20190625Avista to Staff 1-35.pdf

Avista Corp.
1411 East Mission P.O.Box3727
Spokane. Washington 99220-0500
Telephone [phone]TollFree 800-727-9170
ldaho Public Utilities Commission
Office ol the Secretary
RECEIVED
iuN 2 5 2019 Aftinsrfr
Corp.
Boisc, ldaho
June25,2019
Idaho Public Utilities Commission
472W. Washington St.
Boise, ID 83702-0074
Attn: Edward Jewell
Deputy Attorney General
Re: Production Request of the Commission Staff in Case Nos. AVU-E-19-04
Dear Mr. Jewell,
Enclosed are Avista's responses to IPUC Staffs production requests in the above referenced
dockets. Included in this mailing are the original and two paper copies of Avista's responses to
production requests: Staff No. 4, 5, 8, ll,12, 19r23,25r27-30, and 33. Also enclosed on three
separate CD's are copies of Avista's responses to the production requests. The electronic versions
of the responses were emailed on 06125119.
Also included both on paper and on a separate CD are Avista's CONFIDENTIAL responses to PR
012C, 019C, 025C, 030C & 033C. These responses contain TRADE SECRET,
PROPRIETARY or CONFIDENTIAL information and is separately filed under IDAPA
31.01.01, Rule 067 and233, and Section 9-340D, Idaho Code. It is being provided under a sealed
separate envelope, marked CONFIDENTIAL.
Ifthere are any questions regarding the enclosed information, please contact Paul Kimball at (509)
495-4584 or via e-mail at [e-mail].
Sincerely,
-/a -zl-
Paul Kimball
Manager of Compliance & Discovery
Enclosures
CC (Email)IPUC (Hanian)
Idaho Forest Group (Miller, Williams, Crowley)
AVISTA CORPORATION
RESPONSE TO REQUEST FOR INFORMATION
JUzuSDICTION
CASE NO:
REQUESTER:
TYPE:
REQUEST NO.:
IDAHO
AVU-E-19-04
IPUC
Production Request
Staff-004
DATE PREPARED: 0612512019WITNESS: Elizabeth Andrews
RESPONDER: Violet Makhanov
DEPARTMENT: Corporate Accounting
TELEPHONE: (509) 49s-2883
REQUEST:
Please provide the total amount that the Company spent on the following activities for 2018, and
show how the Company allocated the amounts between its Avista Utilities operating division and
the rest of the Company and its subsidiaries:
a. Internal auditing expenses;
b. The Company's annual report;
c. Deloitte;
d. Rating agencies;
e. All software or information system-related issues;
f. Board of Directors compensation, travel expenses, and meeting expens{
g. Corporate or chartered aircraft;
h. Travel and training for all shared executives of Avista Utilities and affiliates;
i. Insurance coverage;
j Overhead items including utilities, property taxes, security services, and other
corporate headquarter expenses; and
k. All other allocated expenses.
RESPONSE:
See Staff PR 004 Attachment A.
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REQUEST NO. 4: Please provide the total amounts spent on the following activifies during 20t 6 and show how the amounts were allocated between Avista
Utilities and Avista Corp and its subsidiaries:
a. Intemal auditing expenses (by employees and consultants);
O&M Utilitv O&M Non-Utiliry / Subsidiary
Labor 637,999 7,750
Employee Expenses 21,725
Training 1,773Other 3,833
Deloitte Consulting 1,896,581
Total$2,561,911$7,750
b. Avista Corporation's annual report;
c. Deloitte & Touche and Deloitte Consulting;
Refer to (a.)
d. Rating agencies;
O&M Utility O&M Non-Utilitv / Subsidiarv
Moody 110,000
S&P
Total s 200,000 s
e. All software or information system-related items;
o&MUtilitv
Contractor $ 4,286,844
Hardware/Software $ 8,996,945
Labor I 7,145,254
TelecomAletwork $ 3,140,185
Hosting Services $ 3,954,602
PrinterToner S 222,839
Other $ 776,535
Rents $ 319,227
i. Insurance coverage;
Property Insurance
O&M Non-Utility / Subsidiarv
$
$
$
s
12,4s3
82,400
106,813
7,027
42,915
Training $ 45,909
Total $28,888,339 $ 251,608
f Board ofDirectors compensation, travel expenses, meeting expenses;
(See Andrews workpepers section "2.12" Miscellaneous RestatiDg adj)
g. Corporate or chartered aircraft;
(Refer to Request No. 34)
h. Travel and training for Avista Utilities executives that are also Avista Corporation executives;
O&M Utilitv O&M Non-Utiliw / Subsidiarv
Total $ 3,802
s
O&M Utilitv O&M Non-Utility i Subsidiarv
1,462,798 361,060
Insurance
j. Overhead items including utilities, property taxes, security services, and other corporate headquarters expenses*;
O&M Utilitv O&M Non-Utilitv / Subsidiar.v
Janitorial Services 269,766
Labor 538,790
Lease Expense 75
Materials & Equipment 181,353
Other 34,712 37,413
Professional Services 333,340
Rental Expense 4,383
Security Services 253,217
Utilities 810,375
Total $2,426,011 $ 37,413
rcharges associated with the Mission campus only
k. All other allocated expenses;
Time & expenses are directly assigned, there will be no other allocated expenses.
