the electric revenue requirement by
$171 ,000 .
Remove 2015 Storm Costs -(line h .) This adjustment
removes 2015 storm -related expenses included in the
Company 's historical test period beyond the 6-year
average (2009 -2014) of storm expenses . This adjustment
also includes $210 ,000 of amortization expense
representing the customer portion ($630 ,000) to recover
for regulatory purposes over the period 2017 -2019 . This
adjustment reduces the overall revenue requirement by
$1 .057 million .
Move Palouse Wind to Power Cost Adjustment ("PCA ")
Mechanism -(line i .) The Parties agree that , for
purposes of this case , the recovery of costs related to
the Palouse Wind Power Purchase Agreement ("PPA ") will
continue to be included in the PCA , subject to the
current sharing (90 % customer , 10 % Company). This
adjustment removes the Palouse Wind PPA expenses from the
prof orma power supply adjustment included in the
CSB REPORTING
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22 Andrews , Di 13
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Company 's original filing . This adjustment reduced the
electric revenue requirement by $4 .509 million .
Miscellaneous Adjustments -(line j .) The Company
adopted , for settlement purposes , Staff 's proposal to
adjust or remove various administrative and general (A&G)
expenses including : 1) removing certain Board of Director
expenses included in the Company 's 2015 historical test
period ($159 ,000); 2) removing legal expenses allocated
to Idaho electric in error ($33 ,000); 3) removing
expenses associated with certain expired leases in 2015
($62 ,000); and 4) inclusion of the O&M savings associated
with the Company 's Street & Area Light project ($79 ,000)
This adjustment decreases the overall electric revenue
requirement by $333 ,000 .
Q. Please summarize the impact of these
adjustments on the electric revenue requirement agreed to
by the Parties .
A . The adjustments discussed above , and agreed to
by the Parties , reduce Avista 's electric revenue
requirement of $15 .433 million to $6 .25 million ,
resulting in a 2 .6% electric base rate increase . Net
rate base for electric is $754 million , effective January
1 , 2017 .
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23 Andrews , Di 14
Avista Corporation
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IV. CONCLUSION
Q. In conclusion , why is this Stipulation in the
public interest?
A. This Stipulation strikes a reasonable balance
between the interests of the Company and its customers ,
including its low-income customers . As such , it
represents a reasonable compromise among differing
interests and points of view .
The terms of the Stipulation represents an electric
base rate increase designed to provide necessary retail
revenues . The Parties have agreed that the Company has
demonstrated the need for a revenue increase for its
electric operations , thus providing recovery of its costs
over the 2017 rate period .
In the final analysis , any settlement reflects a
compromise in the give-and-take of negotiations . The
Commission has before it a Stipulation that is supported
by sound analysis and supporting evidence , the approval
of which is in the public interest .
Q.
A.
Does this conclude your direct testimony?
Yes , it does .
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24 Andrews , Di 15
Avista Corporation
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(The following proceedings were had in
open hearing .)
COMMISSIONER KJELLANDER : And if you would
like to proceed , we will tender now your witness . Are
there any additional comments you need in reference to
that?
MR . MEYER : No .
COMMISSIONER KJELLANDER : Let 's move ,
then , to the Staff . Mr . Karpen , do you have any
questions?
Mr . President .
MR . KARPEN : No questions ,
COMMISSIONER KJELLANDER : Mr . Miller?
MR . MILLER : No , thank you , Your Honor .
COMMISSIONER KJELLANDER : Any , Mr . Purdy?
MR . PURDY : I have none . Thank you .
COMMISSIONER KJELLANDER : Fortunately ,
then , that means there is no cross-examination . Are
there any questions from the Commission?
COMMISSIONER ANDERSON : No , Mr . President .
COMMISSIONER RAPER : No .
COMMISSIONER KJELLANDER : So happy to see
you this morning .
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(208) 890 -5198
THE WITNESS : Thank you .
COMMISSIONER KJELLANDER : We 've enjoyed
25 ANDREWS
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your smile and you are excused .
THE WITNESS : Thank you .
(The witness left the stand .)
COMMISSIONER KJELLANDER : And if Avista
would like to call its next witness .
MR . MEYER : Patrick Ehrbar , please .
PATRICK D. EHRBAR ,
produced as a witness at the instance of Avista
Corporation , having been first duly sworn , was examined
and testified as follows :
DIRECT EXAMINATION
BY MR . MEYER :
Q For the record , please state your name .
A Patrick Ehrbar .
Q By whom are you employed and what is your
title?
A Avista Corporation . I 'm the senior
manager of rates and tariffs .
Q Have you prepared and prefiled direct
testimony in support of the stipulation?
A
Q
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Yes , I have .
Do you have any changes to make to that?
26 EHRBAR (Di)
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A I do not .
MR . MEYER : With that , I ask that his
testimony be spread as if read .
COMMISSIONER KJELLANDER : And without
objection , we will spread the testimony across the record
as if read .
(The following prefiled direct testimony
of Mr . Patrick Ehrbar is spread upon the record .)
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27 EHRBAR ( Di)
Avista Corporation
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I. INTRODUCTION
Q. Please state your name , employer and business
address .
A. My name is Patrick D. Ehrbar and I am employed
as the Senior Manager of Rates and Tariffs for Avista
Utilities ("Company " or "Avista "), at 1411 East Mission
Avenue , Spokane , Washington .
Q. Have you previously filed direct testimony in
this proceeding?
A. Yes . My testimony in this proceeding covered
the spread of the proposed electric revenue increase
among the Company 's electric general service schedules .
My testimony also described the changes to the rates
within the Company 's electric schedules .
Q. What is the scope of this testimony?
A. The purpose of my testimony is to describe and
support the non-revenue requirement portions of the
Stipulation and Settlement ("Stipulation "), filed on
October 24 , 2016 between the Staff of the Idaho Public
Utilities Commission ("Staff '), Clearwater Paper
Corporation ("Clearwater "), Idaho Forest Group , LLC
("Idaho Forest "), the Community Action Partnership
Association of Idaho ("CAPAI "), the Snake River Alliance
("Snake River ") and the Company . These entities are
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collectively referred to as the "Parties ," and represent
all parties in the above -referenced cases .
In my testimony I will explain the following
Settlement components :
1.
2 .
Rate Spread and Rate Design
Other Settlement Items
I will also provide an overview of the Company 's customer
service programs .
