20220428Avista to Staff 1-7.pdf

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RESPONSE TO REQITEST FOR TNFORMA',TION ,i::i] i-'ii3L
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CASE NO:
REQUESTER:
TYPE:
REQUEST NO.:
IDAHO
AVU-E-22-05
IPUC
Production Request
Staff-OO1
DATE PREPARED:
WITNESS:
RESPONDER:
DEPARTMENT:
TELEPHONE:
MD8t26il
TiaBenjamin
Regulatory AffaiN
(50e) 4es-222s
RBQIIEST:
Please provide the US Bureau of Labor Statistics, Producer Price Index" for thermoplastic resins
from 2015 tbrougfo to the current period, monthly if available.
RESPONSE:
Please see StaffiPR-OOl Attachment A.
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AYISTA CORPORATION
RESPONSE TO REQITEST F',OR INFORLATION
ruRISDICTION:
CASE NO:
REQUESTER:
TYPE:
REQUEST NO.:
IDAHO
AVU-E-22-05
IPUC
Production Request
Staff-002
DATE PREPARED: 0412812022
WITNESS:
RESPONDER: Tia Benjamin
DEPARTMENT: Regulatory Affairs
TELEPHONE: [phone]s
REQUEST:
Please provide workpapers in electronic format with links intact and formulae enabled that support
the table of values shown on page 4 of the Application.
RESPONSE:
Please see Staff-DR-O02 Attachment A for the summary sheet of the table provided on page 4 of
the Application in Excel. These values are input using the Cost Workpapers file provided in the
filing.
Developments
Builder/Service Charge
kss Allowance:
BuilderPymt
Overhead Primary Circuit:
Fixed Cost
Variable Cost
Undereround Primary Circuit
Fixed Costs
Variable Costs
Underground Secondary Circuit
Fixed Costs
Variable Costs
Overhead Secondary Circuit
Fixed Costs
Overhead Service Circuit
Underground Service Circuit
Overhead Transformer
Padmount Transformer
Present Prooos€d 7o Change
$ 1,350 $ 1,612 19.4% Costperlnt
$ 422 $ 458 8.4%
$
$
(2,065) 8.7o/o
Present Proposed YoChange
,900)($
$5
$
$
$
$
$
$
4,677 $
9.r7 $
1,920 $
10.01 $
394 $
8.60 $
4.27 $
8.43 $
2,345 $
3,477 $
4,521
8.75
1,958
I 1.15
392
I 1.55
3.96
9.14
2,508
3,597
-3.30/o
4.60/o
2.0%
tt.4%
-0.3%
34.3%
-7.3%
8.4%
7.0o/o
3.s%
$ 1,936 $ 1,843 -4.80/o
$
$
$
$
Staff-PR-O0z Attachment A.xlsm 1of 1
AVISTA CORPORATION
RESPONSE TO REQIIEST FOR INFORLATTON
ruRISDICTION:
CASE NO:
REQUESTER:
TYPE:
REQUEST NO.:
IDAHO
AVU-E-22-05
IPUC
Production Request
Staff-003
DATE PREPARED: 0412712022
WITNESS:
RESPONDER: Tia Benjamin
DEPARTMENT: Regulatory Affairs
TELEPHONE: [phone]
REQUEST:
Please provide documentation supporting the claim that higher resin costs are attributed to: (1)
higher demand than manufacturers can supply; and (2) that manufacturers located along the Texas
gulf coast were taken offline one or more months due to hurricanes and storms affecting the supply
of resin in the market. Application at4l5.
RESPONSE:
Please see StaflDR-003 Attachments A and B for articles describing the affect of various
environmental impacts on the plastics industry which support the Company's explanation for
increased job cost due to an increase in PVC conduit and PE pipe prices.
Resin buyers struggle with high prices and
short supply
Businesses have stockpiled product, used fewer materials and bolstered internal manufacturing to
cope in a tight market.