StaflPR_0O4 Attachment A.XLSX Page I of I
AVISTA CORPORATION
RESPONSE TO REQUEST FOR INFORMATION
JURISDICTION
CASE NO:
REQUESTER:
TYPE:
REQUEST NO.:
IDAHO
AVU-E-19-04
IPUC
Production Request
Staff-005
DATE PREPARED: 0612512019WITNESS: Elizabeth Andrews
RESPONDER: Jaime Majure
DEPARTMENT: Regulatory Affairs
TELEPHONE: (s09) 495-7839
REQUEST:
Please provide a copy of all regulatory orders relating to Avista Utilities or the Company and its
subsidiaries issued by state agencies in Oregon, Washington, Alaska, or the Federal Energy
Regulatory Commission (FERC) in20l7 through 2019 to date.
RESPONSE:
See Staff AR_005 Attachment A for the State orders.
See Staff AR_005 Attachment B for the FERC orders.
Due to the voluminous nature of the attachments, they are being provided in electronic format only
AVISTA CORPORATION
RESPONSE TO REQUEST FOR INFORMATION
JURISDICTION:
CASE NO.:
REQUESTER:
TYPE:
REQUEST NO.:
IDAHO
AVU-E-19-04
IPUC
Production Request
Staff-008
DATE PREPARED: 0612512019WITNESS: Mark Thies
RESPONDER: Laura Vickers
DEPARTMENT: Finance
TELEPHONE: (509) 49s-2904
REQUEST:
Please provide a matrix identifuing the major capital expenditure approval levels that includes
the dollar level of authorization by employee title, division, and company. Please include within
your response the dollar level at which the individual capital expenditures require approval by
the Board of Directors.
RESPONSE:
Please refer to the Infrastructure Plan in Thies testimony for additional information regarding
Avista's capital planning process. The Capital Planning Group (CPG), comprised of nine director-
level employees from across the organization, is responsible for prioritizing capital expenditures,
allocating funds and ultimately developing a recommended five-year capital plan. This five-year
capital plan is discussed in detail with the Officer group and once agreement regarding funding is
reached it is finalized for submittal to the Finance Committee of the Board of Directors (FC).
Through this process the Officers are approving all funding through approval of the overall plan.
The FC reviews the plan and also approves funding of the individual projects and programs by
approval of the overall plan for the first year of the five year plan. The Officers have delegated
the CPG authority to make reallocations throughout the year to accommodate revisions and new
projects to the extent that the total approved capital budget is not exceeded. Any new projects
over $10 million that were not part of the original approved plan need to be approved by the FC.
Page I of I
AVISTA CORPORATION
RESPONSE TO REQUEST FOR INFORMATION
JURISDICTION:
CASE NO.:
REQUESTER:
TYPE:
REQUEST NO.:
IDAHO
AVU-E-19-04
IPUC
Production Request
Staff-0 1 I
DATE PREPARED
WITNESS:
RESPONDER:
DEPARTMENT:
TELEPHONE:
EMAIL:
0612012019
Elizabeth Andrews
Joel Anderson
State & Federal Regulation
(s09) 49s-281 l
j oel. [e-mail]
REQUEST:
Please provide a list of "out-of-period adjustments" and "extraordinary items" for the years
2017-2019 to date.
RESPONSE:
The Company believes there are no extraordinary items for years 2017 through2019 year to date,
which includes the test period of twelve months ended December 31,2018. Each month, as the
Results of Operations reports are prepared, the Company reviews unusual fluctuations in revenues
and expenses. Certain prior period costs are removed at that time (primarily tax return true-ups for
prior years). The Company is in the process of reviewing all non-standard journal entries for the
period 2017-2019 to date, and will supplement this response at the conclusion of that review.