Q. Are you sponsoring any exhibits?
A. No , I am not . Company witness Ms . Andrews is
sponsoring Exhibit No . 14 , which is a copy of the
Stipulation and Settlement filed on October 24 , 2016 ,
with the Commission .
II. RATE SPREAD & RATE DESIGN
Q. Please explain the settlement terms relating to
cost of service .
A. In this case , the Company prepared a cost of
service analysis that incorporated , among other things , a
system load factor peak credit method of classifying
production costs , allocating 100 % of transmission costs
to demand , and allocating transmission costs on a twelve-
month coincident peak allocation factor . The Parties in
this case did not reach agreement on any particular cost
of service methodology .
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For settlement purposes , the
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Parties agreed to use a pro -rata allocation based on the
Company 's proposed 25% move towards unity for purposes of
spreading the agreed-upon electric revenue increase .
Q.
A.
How did the Stipulation address rate design?
For settlement purposes , with the exception o f
the Residential Basic Charge , the Parties agreed to the
rate design changes proposed by the Company in Mr .
Ehrbar 's direct testimony . For the electric Residential
Basic Charge (Schedule 1 ), the Parties agreed on an
increase from $5 .25 per month to $5 .75 per month , an
increase of $0.50 per month . Appendix C of the
St i pulation (Andrews Exhibit No. 14) provides a summary
of the current and proposed rates and charges for
electric service .
Q. What is the effect on retail rates , by rate
schedule , of the proposed settlement?
A. The following table reflects the agreed-upon
percentage increase by schedule for electric service :
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Rate Schedule
Residential Schedule I
General Service Schedules I 1/12
Large General Service Schedules 21/22
Extra Large General Service Schedule 25
Clearwater Paper Schedule 25P
Pwnping Service Schedules 31/32
Street & Area Lights Schedules 41-48
Overall
CSB REPORTING
[phone]
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Increase in Increase in
Base Rates Billing Rates
3.2% 3.1%
1.9% 1.8%
2.3% 2.3%
1.9% 1.9%
1.8% 1.8%
3.1% 3.0%
3.4% 3.3%
2.6% 2.5% =
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Q . What is the electric residential bill impact if
the Commission approves the Settlement Stipulation?
A . An electri c residential customer using an
average of 918 kilowatt hours per month would see a
$2 .64 , or 3 .1%, increase per month for a revised monthly
bill of $87 .15 .
III. OTHER ELEMENTS OF THE STIPULATION
Q . Please explain the settlement terms relating to
the PCA authorized level of expenses .
A. The new level of power supply revenues ,
expenses , retail load and Load Change Adjustment Rate
resulting from the January 1 , 2017 settlement revenue
requirement , for purposes of monthly PCA mechanism
calculations , are detailed in Appendix A of the
Stipulation (Andrews Exhibit No . 14).
Q. Please explain the settlement terms relating to
the authorized base for the Electric Fixed Cost
Adjustment Mechanism .
A. The new level of baseline values for the
electric fixed cost adjustment mechanism resulting from
the January 1 , 2017 settlement revenue requirement are
detailed in Appendix B (Andrews Exhibit No . 14).
Q. Please explain the other issues agreed upon in
the Settlement Stipulation .
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A . The Parties agreed to meet and confer , prior to
the Company 's next general rate case filing , regarding
the Company 's electric cost of service study . Included
in the workshop(s) would be discussion related to the
methodologies used by Avista to classify and allocate its
costs , as well as a review of the changes that occurred
between the cost of service study results from the
Company 's 2015 general rate case filing and its 2016
general rate case filing . The Company will provide
available information , studies and data requested by a
Party so as to enable meaningful workshop participation
and discussion of issues . Unless it decides to do so , a
Party shall not be bound by workshop discussions and may
contest cost of service and rate spread issues in
subsequent proceedings .
Second , the Company and interested parties will meet
and confer prior to the Company 's next general rate
filing in order to assess the Low Income Weatherization
and Low Income Energy Conservation Education Programs to
explore policy goals and program structures that may
enhance or improve Avista 's low -income program .
IV. CUSTOMER SERVICE PROGRAMS
Q. Does the Company have programs in place to
mitigate the impacts on customers of the proposed rate
increases?
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A. Yes . We have a history of making it a priority
within our Company to maintain meaningful programs to
assist our customers that are least able to pay their
energy bills . We also have programs to assist our entire
customer base , i .e ., not just our low -income c ustomers .
Some of the key programs that we offer or support are as
follows :
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DSM Energy Efficiency Programs and Funding. The
Company offers a broad array of energy efficiency
program measures that provide customers with
increased opportunity to manage their energy bills .
Avista conducted 26 events through its Energy
Resource Van reaching 1 ,741 individuals with energy
saving and bill/payment options and assistance
information and resources throughout our service
territory in Idaho in 2016 . Avista 's mobile ou treach
van traveled to locations such as Juliaetta ,
Pinehurst , Sandpoint , Lapwai and Coeur d 'Alene to
reach low-income customers through their local fo od
bank .
Project Share. Project Share is a voluntary program
allowing customers and employees to donate funds
that are distributed thro ugh community action
agencies to customers in need . In the 2015/2016
heating season , Av ista Utilities ' customers ,
employees and Avista Corp donated $150 ,224 which was
directed to Idaho Community Action Agencies .
Comfort Level Billing. The Company offers the
option for all customers to pay the same bill amount
each month of the year by averaging their annual
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usage . Under this program , customers can avoid
unpredictable winter heating bills .
Payment Arrangements. The Company 's Contact Center
Representatives work with customers to set up
payment arrangements to pay energy bills .
CARES Program. Customer Assistance Referral and
Evaluation Services provide assistance to
special -needs customers through access to specially
trained (CARES) representatives who provide
referrals to area agencies and churches for help
with housing , utilities , medical assistance , etc .
Senior Energy Outreach: Avista has developed
specific outreach efforts to reach our more
vulnerable customers (seniors and disabled
customers) with bill paying assistance and energy
efficiency information that emphasizes comfort and
safety . Some examples of this effort are as follows :
Senior Publications: Avista has created a one -page
advertisement that has been placed in senior
resource directories and targeted senior
publications to reach seniors with information about
energy efficiency , Comfort Level Billing , Avista
CARES and energy assistance . A brochure with the
same information has also been created for
distribution through senior meal delivery programs
and other senior home-care programs .