Published Nov. 1 8,2021
By Meena Thiruvengadam
Paula Bronstein via Getty lmages
Multiple companies along the resin supply chain are adjusting their inventory strategies
and production outlooks due to a tight and pricey market.
Resins - key building blocks of a variety of plastic products - have been in short supply
since a rare southern ice storm knocked out a significant chunk of U.S. production
capacity and drove prices up 3o% to go%.
Resins are a byproduct of petroleum refining whose production capacity is concentrated
along the U.S. Gulf Coast, a region that's no stranger to disruptions from catastrophic
weather. Ahead of Hurricane Ida, which made landfall in louisiana in late August,
plastics manufacturers still reeling from February's winter storm had been stockpiling
key resins to compensate for volatility in supply and pricing.
Resin prices surged
Producer Price lndex for ptastics material and resins manufacturing
Staff-PR{o3 Athchment A Page 1 of4
The market has plateaued a little bit, at least for now. But manufacturers continue to
report higher prices and short supplies of resin-related products, according to the
Institute for Supply Management's October Manufacturing Report on Business.
"Current inventories are at record levels, so we're seeing supply and demand balancing
out," said Sudeep Suman, a director at the consulting firm AlixPartners. "Preparing for
it softened the effect."
Still, volatility is increasingly the norm in the resin market. An ongoing pandemic
continues to drive up demand for drinking straws, plastic containers, face shields,
medical supplies and more. Stockpiling and preparation can only do so much.
Challenges in the resin supply chain
Water bottlers face a double whammy when it comes to key resins like Polyethylene
Terephthalate, also known as PET. The clear, lightr,veight plastic is commonly used in
food and beverage packaging.
The material became more expensive after a tax on imported resins was reinstated last
year.
Duties on PET from China are now set at $r.8o for each $r of imported goods, said Joe
Doss, president and CEO of the International Bottled Water Association. And they're not
just more expensive but also harder to get.
"Our members have products sitting on boats," Doss said.
Water bottlers have been responding to PET pricing volatility by trying to use less of it, a
practice that's leading to lighter water bottles. Still, they're seeing prices from domestic
producers increase and are having to contend with partial deliveries, Doss said.
Staff-PR-003 Attachment A Page2ot4
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Water bottlers contend with increased prices from domestic producers and partial
deliveries in a tight resin market.
The Association of Plastic Recvclers
Resin is also a oommon material in paint, used to bind particles to one another and to
the surface painted. As winter and tropical storms disrupted production, Sherwin-
Williams lowered its sales and earnings expectations for the year in late
Seotember. citine the effects of Hurricane Ida.
"Our suppliers are now reporting that the impacts of Hurricane Ida are more severe and
rvill be longer lasting than initially thought. Production of several key resins, additives
and solvents, expected to resume by late September, has been pushed out," the
company's CEO John G. Morikis said in a press-rclease.
The company said it would purchase a specialty polymers manufacturer to bolster its
internal resin manufacturing capacity.
Staff-PR-oo3 Attachment A Page 3 of4
"We see the opportunity to add millions of pounds of additional capacity to its footprint
in the near term with relatively minimal investment," Morikis said.
A fbreath of fresh airt for resin buyers
The automotive industry is among the largest users of resins. A shortage of
semiconductors that has slowed down automotive production lines provided some relief
that Suman said could lead to downward pressure on resin prices.
"It could be a little breath of fresh air for resin users," he said.
And other bits of welcome news are emerging for businesses reliant on resins.
Commodity grade resin supply availability has improved, and spot prices for
polyethylene and polyprop]rlene - two of the most commonly used resins - have slowly
been declining, according to The Plastics Exchange, a marketplace for buyrng and selling
commodity grade resins.
rrW'erre seeing supply and demand balancing out "
Sudeep Suman
Director at AlixPartner s
Polyethylene plants knocked offline in Texas - home to 85% of U.S. polyethylene
production - after Hurricane Nicholas made landfall in September are comingback
online. Meanwhile, facilities whose production schedules were significantly disrupted by
Hurricane Ida's landfall in louisiana in late August also are seeing their production
capacity return.