Page I of I
AVISTA CORPORATION
RESPONSE TO REQUEST FOR INFORMATION
JUzuSDICTION:
CASE NO.:
REQUESTER:
TYPE:
REQUEST NO.:
IDAHO
AVU-E-19-04
IPUC
Production Request
Staff-012
DATE PREPARED: 0612412019WITNESS: Elizabeth Andrews
RESPONDER: Joel Anderson
DEPARTMENT: State & Federal Regulation
TELEPHONE: [phone]EMAIL: [e-mail]
REQUEST:
Please provide a schedule showing injuries and damages claims over $2,000 for the years
2016-2018. Please include within your response the description of each item, the amount for each
item, and the account charged.
RESPONSE:
Please note that the attached document contains TRADE SECRET, PROPRIETARY or
CONFIDENTIAL information and are separately filed under IDAPA 31.01.01, Rule 067 and
233, and Section 9-340D,Idaho Code.
Please see Staff_PR_0I2C Confidential Attachment A for the requested information.
Page I of I
AVISTA CORPORATION
RESPONSE TO REQUEST FOR INFORMATION
JUzuSDICTION:
CASE NO:
REQUESTER:
TYPE:
REQUEST NO.:
IDAHO
AVU-E-19-04
IPUC
Production Request
Staff-0 1 9
DATE PREPARED: 06125120t9WITNESS: Mark Thies
RESPONDER: Laura Vickers
DEPARTMENT: Finance
TELEPHONE: (s09) 495-2904
REQUEST:
Please provide copies of the monthly, quarterly, and annual comparison of operating and capital
budget to actuals expenditures for 2016-2019 to date. Please include within your response a
narrative explanation for budget variations. This should include, but not be limited to, written
operating and capital budget variance reports and explanations used by Company officers and
managers to monitor and control budgets under their responsibility. Please supplement your
response as additional information becomes available throughout 2019.
RESPONSE:
TRADE SECRET, PROPRIETARY or CONFIDENTIAL information and exempt from public
viewandisseparatelyfiledunderIDAPA3l.0l.0l,Rule06T and233,andSection9-340D,Idaho
Code, and pursuant to the Protective Agreement
Please see Staff AR_019C Confidential Attachment A, a folder that contains the requested
information by year and by month, for capital expenditures actual to budget comparisons by
expenditure request (ER) and operating expenses actual to budget comparisons with variance
explanations by organization code (department). Due to the voluminous nature of the attachment,
it is being provided in electronic format only.
AVISTA CORPORATION
RESPONSE TO REQUEST FOR INFORMATION
JURISDICTION:
CASE NO:
REQUESTER:
TYPE:
REQUEST NO.:
IDAHO
AVU-E-19-04
IPUC
Production Request
Staff - 023
DATE PREPARED: 0612412019WITNESS: Mark Thies
RESPONDER: Ian Mclelland
DEPARTMENT: Corporate Accounting
TELEPHONE: [phone]
REQUEST:
Please provide a list of all leased items in 2017,2018, and2019 to date. Please separate capital
leases from operating leases and show the dates, terms, amounts, and accounts used for each lease.
RESPONSE:
Please see Staff PR_023 Attachment A for a list of all leased items in 2017,2018 and2019
year-to-date.
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AVISTA CORPORATION
RESPONSE TO REQUEST F'OR INFORMATION
JUzuSDICTION
CASE NO:
REQUESTER:
TYPE:
REQUEST NO.:
IDAHO
AVU-E- 19-04
IPUC
Production Request
Staff-025
DATE PREPARED:
WITNESS:
RESPONDER:
DEPARTMENT:
TELEPHONE:
0612512019
Elizabeth Andrews
Annette Brandon
State & Federal Regulation
(s09) 49s-4324
REQUEST:
For each officer of the Company, please provide the total dollar amount of remuneration for
2015-2018. Please separate by year, salary, incentive pay, options, benefits, and other. For each
officer, please provide the percentages of his or her total remuneration that is allocated to other
subsidiaries each year along with the basis for that allocation.
RESPONSE:
TRADE SECRET, PROPRIETARY or CONFIDENTIAL information and exempt from
public view and is separately filed under IDAPA 31.01.01, Rule 067 and233, and Section 9-340D,
Idaho Code, and pursuant to the Protective Agreement
Please see Staff PR_025C Confidential Attachment A for total compensation for executive
officers for 2015-2018. Data is provided categorized by FERC account and expenditure type
(regular payroll, paid time off, incentive). Included within the data are charges to non-utility
accounts which are not included in the Company's rates. Benefits and payroll taxes are part of an
overall labor loader and are not tracked at the employee level. Overhead rates are applied to the
general ledger account where the direct labor charges originate. Please see the Company's
response to Sta[PR_026 for additional information on incentive compensation.