Senior Energy Workshops: With the help of the
Avista Conservation Energy Education Team , five
Energy Workshops have been facilitated in 2016 , with
eight currently scheduled through December . Through
the five workshops , 126 seniors and low -income
individuals were reached and given Home Energy
Saving kits along with learning about
low -cost/no -cost ways to reduce energy use .
Q .
A.
Does this conclude your direct testimony?
Yes , it does .
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open hearing .)
cross .
Mr . Miller .
Mr . Karpen .
(The following proceedings were had in
MR . MEYER : And he is available for
COMMISSIONER KJELLANDER : Let 's start with
MR . MILLER : No , thank you .
COMMISSIONER KJELLANDER : Mr . Purdy?
MR . PURDY : None , thanks .
COMMISSIONER KJELLANDER : Let 's move to
MR . KARPEN : I have nothing for this
witness . Thank you .
COMMISSIONER KJELLANDER : Are there any
questions from members of the Commission? There being
none , there is no opportunity for cross -examination and
you are free .
THE WITNESS : Thank you , sir .
(The witness left the stand .)
COMMISSIONER KJELLANDER : And does that
conclude your case?
MR . MEYER : It does and now they have two
more lines on their resumes saying they 've testified and
that 's all to the good .
COMMISSIONER KJELLANDER : And they get
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credit for this?
MR . MEYER : They get full credit .
COMMISSIONER KJELLANDER : Good deal , so
you get a raise if you get more on your resume?
The AUDIENCE : Yeah .
COMMISSIONER KJELLANDER : Perfect . Good ,
now we know how this works . Keep that in mind in your
next settlement discussion . Let 's move now to the next
order of witnesses and let 's move to the Staff for the
Idaho Public Utilities Commission . Mr . Karpen , will you
please call your first witness?
MR . KARPEN : The Staff calls Randy Lobb .
RANDY LOBB ,
produced as a witness at the instance of the Staff ,
having been first duly sworn , was examined and testified
as follows :
DIRECT EXAMINATION
BY MR . KARPEN :
Q Good morning , Mr . Lobb . Can you please
state your full name and spell your last name for the
record?
A
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(208) 890 -5198
My name is Randy Lobb , L-o -b -b .
36 LOBB (Di)
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Q Can you tell the Commission with whom you
are employed and in what capacity?
A I 'm employed by the Idaho Public Utilities
Commission as the utilities division administrator .
Q Are you the same Randy Lobb that filed
testimony in this matter previously?
A I am .
Q Do you or does Staff have any changes or
wish to clarify any positions that have been stated in
those comments?
A No .
Q So if I were to ask you today the same
questions set forth in your testimony , your answers would
be the same?
A They would be , yes .
Q Are they true and correct to the best of
your knowledge?
A Yes .
MR . KARPEN : Mr . President , with that , I
move to spread Mr . Lobb 's testimony on the record as if
read .
COMMISSIONER KJELLANDER : Without
objection , we will spread Mr . Lobb 's testimony across the
read as if read .
(The following prefiled direct testimony
of Mr . Randy Lobb is spread upon the record .)
CSB REPORTING
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37 LOBB (Di)
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Q . Please state your name and business address for
the record .
A . My name is Randy Lobb and my business address
is 472 West Washington Street , Boise , Idaho .
Q. By whom are you employed?
A . I am employed by the Idaho Public Utilities
Commission as Utilities Division Administrator .
Q. What is your educational and profess ional
background?
A . I received a Bachelor of Science Degree in
Agricultural Engineering from the University of Idaho in
1980 and worked for the Idaho Department of Water
Resources from June of 1980 to November of 1987 . I
received my Idaho license as a registered professional
Civil Engineer in 1985 and began work at the Idaho Public
Utilities Commission in December of 1987 . I have
analyzed utility rate applications , rate design , tariff
filings and customer petitions . I have testified in
numerous proceedings before the Commission including
cases dealing with rate structure , cost of service , power
supply , line extensions , regulatory policy and facility
acquisitions . My duties at the Commission include case
management and oversight of all technical Staff assigned
to Commission filings .
Q. What is the purpose of your testimony in this
CASE NO . AVU -E-16-03
11/21/16
38 LOBB , R . (Stip) 1
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case?
A. The purpose of my testimony is to describe the
proposed comprehensive settlement and explain Staff 's
support .
Please summarize your testimony . Q.
A. Avista Utilities filed an application with the
Commission on May 26 , 2016 requesting an electric rate
increase of $15 .4 million (6 .3 %) effective January 1 ,
2017 . After comprehensive review of the Company 's
Application , thorough audit of Company books and records
and extensive negotiation with parties to the case , an
agreement was reached by all parties to settle the case
without further litigation .
The proposed settlement and Stipulation
provides an electric rate increase on January 1 , 2017 , of
$6 .25 million (2 .57 %). It also specifies how the revenue
requirement will be allocated to the various cust omer
classes , how rates within each class will be adjusted and
describes an opportunity for parties to meet and discuss
low income and cost of service issues .
Staff believes the proposed Settlement
represents a reasonable compromise of revenue requirement
issues . The Settlement is only 41 % of the electric rate
increase originally proposed by the Company and is a
reasonable compromise of its original position . Staff
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also believes that the customer class revenue allocation ,
rate adjustments and issues identified for further
discussion properly address concerns of participating
parties . Staff maintains that the Settlement is in the
public interest and recommends that it be approved by the
Commission .
Background
Q . Please describe Avista 's original filing and
the process leading to settlement .
A. Avista originally filed on May 26 , 2016
requesting authority to increase its electric rates by
15 .4 million (6 .3%) effective January 1 , 2017 . The
Company proposed a 50/50 capital structure and a return
on common equity of 9 .9%. The Company proposed to spread
the revenue increase to the various customer classes
using a 25 % move toward cost of service and increase the
residential customer charge from $5 .25 to $6 .25 .
The Commission accepted the application for
filing and approved intervention in the case by
Clearwater Paper Corporation , Idaho Forest Group LLC .,
Snake River Alliance and Community Action Partnership
Association of Idaho (CAPAI). Together with the Company
and Commission Staff , these participants make up the
parties to the case .
The parties agreed to a procedural schedule for
CASE NO . AVU -E-16 -03
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processing the case that included a settlement
confe r ence , staff and intervenor prefiled testimony ,
Company rebuttal and a technical hearing . Staff also
scheduled and held two customer workshops in Moscow and
Coeur d 'Alene , Idaho on September 21 and September 22 ,
2016 respectively .