But hurricanes continue to pose a threat to manufacturers largely based along the Gulf
Coast in Texas and Iouisiana. And even when hurricane season passes, winter brings
the threat of more storms.
Suman expects resin supplies to remain tight through the winter and into 2c.22.
'\rVe're not out of the woods yet," Suman said. 'Winter is coming."
Staff-PR-oo3 Attachment A Page 4 of4
Plastics Supply Chain ls Not Hurricane-
Ready
The forecast for an above-average Atlantic hurricane season is a minefield that the
plastics supply chain must navigate.
Jeremv Pafford I Jul12,2021
For the plastics supply chain, most of 202L has felt like a never-ending tightrope walk.
Demand is strong as consumers and economies take steps to re-emerge from pandemic
conditions. However, supplies of raw materials and labor are constrained and getting costlier,
and the ability to move product is challenging.
Given a quiet summer and fall, there is substantial likelihood that supply chains will adapt
and market conditions witl find balance by end of year. But there is a minefield to navigate
before we get there, and that is the Atlantic hurricane season.
SUPPLY CHAIN
Staff-PR-oo3 Attachment B Page 1 of6
Forecasters of this year's hurricane season expect above-normal activity. That seems on point
as of this writing with five tropicalsystems having formed since the season began June 1.
q3
Based on historical data, the NationalWeather Service estimates that Texas' and Louisiana's
yearly odds of being affected (brushed by or hit) by a hurricane - a tropicalsystem with
sustained winds greater than 74 miles per hour - at f -in-3. About 200/o of the Texas-Louisiana
coastline (particularly south of Corpus Christi, TX) is not dotted with chemical/polymer plants
or refineries, so factoring that out leads to about a l-in-4 chance each year that a hurricane
willstrike a section of the Gulf Coast keyto the plastics supply chain.
History lessons.
Chemical plant and refinery operators are accustomed to those risk odds and are adapted to
the challenges operating in a hurricane-risk environment. Gulf Coast refineries, crackers, and
chemical derivative plants weather the situation via orderly shutdowns ahead of the storm,
assessment of any damages after it passes and then making relatively quick repairs to get
back into operation. Historically, the plants were back up and running within a couple of
Jerenry Pafford, head of North America market development, lClS
"Should a major tropical weather event occur on the Iexas-Louisiana coast this storrrr season, the net effect
on polyrrrer production and pricing would buck previous nornrs of short-tertn ntarket blips and instead
reserrrble what happened with Fe bruary's winter storm - or be worse. "
SackgrolttC tIi,ti1r: r:ourlr\v 0l 0ar!J
Staff-PR-oo3 Attachment B Page 2 of 6
weeks, although particularly devastating windstorms such as hurricanes Katrina and Rita in
2005 led to multi-month outages. More recently, Hurricane Harvey in20L7 brought historic
flooding to the Texas coast, while Louisiana in 2020 was subjected to five tandfalling
hurricanes. Refineries and chemical plant production were affected, but only for a short
period - especially in comparison with winter weather events such as Winter Storm Uri's
arctic blast this past February.
There are no worries of another Uri coming through in the next couple of months, although
those of us on the Gulf Coast wilt gtadly take a summertime cool front. Hurricanes are a
different matter. Should a major tropicaI weather event occur on the Texas-Louisiana coast
this storm season, the net effect on polymer production and pricing would buck previous
norms of short-term market blips and instead resemble what happened with February's
winter storm - or be worse.
Prices for materials would rocket higher from a much higher basetine of current pricing than
where we were at earlierthis year during Uri.
Consider the following from market data and insight provider Chemical Data (CDl), a part of
ICIS:
US high-density polyethylene (HDPE) contract prices as of June had reached double
their historical average level.