AVISTA CORPORATION
RESPONSE TO REQUEST FOR INFORMATION
JURISDICTION
CASE NO:
REQUESTER:
TYPE:
REQUEST NO.:
IDAHO
AVU-E-19-04
IPUC
Production Request
Staff-027
DATE PREPARED:
WITNESS:
RESPONDER:
DEPARTMENT:
TELEPHONE:
06125120t9
Elizabeth Andrews
Annette Brandon
State & Federal Regulation
(s09) 49s-4324
REQUEST:
Please provide the quantifiable savings from any cosVworkforce reduction programs during the
past five years. Please provide any additional workforce reduction programs planned for
20t8-2019.
RESPONSE:
The last quantifiable workforce reduction was completed in 2012 wrth the Company's Voluntary
Severance Incentive Plan (VSIP). Since VSIP, no workforce reduction programs have been made
and none are currently anticipated. However, in an effort to mitigate the annual growth in
operating expenses, Avista has ongoing hiring restrictions, which requires approval by the
Chairman/President/CEO, the President of the Utility, the Chief Financial Officer, and the Sr. VP
for Human Resources for all replacement or new hire positions.
In addition to base wages, the Company also provides variable pay (in the form of pay-at-risk
incentive compensation) and a comprehensive benefit package. Each component is carefully
considered within the overall package in order to provide total compensation, which will be
cost-effective for the Company, remain attractive to employees, and is an effective recruitment
tool. In order to manage costs for total compensation, adjustments have been made to the benefits
portion of compensation. Please see the Company's response to StafLPR_028 for additional
information regarding benefits and retirement plans. See also Staff_PR_033 for an explanation of
the basis for setting employee compensation by employee group.
AVISTA CORPORATION
RESPONSE TO REQUEST FOR INFORMATION
JURISDICTION:
CASE NO:
REQUESTER:
TYPE:
REQUEST NO.:
IDAHO
AVU-E-19-04
IPUC
Production Request
Staff-028
DATE PREPARED
WITNESS:
RESPONDER:
DEPARTMENT:
TELEPHONE:
0612512019
Elizabeth Andrews/Mark Thies
Annette Brandon
State & Federal Regulation
(s09) 49s-4324
REQUEST:
Please summarize all benefit and retirement plans provided to any classification of Company
employees. Please also include any changes that have occurred to the benefits/accruals during the
past five years.
RESPONSE:
All regular employees, including Executive Officers, are eligible for the Company's Qualified
Defined Benefit plan (hires after 01.01.14 - see below), the Company's 401(k) plan, health and
dental coverage, Company-paid term life insurance, disability insurance, paid time off and paid
holidays. This benefit package offers several choices as to the type of medical plan, dental plan,
life insurance, etc, to determine the best fit for the employee's circumstances. These plans are
designed to be competitive with the overall market practices and are in place to attract and retain
the talent needed in the business. As with all portions of the plan, the Company works with a
third-party administrator to determine the annual rates for the Company and for each individual
employee based on their elections.l
Medical - Avista sponsors a self-funded medical benefit plan that provides various levels of
coverage for medical, dental and vision. Avista encourages employees to take responsibility for
their health care decisions and make lifestyle changes to avoid health care issues. The Company
also encourages participants to adopt and maintain healthy lifestyles, and use health care wisely.
Proactive programs are set up to help individuals change their behaviors and live a healthier life.
The Company addresses this by using a health continuum; low risk (Wellness), moderate risk
(Wellness, Lifestyle Health Coaching) and high risk (Disease Management, Case Management).
As noted above, Avista provides various wellness programs in an effort to proactively manage
medical expense claims. In addition, the Company has implemented several measures to keep
medical costs down. To keep office visit costs down, we offer access to phone or web-based24l7
telemedicine services and an on-site clinic. We have limited our exposure to large claims through
an insurance policy with annual stop-loss limits of $250,000 per person. When employees do
require medical care for catastrophic conditions, we have a case management program managed
by a third-party administrator to help manage these costs. To keep prescription drug costs down,
the Company has contracted with specialty pharmacies who help participants determine the most
economic treatment options.
I The Company also offers Optional and Dependent Life insurance, Voluntary Accidental Death and Dismemberment
Insurance, Group Legal Services, and miscellaneous other benefits. Expenses related to these benefits are borne by
the employee and are not included in the Company's case. For this reason, and the immaterial nature of the cost, we
have not described these benefits in this response.