The parties held a Settlement Conference on
October 3 , 2016 and reached agreement resolving all
issues in the case . The Settlement Stipulation
specifying the terms of the agreement was filed with the
Commission on October 25 , 2016 .
Settlement Terms
Q. Would you please describe the terms of the
proposed Settlement?
A. Yes , the Settlement Stipulation specifies an
overall annual revenue requirement increase of $6 .25
million or 2 .57 % higher than current base revenues . The
smaller increase relative to that originally proposed by
the Company ($13 .7 million or 6 .2 %) is due to agreement
on a 9 .5 % return on equity rather than the 9 .9 % proposed
by the Company , and a variety of other expense and
capital adjustments . Total electric rate base is set at
$754 million .
Q . What expense and capital adjustments are
included in the Stipulation?
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A. The Stipulation specifies nine adjustments that
decrease the Company 's requested base rate revenue
requirement by approximately $10 .4 million per year .
four largest adustments are for : 1) removal of $4 .5
million in Palouse Wind contract expenses for 90 %
The
recovery in the Power Cost Adjustment (PCA) mechanism ; 2)
a $2 .47 milli o n reduction t o reflect the lower return on
equity ; 3) a $1 .33 million reduction to reflect removal
of capi tal plant additions projected to occur in 2017 ;
and 4) a $1 .06 million reduction to reflect removal of
2 015 storm costs from the average storm expense included
in rates .
The other five adjustments t otal $1 .04 mi l lion
and were for : 1) adjustment to actual 2016 deferred
debits and credits ; 2) removal of 2017 non -union labor
expenses ; 3) including a Nine Mile investment tax credit ;
4) removal of officer incentives ; and 5) removal o f legal
expenses . The Settlement also included a $1 .22 million
increase in expense to reflect updated 2016 employee
benefit costs . The net effect of these combined
adjustments is to reduce the proposed increase by $9 .18
million .
Q . Does the Stipulated Settlement specify how the
revenue requirement will be spread to each customer class
and how rates within each class will change?
CASE NO . AVU -E-16-03
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A . Yes , the Settlement specifies that the increase
be allocated to the various customer classes using a
prorated 25 % move toward costs of service as originally
proposed by the Company . This results in a non -uniform
increase to various classes . For example , residential
customers will see a 3 .2 % increase while large industrial
customers will see a 1 .9 % increase .
The residential customer charge will increase
from $5 .25 per month to $5 .75 per month with the balance
of the class revenue requirement collected through a
uniform increase in the commodity rate . Rate components
for all other customer classes will increase uniformly .
Q. What other terms and conditions are specified
in the Stipulation and Settlement?
A . The parties agreed to two other conditions as
part of the Stipulated Settlement . The first is to hold
a workshop to discuss class cost of service methodology
to determine how and why cost recovery responsibility
changes for the various customer classes in between rate
cases . The second condition requires collaboration by
interested parties on low income issues . The issues
identified for discussion include policy and structure
for low income weatherization and energy efficiency
education programs .
CASE NO . AVU -E-16-03
11/21/16
43 LOBB , R. (Stip) 6
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Settlement Negotiation
Q . Could you please describe Staff 's investigation
leading up to the settlement conference?
A . Yes . Staff 's approach prior to the settlement
conference was to extensively review the Company 's
filing , identify adjustments to its revenue requirement
request and prepare to file testimony for a
fully -litigated proceeding . Staff submitted over 140
production requests as part of its investigation and
conducted comprehensive on -site auditing of Company books
and records . Staff reviewed both completed and proposed
Company investments , evaluated expenditures including
pensions , salaries , and operation and maintenance ,
investigated power supply modelling , weather
normalization and class cost of service methodologies and
compared rate design alternatives . Staff identified 19
revenue requirement adjustments and established positions
on test year proforma limitations , class revenue
allocations and rate design modification .
Staff positions were established through
investigation and were prepared for presentation at the
Settlement conference . These positions would form the
basis for Staff testimony at hearing should settlement
negotiations have failed .
Q . Could you please describe the settlement
CASE NO . AVU -E-16-03
11/21/16
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process?
A. Yes , settlement negotiations began with a Staff
presentation of its investigative results . This
primarily entailed a step by step discussion of each
identified revenue requirement adjustment . Staff
explained its rationale and the other parties , primarily
the Company , asked questions and provided positions on
why the adjustments should be rejected , modified or
accepted .
The Company then developed a revenue
requirement counter proposal and presented it to the
parties for discussion . Staff likewise evaluated the new
Company proposal based on previous discussion and an
assessment of how successfully an adjustment might be
defended at hearing . Staff then developed and presented
a counter proposal . After several iterations of counter
proposals , negotiation and compromise , agreement was
reached on individual adjustments and an overall revenue
requirement that was supported by all parties .
Q. Were there other areas of disagreement that had
to be resolved during the settlement process?
A . Other than revenue requirement , the parties
were generally in alignment on remaining issues . There
was some discussion of class cost of service and while no
party agreed on any specific class cost of service
CASE NO . AVU -E-16-03
11/21/16
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methodology , all agreed that the 25 % move originally
proposed by the Company was reasonable in this case . The
parties did agree that a workshop was needed to discuss
how and why class cost responsibility changes between
rate cases .
The parties also agreed it was reasonable for
interested parties to meet on low income energy
efficiency issues including appropriate fund ing levels .
Other issues such as the $0 .50 increase in monthly
residential customer charges , PCA expense levels and the
authorized base for the Fixed Cost Adjustment (FCA)
mechanism were discussed and approved as reasonable .
Q . How did Staff determine that the overall
Settlement was reasonable?
A . In every settlement evaluation , Staff and other
parties must determine if the agreement is a better
overall outcome than could be expected at hearing . Staff
looked at each of its revenue requirement adjustment and
determined that the overall agreement was as good or
better than what could be achieved through litigation .
Other parties , made up of customer groups and low income
representatives obviously agreed with Staff in support of
the settlement .
In addition , Staff evaluated this case by
comparing it to the last general rate case filed by
CASE NO . AVU-E-16-03
11/21/16
46 LOBB , R . (Stip) 9
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Avista in 2015 . In Case No . AVU -E-15 -05 , Avista applied
for a two -year rate plan through 2017 . The Company
requested a $13 .2 million increase in 2016 and a $13 . 7
million increase in 2017 . The parties settled for a one
year increase of $1 .7 million . However , much of the
investment and many of the expenses removed from that
case are included in this case . Nevertheless , the
overall increase in 2016 when combined with the
settlement in this case totals approximately $7 .95
million or less than 30 % of the original 2015 two -year
request .