In addition, effective January l, 2074 the Company made the following changes to the medical
plan offered to employees:
For non-union employees hired or rehired on or after January I,2014, and Local Union
659 employees hired or rehired on or after April 1, 2014, upon retirement the Company
no longer provides a contribution towards his or her medical premiums. The Company
will provide access to the retiree medical plan, but the retiree will pay the full cost of
premiums upon retirement.
Manage Utilization of Specialty Drugs - The Company reviews measures to lower the
cost of prescription drugs including requiring prior authorization, and implementing
step therapy.
a
a
Beginning January 1,2020, the method for calculating health insurance premiums for
the following employee groups will change: non-union retirees, Local Union 659, hired
or rehired after April 1,2014 under age 65, and active non-union employees hired or
rehired after April 1,2014 under age 65. Revisions will result in separate health
insurance premium calculations for retirees and active employees beginning January l,
2020.
Finally, as of 2017, Avista offers a self-insured High Deductible Health Plan ("HDHP") in
addition to the current self-insured plan. The HDHP requires plan participants to pay all costs of
medical care up to defined deductible limits. This plan enforces the message to participants to
manage their own health with an array of tools to assist them in becoming better consumers. Over
time we expect this plan to result in lower overall medical costs to the Company. The level of cost
savings is dependent upon, among other things, the number of employees that choose this plan,
and the level of utilization of medical care for those employees (i.e., the overall medical expense to
the Company under the High Deductible plan versus the old plan for those particular employees
and their families). The level of cost savings from the HDHP is expected to be minimal initially,
and will be unknown for the longer-term until we have actual experience under the plan.
Retirement Plans - Retirement programs are crucial to attracting and retaining a skilled workforce
within the utility industry. The Company provides a defined benefit pension plan and a defined
contribution plan (401k) to employees. For all employees hired or rehired on or after January 1,
20l42,the Company's defined benefit is closed to all non-union. All actively employed non-union
employees that were hired prior to January 1,2014, and were covered under the defined benefit
pension plan at that time, will continue accruing benefits as originally specified in the plan. A
defined contribution a0lft) plan replaced the defined benefit pension plan for all non-union
employees hired or rehired on or after January 1, 2014. Under the defined contribution plan, the
Company will provide a non-elective contribution as a percentage of each employee's pay based
on his or her age. This defined contribution is in addition to the existing 401(k) contribution, where
Avista matches a portion of the pay deferred by each participant. In addition to the above changes,
the Company also revised our lump sum calculation for non-union retirees under the defined
benefit pension plan to provide non-union participants who retire on or after January 1, 2014 with
a lump sum amount equivalent to the present value of the annuity based upon applicable discount
rates,
a
2 Changes were applicable to Local Union 659 (Southeast Oregon) effective Aprill,2014
Miscellaneous Other Benefits
The Company also offers these miscellaneous other Miscellaneous Benefits. Overall, costs
represented by these benefits represent less than 2o/o of overall benefit costs:
o Short and Long Term Disability
o Employee Assistance Plan. Company Provided Term Life Insurance. Tuition Assistance program
In addition, executives are offered the following benefits:
1. Supplemental Executive Officer Retirement Plan (SERP)
In addition to the Company's retirement plan for all employees, the Company provides
additional pension benefits through the SERP to executive officers of the Company who
have attained the age of 55 and a minimum of 15 years of credited service with the
Company. The costs associated with SERP are excluded from retail rates.
2. Deferred Compensation
The Executive Officer Deferred Compensation plan provides the opportunity to defer up to
l5Yo of base salary and up to 100% of cash bonuses for payment at a future date. This plan
is competitive in the market, and provides eligible employees and executive officers with a
tax-efficient savings method. The costs associated with Deferred Compensation are
excluded from retail rates.
Avista regularly participates in a comprehensive benefit study, BENEVAL, conducted by Towers
Watson which compares the total value of our benefit package to the total benefit value of our
peers. This study is comparable to the peer group benchmarking conducted annually for direct
compensation. See Avista's response to Staff PR_033 for additional information.
The Company actively manages costs associated with the overall compensation package which
includes base salary and pay-at-risk incentive compensation in addition to the benefit package.
Please see the Company's response to Staff PR_025 and StaflPR_026 for additional information
on incentive and base pay.
AVISTA CORPORATION
RESPONSE TO REQUEST FOR INFORMATION
JURISDICTION:
CASE NO:
REQUESTER:
TYPE:
REQUEST NO.:
IDAHO
AVU-E-19-04
IPUC
Production Request
Staff-029
DATE PREPARED:
WITNESS:
RESPONDER:
DEPARTMENT:
TELEPHONE:
06t2s/2019
Elizabeth Andrews
Annette Brandon
State & Federal Regulation
(s09) 49s-4324
REQUEST:
Please provide the amount of Supplemental Executive Retirement Plan expense, if any, which is
included in the test year.
RESPONSE:
No Supplemental Executive Retirement Plan expenses have been included in the test year
AVISTA CORPORATION
RESPONSE TO REQUEST FOR INFORMATION
JURISDICTION:
CASE NO:
REQUESTER:
TYPE:
REQUEST NO.:
IDAHO
AVU-E-19-04
IPUC
Production Request
Staff-030
DATE PREPARED:
WITNESS:
RESPONDER:
DEPARTMENT:
TELEPHONE:
0612s120t9
Mark Thies
Kaylene Schultz
State & Federal Regulation
(s}e) 4es-2482
REQUEST:
Please provide copies of the Company's pension and actuarial reports for the years 2016-2018.
Also, please provide any actuarial calculations and documentation that shows the development of
FAS 87 expenses (ASC 715 Compensation - Retirement Benefits as codified), Company
contributions, balances, and assumptions.
RESPONSE:
TRADE SECRET, PROPRIETARY or CONFIDENTIAL information and exempt from
public view and is separately filed under IDAPA 3l .01.01, Rule 067 and233, and Section 9-340D,
Idaho Code, and pursuant to the Protective Agreement
See Staff PR_030C Confidential Attachments A - C for the2016-2018 actuarial reports. The
reports contain the calculations, company contributions, balances, and assumptions. Due to the
voluminous nature of the attachments, they are being provided in electronic format only.
AVISTA CORP.
RESPONSE TO REQUEST FOR TNFORMATTON
JURISDICTION:
CASE NO:
REQUESTER:
TYPE:
REQUEST NO.:
IDAHO
AVU-E-19-04
IPUC
Production Request
Staff-033
DATE PREPARED:
MTNESS:
RESPONDER:
DEPARTMENT:
TELEPHONE:
0612s12019
M. Thies / E. Andrews
K. Schultz / D. Ellenson
Regulatory Affairs
(s09) 49s-2482
REQUEST:
To the extent not previously included in Request No. 32, please provide access to copies of all
studies used to determine employee compensation, including executive compensation, and
explanations of how the Company applied them in the years 2012-2017 to date.
RESPONSE:
Please see Avista's response 033C, which contain TRADE SECRET, PROPRIETARY or
CONFIDENTIAL information and are separately filed under IDAPA 31.01.01, Rule 067 and
233, and Section 9-340D,Idaho Code.
Please see "Staff PR_033C Confidential Attachment" which is a "zip file" that includes over 75
salary studies the Company has participated in for 2017-2019 to date. These studies include
companies such as Willis Towers Watson (formerly Towers Watson), Mercer, Milliman, Work at
Work, to name a few. Due to the voluminous nature of the documents they are being provided in
electronic format onlv.
The Company conducts and participates in numerous salary studies each year to aid in the
determination of salary levels as part of the overall compensation packagel. These studies are used
in various ways depending upon the type of information collected in the study. In addition, the
benchmarking methods and resources used are slightly different for each group or classification of
employee; officer, non-union, and union, as described further below. Benchmarking may be
conducted annually or as needed depending on the group ofemployees. The types ofresources
used may change over the years depending on cost, relevance, and availability of the resource as
well as changes in pay practices.
We use these resources for different purposes: for example we may use a survey to benchmark a
specific position or job type by region, to gather intelligence on overall anticipated salary increases
and pay structure changes, and/or to compare our pay practices to other companies and overall
regional trends.
The Company compiles the results of these surveys and targets overall compensation levels (base
and short-term incentive) to be within +/- 15% of the median. Typically the Company targets the
utility industry for merit increases and changes to midpoints. Regional peers are also reviewed in
an effort to obtain intelligence on trends within the region. Ultimately the goal is to appropriately
position the overall compensation package to recruit and retain qualified employees.
1Salary planning studies are also periodically utilized in the evaluation of the non-executive officer short
term incentive plan. No changes to target opportunities have been made in this plan since 2004.
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While benchmarking is an important component ofthe setting of overall compensation levels, it is
not the sole criteria.Pay components may vary higher or lower than the median depending on an
individual's role, responsibilities and performance within the Company.