Staff Support of the Settlement Terms
Q. Could you please describe the Palouse Wind
adjustment and explain Staff 's support?
A. Yes . The largest single adjustment of $4 .5
million is for Palouse Wind cont ract expenses . Staff
maintains that this project was acquired by Avista to
meet Resource Portfolio Standards (RPS) for the state of
Washington and not to meet Idaho Load . Moreover , Staff
estimates that the $4 .5 million is the difference between
what Avista pays for the energy generated by the project
and the market value of the energy . Staff believed that
this difference should not be recoverable from Idaho
customers .
The Company maintains that the project does
CASE NO . AVU -E-16-03
11/21/16
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serve Idaho load and is a very low cost renewable
resource relative to other regional resources . Rather
than remove the entire amount from rates , the compromise
is to remove the above market value from base rate
recovery and flow it through the PCA at 90 %. The net
effect of the adjustment is a savings to Idaho customers
of $450 ,000 an n ually .
This adjustment has been included in the last
four Avista rate case settlements and Staff continues to
support the compromise rate treatment .
Q. Please explain why Staff believes the 9 .5 %
Return on Equity and capital structure with 50 % equity
and 50 % debt are reasonable .
A. Staff believes a 9 .5 % Return on Equity (ROE)
will provide continued cash flow for capital
expenditures , maintain credit ratings and allow access to
capital markets at a reasonable cost . New capital
expenditures are required to maintain safe and reliable
customer service . Not only is access to capital markets
important to fund new expenditures but also to refund and
repay maturing short -term and long -term debt obligations .
Staff 's evaluation of the Discounted Cash Flow and other
earnings comparison support a 9 .5% ROE . The 9 .5% ROE is
also the lower point in Avista 's Cost of Equity range .
The projected capital structure at December 31 ,
CAS E NO . AVU -E-16-03
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2016 consists of 50 .8 % equity . The actual capital
structure at December 31 , 2015 had 49 .3% equity . These
equity ratios provide a reasonable range and are
consistent with the proposed and stipulated capital
structure with 50 % equity .
The 9 .5% ROE and a capital structure consisting
of 50 % equity and 50 % debt are the same and maintain
consistency with the stipulated components in AVU -E-15 -05
and AVU -G-15 -01 . They were approved with Order No . 33437
and continue to be reasonable .
Q. Could you please describe Staff 's support for
the other Settlement adjustments?
A. Many of the other revenue requirement
adjustments consist of removal of forecasted capital
additions and expense adjustments beyond a proforma
period of December 31 , 2016 . Staff has consistently
proposed limiting forecasted proforma adjustments to a
defined test period many times in the past and believes
it is appropriate in this case as well .
Likewise , most of the other adjustments such as
legal expenses , storm expenses and salaries associated
with Company management have consistently been removed .
Staff maintains that the adjustments that are
specifically identified and those that are not reflect a
compromise by the parties and are supported by Staff as
CASE NO . AVU -E-16 -03
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part of the Settlement .
Q . Why does Staff support the residential customer
charge increase?
A . Staff believes that an increase in the
residential customer charge from $5 .25 to $5 .75 per month
is reasonable given the level of fixed cost incurred to
serve each customer . While the energy rate has increased
several times over the last five years , the customer
charge has not increased since 2011 . In addition ,
slightly increasing the customer charge will reduce fixed
cost recove ry in the energy rate thus reducing the
potential impact of the FCA on residential customers .
Q . Why does Staff support a cost of service
workshop and collaboration on low income issues?
A . Staff believes that meeting to discuss these
issues will help all parties better understand how
various customers groups are impacted . For example ,
class cost of service studies show significant variation
in cost allocatio n between rate cases . A better
understanding of factors that cause this to occur would
assist parties in evaluating future cost of service
methodolog ies . With respect to low inc ome issues , Staff
agrees that evaluating how low income customers utilize
energy efficiency programs and how the cost of these
programs are covered by all customers is important to
CASE NO . AVU -E-16-03
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• 1 properly establish funding levels .
2 Q. Does that conclude your testimony?
3 A. Yes it does .
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CASE NO . AVU -E-16-03 51 LOBB , R. (Stip) 14
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(The following proceedings were had in
open hearing .)
COMMISSIONER KJELLANDER : And he is now
tendered for cross -examination . Let 's begin with
Avista .
MR . MEYER : No questions .
COMMISSIONER KJELLANDER : Mr . Miller?
MR . MILLER : No , thank you .
COMMISSIONER KJELLANDER : And Mr . Purdy?
MR . PURDY : None , thanks .
COMMISSIONER KJELLANDER : Are there any
questions from members of the Commission?
are excused .
COMMISSIONER ANDERSON : No .
COMMISSIONER RAPER : No .
COMMISSIONER KJELLANDER : Mr . Lobb , you
(The witness left the stand .)
MR . KARPEN : Thank you , Mr . President .
The Staff has no further witnesses .
COMMISSIONER KJELLANDER : Thank you very
much . Now , let 's turn to the Community Action
Partnership Association of Idaho and Mr . Purdy , would you
like to call your witness?
Zamora .
CSB REPORTING
(208) 890 -5198
MR . PURDY : Yes , CAPAI calls Christina
52 LOBB
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CHRISTINA ZAMORA ,
produced as a witness at the instance of the Community
Action Partnership Association of Idaho , having been
first duly sworn to tell the truth , was examined and
testified as follows :
BY MR . PURDY :
Q
name?
A
Q
A
Q
DIRECT EXAMINATION
Would you please state and spell your
Christina Zamora , Z-a -m-o -r -a .
And what is your position with CAPAI?
I 'm the executive director .
And have you previously prepared and
prefiled direct testimony in this matter consisting of 13
pages?
testimony?
A
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Yes .
Do you have any exhibits to that
No .
Okay , do you have any changes to it?
No .
All right , if I were to ask you the same
questions today as contained in your prefiled direct
CSB REPORTING
(208) 890 -5198
53 ZAMORA (Di)
CAPAI
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testimony , would your answers be substantially the
same?
A Yes .
MR . PURDY : With that , Mr . Chairman , I
would ask that the testimony of Christina Zamora be
spread upon the record as if read .
COMMISSIONER KJELLANDER : Thank you , and
without objection , we will spread the testimony of
Ms . Zamora across the record as if read .
(The following prefiled direct testimony
of Ms . Christina Zamora is spread upon the record .)
CSB REPORTING
(208) 890 -5198
54 ZAMORA (Di)
CAPAI
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I. INTRODUCTION
Q: Please state your name and business address .
A : My name is Christina Zamora . I am the
Executive Di r ector of the Community Action Partnership
Association of Idaho at 3350 W. Americana Terrace , Suite
360 , Boise , ID 83706 .
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 , the low
income customers of Avista .
II . BACKGROUND
Q: Please describe CAPAI 's organizational
structure and the functions it performs , relevant to its
involvement in this case .
A: CAPAI is an association of the following
private , nonprofit organizations that fight poverty in
Idaho : 1 ) The Community Action Partnership (CAP-N &
CAP -NC) ; 2) El Ada , Inc . ( El Ada) ; 3) The Western I daho
Community Action Partnership (WICAP); 4) The South
Central Community Action Partnership (SCCAP); 5) The
Southeastern Idaho Community Action Agency , Inc .
(SEICAA); 6 The Eastern Idaho Community Action
Partnership , Inc . (EICAP); 7) The Community Council of
55 CHRIS TINA ZAMORA 2
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Idaho , Inc . (CCI), and ; 8) Metro Community Services (MCS)
formerly named the Ca n yon County Organization on Aging ,
Weatherization and Human Services , Inc . The last two
agencies , CCI and MCS , are designated in CAPAI 's Bylaws
as "special purpose agencies ." These agencies are
focused on providing services to migrant and senior
populations , respectively . Collectively , the six
Community Action Agencies (sometimes referred to as
"CAPs ") along with CCI and MCS are referred to as "member
agencies ." For the purposes of the
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56 CHRISTINA ZAMORA 2a
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Stipulation at issue in this proceeding , there is no
relevant distinction between a Community Action Agency
and a special purpose agency .
Each member agency has a designated service
area . Combining all agencies , every county in Idaho is
served . The agencies design their various programs to
meet the unique needs of communities located within their
respective service areas . Not every agency provides all
of the following services , but all work with people to
promote and support increased self -sufficiency . Programs
provided by CAPS include : employment preparation and
retention , education assistance , child care , emergency
food , senior independence and support , clothing , home
weatherization , energy assistance , affordable housing ,
health care access , and much more .
Q: What is the relationship between CAPAI and the
member agencies?
A: CAPAI is effectively the umbrella organization
that provides a myriad of services to the members to
assist them in carrying out their individual missions
throughout Idaho . Such services include training and
technical assistance , coordination of resources , program
planning and assistance with implementation , programmatic
administrative oversight , and advocacy for the low -income
in Idaho , among other things .
57 CHRISTINA ZAMORA 3
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Q: Are the individual member agencies represented
on CAPAI 's Board of Directors and , if so , how?
A: Yes they are . Each agency has an Executive
Director and its own Board of Directors that establishes
policy for that agency . The Executive Director manages
the day to day functions of the agency . In addition ,
each Executive Director of each member agency sits on the
CAPAI Board of Directors .
CAPAI Board members .
Thus , there are currently 8
Q: Which of the eight member agencies provide
low -income assistance to Avista 's service territory?
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A: The Community Action Partnership ("CAP ") serves
North Idaho including all of Avista 's Idaho service
territory .
Q: Have you testified before this Commission in
other proceedings?
A: Yes , I have testified on behalf of CAPAI in
numerous cases involving United Water , Idaho Power ,
AVISTA , and Rocky Mountain Power , to name a few .
Q : Would you please describe CAPAI 's involvement
in this case?
A : CAPAI participated fully throughout the
entirety of this case and participated in all settlement
negotiations .
III. SUMMARY
Q: Please summarize your testimony in this case?
A : The purpose of my testimony is to support the
settlement stipulation entered into between CAPAI ,
Avista , Commission Staff , Clearwater Paper Corporation ,
Idaho Forest Group , L .L .C ., and the Snake River Alliance .
The Settlement Stipulation was filed with the Commission
on October 24 , 2016 , and accompanied by a Motion for
Approval of Stipulation and Settlement pursuant to Rule
274 of the Commission 's Rules of Procedure , IDAPA
31 .01 .01 .274 . As discussed later in my testimony , the
parties settled for a considerably reduced rate increase
59 CHRISTINA ZAMORA 4
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of 2 .6% resulting in increased revenues of $6 .25 million .
I also provide the r ationale for CAPAI 's support of the
settlement . Finally , I will explain why I believe that
the settlement is in the interests not only of Avista 's
low -income customers , but the general body of ratepayers
as well .
Q: Is CAPAI 's support for the Settlement
Stipulation unconditional?
A:
Q:
A:
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Yes it is .
Are there any exhibits to your testimony?
No .
60 CHRISTINA ZAMORA 4a
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IV. ESSENTIAL ELEMENTS OF SETTLEMENT
A. Revenue Requirement:
Q: Please identify the primary aspects or elements
of the settlement from CAPAI 's perspective .
A : The Company 's original application sought a
6 .3% increase in revenue equaling $15 .4 million annually
commencing in the year 2017 . As I testified earlier , the
parties ultimately agreed to reduce Avista 's requested
rate increase by roughly 60 % (resulting in an increase in
revenue of 2 .6% or $6 .25 million . Though any rate
increase is of obvious concern to CAPAI and to the
Company 's customers , Avista demonstrated that , for
various reasons , it was entitled to some form of rate
increase based on the facts and law applicable to this
case . CAPAI 's position , therefore , is that the amount of
actual rate relief ultimately agreed upon constitutes a
fair , just and reasonable settlement , especially in light
of certain terms and conditions agreed to by Avista
pertaining to low income customers , which I will discuss
later.
B. Monthly Basic Charge:
Q: What is CAPAI 's perspective on the agreement to
increase the fixed , monthly residential basic charge by
fifty cents from $5 .25/month to $5 .75 .
A: The monthly basic charge is intended to cover
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the costs directly attributable to individual residential
customers and includes , among other things , items such as
a customer 's service drop and meter . CAPAI is aware that
the costs recovered by the basic charge do increase over
time and believes that a fifty cent increase is not
excessive . Further , CAPAI believes that an increase in
the basic mon thly charge , as proposed , won 't necessarily
be contrary to the interests of low income customers on
the whole .