Officers Group
The Compensation Committee of the Board makes all compensation decisions regarding the
executive officers, including the level of cash compensation and equity awards. Each year the
Compensation Committee works with their independent compensation consultant to conduct a
benchmark study on the total compensation progrzrm for the offrcers. The studies typically include
base salaries, short-term cash incentives and long-term incentives. The Compensation Committee
believes it is important to provide a compensation structure that is competitive with compensation
paid to comparable executives of companies within the energy/utility industry to ensure the
Company attracts and retains quality employees in key positions to lead the Company.
Since Avista is an investor-owned utility it is also best practice to benchmark our officers'
compensation against other investor-owned utilities by focusing on compensation as disclosed in
proxy statements. Proxy statements focus on only the top 5 paid positions which means other
sources must be used to benchmark the remaining officers' compensation. The Compensation
Committee uses the Willis Towers Watson Energy Services Executive Compensation database for
additional compensation data.
Benchmarking best practices also suggest narrowing the range of companies to compare to that
which better reflect your own business and size. Avista's Compensation Committee compares
market data from a customized group of utilities we call our Proxy Peer Group. The Proxy Peer
Group better represents our Company's business, size and competitive market for talent. By using
publicly disclosed data from proxy statements, Form 8-Ks, and Form 4s it allows the Company to
maintain a consistent peer group without being restricted by private survey participation which
varies year to year. The Committee uses companies from the S&P 400 Utilities Index in the Proxy
Peer Group. The median revenues and market capitalization of the Proxy Peer Group run between
$2.3 billion and $3.1 billion, respectively. The data is not adjusted to reflect the differences in size
because the Committee generally targets overall compensation within +l- 15% of the median of
the peer group.
As mentioned above, the Committee also uses the Willis Towers Watson Energy Services survey
as a secondary resource for the top 5 but a primary resource for the other officers' compensation.
The survey provides additional compensation data on comparable diversified energy companies
with revenues between $l billion and $3 billion. The advantage of using a survey is that it provides
competitive data for all of our executive officer positions. The Compensation Committee uses all
of these sources of data to help it make informed decisions about market compensation practices.
The Compensation Committee periodically will have the consultant prepare a special report on
best pay practices for executive officers.
Non-Union Group
The executive officers of the Company in collaboration with management make all compensation
decisions related to the level of cash compensation and equity awards for the non-union employee
population. Our HR staff conducts studies and research related to best pay practices. Each year
Avista staff conducts benchmark and pay practice studies for the non-union group. The studies
typically include base salaries, short-term cash incentives and long-term incentives. The Company
Page 2 of 6
believes it is important to provide a compensation structure that is competitive with compensation
paid to comparable positions of companies within the energy/utility industry as well as regional
and local areas in which we compete for talent. By keeping an eye on the market we ensure the
Company attracts and retains quality employees in key positions to run the business efficiently and
within reasonable costs.
The benchmarking process for the non-union group is different from the officer group in that we
do not have a specific Peer Group for the entire non-union group. Ow definition of market is the
organizations in which we compete for labor. For example, we may use a national utility survey
to benchmark an electrical engineer or a local general industry survey for an administrative
assistant position because that is the labor market in which we compete for talent. Outlined below
are the types of labor market competitors we compare ourselves to for the following job groups.
General General General General
$1 - $3 billion
All sizes
All sizes All sizes All sizes
And relative to our competitor group, we monitor market rate data as follows:
Median (Median Median Median
percentile) 75th percentile 75ft percentile 75ft percentile
75th
The surveys we select support our philosophy by reporting data in the categories described above.
Outlined below is a list of salary surveys we have participated in over the years as well as their
general focus.
utility Gas,
Electric &
Alternative
Nation-
wide
Exec Base salary, incentives,
pay practices
Inclustry
Geography
Orgarrization
Size
Managentr,"nt
Statistical Data
Adrninistrative/ J cchnical
Professiorral
Cornpensation
Data
.$11.r]:9r ,,-., . -,-wTw-
American (ias
Association
WTW - Energy
Services
Executive
hrduslrl' Location 'l
1.'pes o1'Positions 'l )'pe o1'Data
Page 3 of6
I,abor h4 arket Conr pet itols
Support
WTW - Energl,
Sen,iccs h'IAP
Nliltiman - NIV
Utilities
Millinran - NW
lllgmt & Prof
l\'Iilliman -
Spokane Area
N{illiman - NW
Technologr
illercer -
Technology
(oeldcd 2015)
EAPDIS
AONtIeuitt -
Markcting &
Tratling
TIY - General
Inclustry
ACR - Invcstor
Ilelations
i\lilliman -
Enginecring,
Scicntific &
Project
Managernent
(odded 2aI7)
Utility
Electric
Non and
regulated
Utilities
Pacific
Northwest
Nation-
wide
Mgmt, Prof, Tech &
Craft
Base salary, pay
All
Industries
Technology Nation-
wide
Spokane& Tech&Support
Kootenai
Counties
Base salary, incentives,
pay practices
Base salary, incentives,
pay practices
Mgmt, Prof, Tech &
Support
Exec, Mgmt, Prof &
Tech
Base salary, incentives,
pay practices
2015 - discontinued participation
Our benchmarking process is generally done on an annual basis. It starts with completing
questionnaires for the different surveys then analyzing the data when the results are retumed to us.