Q:
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Why is this?
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A : Depending on any given customer 's level of
electricity consumption and the amount of the increase in
the basic monthly charge , that customer might experience
a bill increase , a bill reduction , or remain relatively
neutral . This is because increased revenue derived from
increasing the basic charge will not be recovered through
commodity rates based on the amount of electricity
consumed by a customer .
Q:
A:
Could you please elaborate on this statement?
Because Avista has tiered rates priced at a
higher level as consumption increases , customers who are
relatively high users might benefit if the overall rate
increase is recovered through a fixed charge paid by
everyone rather than the amount of electricity consumed
by a customer . Because of the relatively modest increase
of fifty cents/month , as well as the mixed effect it will
have on low income customers , it is CAPAI 's position that
the agreed -upon increase is fair , just and reasonable .
Q: Do you have an opinion on the manner in which
the rate increase is proposed to be recovered from
ratepayers?
A: Yes . The Stipulation calls for the increased
revenues to be collected from all electric rate schedules
on a pro rata allocation of the Company 's rate spread
percentages as contained in the original filing . I
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believe that this is a reasonable rate spread proposal
that , under the facts presented , is fair .
C. Rate Spread:
Q: Are the relative rate increases for the various
customer classes , as set forth in the settlement
stipulation , equal?
A: No . In fulfilling its mandate to establish
rates that are fair , just and reasonable and that do not
unduly favor any customer or customer class over another ,
the Commission attempts to occasionally determine what is
known as the "cost of service " for each customer class .
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Cost of service pertains to whether a given customer
class is paying rates that recover the costs of serving a
given class . In addition to any cost of service study
provided by a utility when it seeks a general rate
increase , other parties , including Commission Staff , will
often proffer their own cost of service studies or
advocate for specific changes to the Company 's study .
Q : Is the Commission bound to any particular cost
of service study or methodology?
A: No , it is not . The Commission has long noted
that determining cost of service is as much art as it is
science and , therefore , does not believe itself to be
bound by any particular cost of service methodology or
study . Instead , the Commission relies upon cost of
service study results as just one of a number of factors
to consider when allocating changes in a utility 's rates
between customer classes (i .e ., "rate spread ")
Q: So why does the Stipulation result in a
relatively greater increase for the Residential class
than for certain others?
A: The answer is that of the cost of service
studies or analyses for Avista , presented during this
case and past rate cases , demonstrate that the
Residential class , in relation to other classes , is
currently paying rates that are somewhat below its
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respective cost of service .
Q: Does the relatively higher rate increase for
the Residential class bring that class to its full cost
of service?
A: Not necessarily . Again , cost of service is
fairly subjective and that , at least for the Residential
class , it is no feasible , if not impossible , to state
with certainty what the Residential class 's cost of
service is . Consequently , the Commission makes its rate
spread decisions taking into consideration numerous
policies and facts including that cost of service is not
precise and that any rate increase for a given customer
class should not be so significant as to result in what
is often referred to as "rate shock ." In light of this ,
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the parties agreed to a relatively higher rate increase
to the Residentia l class , but less than what the
Company 's cost of service study suggests would be
necessary to bring the Residential customers to full
"parity ."
Q: What is CAPAI 's position on this?
A: CAPAI believes that the relatively higher rate
increase for residential customers constitutes a
reasonable compromise and , thus , is fair , just and
reasonable .
Q: Does the Stipulation provide for further
exploration of the cost of service for Avista 's customer
classes?
A : Yes . Paragraph C(l4) of the Stipulation
provides that prior to the filing of Avista 's next
general rate case , all interested parties will meet and
confer regarding Avista 's cost of service study .
will present an opportunity for all parties to
This
participate and advocate for their respective positions
on the many issues and factors inherent in cost of
service calculations .
D. Low Income Issues:
Q : Are there any provisions contained in the
Stipulation exclusive to low income concerns and
considerations?
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A: Yes . The Stipulation contains several
provisions that address the interests of the Company 's
low income customers . For example , paragraph C(l5)
provides that : "[t]he Company and interested parties will
meet and confer prior to the Company 's next general rate
filing in order to assess the Low Income Weatherization
and the Low Income Energy Conservation Education Program
to explore policy goals and program structures that may
enhance or improve Avista 's low-income program ."
Q :
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A: First , Avista currently has pending , in Case
No . AVO-E-16-06 , an application seeking a finding by the
Commission that the Company 's costs incurred in funding
its various Demand Side Management (DSM) programs ,
including the Low Income Weatherization Assistance and
Low Income Energy Conservation Education Programs , were
prudently incurred . CAPAI is very interested in the DSM
prudency case and has intervened as a party to that case .
To the extent that it is ultimately determined that the
two aforementioned low income programs would benefit from
changes , retooling , or basic analysis , then the provision
contained in the Stipulation in this case will provide an
opportunity to engage in such efforts and dovetail well
with the DSM prudency case . It is CAPAI 's objective and
intent to do what it can to structure the two low income
Avista programs in a manner that enhances their efficacy .
Q : Are there any other provisions in the
St ipulation related specifically to low income customers?
A : Yes . In addition to the Company 's agreement to
engage in a collaborative effort to enhance the two low
income programs it has in place , Avista also agreed to
participate in a study of its low income customers in
Idaho . The purpose of this condition is to provide
greater context for addressing low income issues by
obtaining data such as the actual number of low income
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customers the Company has in Idaho , their incomes , the
nature of their consumption , including whether they
utilize electricity or gas as their primary heat source ,
the amount of electr i city that they consume throughout
the year , and numerous other data . Any such study would
only be undertaken with the assurance that no personal
information identifying any particular Avista customer
will be revealed .
Q : Can you elaborate on the benefits of having the
data that the study will provide?
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A: One example is low income customer consumption
information . In most cases when the Company proposes to
alter its rate design , whether it involves changing the
basic customer charge or altering the commodity pricing
Avista has in place , some customers will realize a net
benefit in terms of their bills while others will realize
the opposite effect . This depends on how much
electricity they consume . While many people naturally
assume that all low income customers have relatively
lower consumption , CAPAI has learned that this isn 't
always the case . For instance , customers who have
electric baseboard heat and/or a poorly insulated home ,
might well have relatively high consumption but
insufficient financial means to either buy a new gas
heater or to better insulate their homes . Another
example of the benefits of conducting a study is to
provide a better idea of how many low income customers
the Company actually has . I believe that this particular
segment of the Company 's customers have historically been
underestimated . Having numbers that are more precise
will help to emphasize the need for consideration of low
income customers ' needs and what is at stake .
V. CONCLUSION
Q: In light of your testimony , do you believe the
proposed revenue requirement increase to be fair , just
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and reasonable?
A: Yes . In combination with other provisions set
forth in the proposed Settlement Stipulation , I believe
the agreed upon and significantly reduced revenue
requirement increase to be fair , just and reasonable .
Q: Does the settlement stipulation adequately
address the low income issues raised by CAPAI in this
case?
A: Yes it does . As I testified earlier , Avista 's
low income weatherization program , along with its other
DSM programs , is currently being assessed to determine
that the costs
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incurred in funding those programs was prudently
incurred . See , Case No . AVU -E-16 -06 . It is entirely
possible that the collaborative set forth in the
Stipulation and involving examining Avista 's low income
programs to , among other things , enhance them, will
produce synergies with the DSM prudency case .
Q: Does the Stipulation provide benefits to the
general body of ratepayers stemming from the low income
provisions?
A: Yes it does . To the extent that all parties
and the Commission have the best knowledge feasible
related to low income customers and the Company 's low
income programs , the better equipped the Commission will
be to make decisions affecting the poor . Any program
that provides assistance to the poor is likely to provide
benefits to all ratepayers in terms of reduced bad debt
expense , improved cash flow , reduced collection costs ,
among others .
Q: What is your opinion of the Stipulation on the
whole?
A: My opinion is that it is fair , just and
reasonable for all ratepayers . CAPAI supports the
Stipulation and respectfully requests that the Commission
approve it .
Q: Does that conclude your testimony?
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• 1 A: Yes it does .
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(The following proceedings were had in
open hearing .)
MR . PURDY : I have nothing further .
COMMISSIONER KJELLANDER : Thank you , and
so we 'll open it up to cross -examination . Mr . Miller?
MR . MILLER : No , thanks .
COMMISSIONER KJELLANDER : Mr . Meyer?
MR . MEYER : No .
COMMISSIONER KJELLANDER : Mr . Karpen?
MR . KARPEN : No questions . Thank you .
COMMISSIONER KJELLANDER : Any questions
from members of the Commission?
COMMISSIONER RAPER : I have one quick
question .
COMMISSIONER KJELLANDER : Please proceed .
CROSS -EXAMINATION
BY COMMISSIONER RAPER :
Q Good morning , Ms . Zamora . My question is
in relation to page 6 of your testimony , line 23 . It
talks about cost of service and I just wanted to clarify ,
because you talk about the Commission 's mandate to
establish fair , just , and reasonable rates , but then you
say , "the Commission attempts to occas ionally determine
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what is known as the 'cost of service ' for each customer
class ," so is it your position that it 's the Commission 's
responsibility to create cost of service categories or to
approve what is presented to it by parties in the case?
A To approve what 's presented to it .
COMMISSIONER RAPER : Okay , thank you .
That was all .
COMMISSIONER KJELLANDER : Well , there 's
probably not much to do in the form of redirect from
that , but I 'll offer you an opportunity .
MR . PURDY : No , she handled that
perfectly . Thank you .
COMMISSIONER KJELLANDER : Thank you very
much . Are there any further questions from members of
the Commission?
COMMISSIONER ANDERSON : No .
COMMISSIONER KJELLANDER : If not , then we
thank you very much for being here today .
THE WITNESS : Thank you .
COMMISSIONER KJELLANDER : Thank you for
your testimony in the case .
(The witness left the stand .)
COMMISSIONER KJELLANDER : It appears as
if --if I can find a way to stretch this out until a
quarter till , I will still be able to say that this is
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one of the quickest technical hearings that we have had
in the history of the Public Utilities Commission .
What I would like to stay as we start to
wrap things up is I certainly do appreciate the work and
effort that the parties put in to making it possible for
us to be here today and deal with a settlement
stipulation . I realize that there was a ton of work that
went on behind the scenes that made it possible for us
today as a Commission to be able to deal with this in a
very timely fashion . We certainly do appreciate that and
we 're in a time and place in history where confrontation
and a lack of collaboration and the willingness to
compromise seems to be the rule of thumb .
It certainly demonstrated at least in this
forum that we 've got some people that are very pragmatic ,
very reasonable and we certainly do appreciate your
participation and , again , for bringing us a settlement
stipulation that should be possible for us as a
Commission to deliberate on in a timely fashion and get
an Order out in a reasonable timeline as well , and so
thank you for all of your effo rts .
gone unnoticed .
It has certainly not
Is the re anything else that needs to come
before the Commission today? Mr . Karpen?
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MR . KARPEN : Nothing here , Mr .
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Commissioner .
MR . MEYER : No , and thank you for your
kind words .
COMMISSIONER KJELLANDER : Thank you , and
since there is nothing further to come before the
Commission today , obviously , if we 've missed spreading
anything across the record or any exhibits haven 't been
officially referenced to be put into the record , by our
Rules of Procedure , those will automatically go int o
play . It 's our intent to leave the record open until
Friday , December 9th , to allow for additional written
comments from the public . Then once the case is fully
submitted , we 'll do our due diligence and try to get an
Order out as quickly as possible , so with that , then , we
are adjourned .
CSB REPORTING
(208) 890 -5198
(The Hearing adjourned at 9 :44 a .m.)
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A U T H E N T I C A T I O N
This is to certify that the foregoing
proceedings held in the matter of the application of
Avista Corporation dba Avista Utilities for authori ty to
i ncrease its rates and charges for electric service in
Idaho , commencing at 8 :00 p .m., on Tuesday , November 29 ,
2016 , and continuing at 9 :30 a .m., on Friday , December 2 ,
2016 , at the Commission Hearing Room , 472 West Washington
Street , Boise , Idaho , is a true and correct transcript of
said proceed i ngs and the original thereof for the file of
the Commission .
Accuracy of all prefiled testimony as
originally submitted to the Reporter and incorporated
herein at the direction of the Commission is the sole
responsibility of the submitting parties .
·"' ,. ~ ~·.t:c.:~~a.;;,·-:.>"":..,·•; .. ·
CSB REPORTING
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Certified Shorthand
79 AUTHENTICATION