As part of the analysis Avista matches its internal jobs to the jobs in the survey sources to establish
an Estimated Market Value. We try to match our jobs to the jobs in at least two survey sources
which we believe better represents the competitive labor market. When establishing an Estimated
Market Value we use the 50th percentile or median data to better estimate the "typical" pay for the
job. Avista's compensation philosophy for the non-union group is to target compensation levels
within +/- l5o of market median.
Avista has a pay structure with established pay ranges that are divided into thirds. The middle third
represents the "market" (+l- 15%) and the midpoint is used for market comparison, compa-ratio
calculations and adjusting the structure. Our pay structure is a lead-lag position relative to the
targeted marketplace. A lead-lag philosophy positions our pay structure midpoints so they match
the market in mid-year (July). Basically our midpoints lead the extemal market for the first half of
the year and lag the market for the second half. This enables us to keep our actual pay levels
directly competitive with our targeted marketplace for each identified job group.
Page 4 of6
Each survey has its own effective date for the data collected and since we try to use at least two
survey sources for each job in our benchmarking process, we age date or "trend" the survey data
to one point in time which is July l. As mentioned above we want to lead-lag the market and this
process allows us to make accurate and consistent market comparisons between the market and
intemal average pay.
This benchmarking process is time consuming and complex. In order to simpliff the process we
currently use a software product called MarketPay. The software is a modeling and reporting tool
that houses employee and survey data. Each year we import specific employee and job data into
the tool as well as survey source data. This software enables us to match an internal job to the
survey job to determine an Estimated Market Value. Once an Estimated Market Value is
determined we can calculate the ratio of internal pay to market by dividing the actual salary by the
market rate. This helps us determine if our current wages are competitive within the labor markets
we compete in for talent. We also calculate the ratio of actual pay to our own pay structure
midpoints. This compa-ratio calculation helps us to determine how much we should adjust our pay
structure to stay competitive.
The benchmarking process described above is one method we use to help control our payroll
growth and individual pay progress. We also participate in salary planning surveys. These surveys
collect data on salary practices such as actual and projected base salary increase budgets, whether
organizations are awarding pay increases or freezing pay, what is the average pay increase for
different job groups and performance levels, what was the actual and projected pay structure
adjustment, what types of incentive plans are being used, and what other pay practices
organizations are considering. These surveys focus on overall changes in employee compensation
for the calendar year and current projections for the following calendar year. We use these studies
to help us make informed decisions on market compensation practices with regards to
compensation spending and budgeting.
Our merit-increase program is a key vehicle through which non-union employee pay is adjusted
on an annual basis. In order to plan and budget for the following calendar year, we collect the
following data from several surveys and compile it into a spreadsheet. Although we collect and
monitor the different markets (national, regional, local, utility), we target the utility industry since
most of our labor is utility specific.
National
Regional
Energy/lJtility
Local
National
Regional
Energytutility
Local
National
Regional
EnergyAJtility
National
Regional
EnergyAJtility
In May of each year, preliminary minimum salary increases are approved for the following
calendar year by the Compensation Committee of the Board of Directors. In November, salary
increases for the following year are finalized and approved by the Board of Directors. The salary
Actual &
Projected
Salary Increase
Budgets
Actual &
Projected
Structure
$djustments..,..,
Execulive OverallNqll,.EfetT,p!_.., . ,. :r E{-elIlp.t
Page 5 of6
structure adjustment data is reviewed and considered but the actual adjustment is determined based
on the compa-ratio analysis conducted during the benchmarking process described above.
The processes described above are used to help us control our labor costs and keep them reasonable
for our customers and yet enables us to recruit and retain the labor force we need to run the business
and provide reliable levels of service.
Union Group
The benchmarking process for the union group is again different from the other groups. The studies
are conducted during or before the contract negotiations. They are not done on an arurual basis.
The studies typically collect average base rate for lineman from other west-coast utilities (investor-
owned, PUDs, municipalities, Co-ops, etc.) and average increase from other west-coast IBEW
local contracts. All wage rates and increases are negotiated.
Page 6 of6