US polypropylene (PP) contract prices in June broke the record high estabtished in
February following the Texas Gulf Coast freeze and are close to being three times as
high as they were a year ago
Freely negotiated contract prices (i.e., those not tied to upstream feedstock formulas)
for US polyethylene terephthalate (PET) have risen 250lo since January and are up
almost 43 percent from their 2020 average.
US June polystyrene (PS) prices were about 630/o higher than their 2020 average, and
that was with a month-on-month drop in contract prices from May.
a
a
Staff-PR-oo3 Attachment B Page 3 of 6
Drivers of these price rises have fairly been ubiquitous across commodity polymer markets.
Leading the charge has resilient demand from consumers for packaging and single-use
plastics, followed closely by production from pandemic-related shutdowns and weather-
related outages. And then there are the myriad logistics issues faced by the entire plastics
supply chain with displaced containers, sky-high demand, and even loftier freight rates.
Part delays problematic.
Hurricane-related price spikes for resins have typically been short-lived at two to three
months as polymer plants on the Gulf Coast are built to make repairs from tropical weather in
relatively short order. But repairing hurricane damage this season may not be as easy a task
as in previous years due to manufacturing issues across suppty chains and the disrupted
logistics of moving needed parts. Such parts are not lying around on department store
shelves. They need to be specially made, and that might be a problem as backlogs of
orders remain elevated according to the lnstitute of Supply Management (lSM). ln fact,
backlogs for fabricated metal products and computer and electronic products all had their
delays increased strongly in June, according to the ISM - not at a[[ a good sign if you need
some plant parts made on the fly. Thus, returns to operations could resemble more the 30 to
45-day process seen in February with Uri than the 7-2L-day process seen with typical Gulf
Coast tropical weather over the last several years.
That would have a significant effect on resin supply over a longertime period and would be
bultish on pricing.
Staff-PR-O03 Attachment B Page 4 ofo
Capacity Changc by Month (l(t) Rcaion: NORTH AMERICA Country: UNITED STATES Compcny: Alt
r.Ilr0 r I
oc2
:
o6
!0
Gulf sbrms
\
Wlnter reather
Harvey
Wlnter .+>
Storm Url
The graph above from the lClS Live Supply Disruption Tracker shows how unplanned outages
from weather have left their marks on chemical markets in the last four years, with this chart
focused on HDPE production.
Resin markets sit at a very dicey stage the COVID recovery. Make itthrough hurricane season
without incident and the supply chain has an excellent chance to balance supply and demand
heading lnto 2022. But there is a legitimate chance of about 250lo that a storm will knock the
wind out of the market, and perhaps do much worse. Raw material scarcity and high-price
volatility in chemical markets would have significant detrimentaleffects on supply chains and
end products, adding fuel to mounting inflation fears and possibly even leading the way
towards an economic downturn.
It is not out of the realm of possibility.
Resin plants may not be more susceptible than normalto hurricane damage right now, but
the markets they serve are vulnerable. Still, while there is a L-in-4 shot of a hurricane affecting
a portion of the Texas-Louisiana coast home to those facilities, that also means there is a 3-in-
4 chance of no hurricane effects at all. The market needs those odds to hold up.
00
150
2 rJl
Sep2017 ,.n?018 May2018 Sep2018 Jan?019 Mry20t9 sep2019 JanaO20 May2020 Sep2020 Jen2021 May202l
Staff-PR-O03 Attachment B Page 5 of 6
AVISTA CORPORATION
RESPONSE TO REQUEST FOR INFORMATION
JURISDICTION:
CASE NO:
REQUESTER:
TYPE:
REQUEST NO.:
IDAHO
AI/I.J-E-22-05
IPUC
Production Request
Staff-004
DATE PREPARED: 0412812022
WITNESS:
RESPONDER: Tia Benjamin
DEPARTMENT: Regulatory Aflairs
TELEPHONE: [phone]s
REQUEST:
Please provide Company invoices showing the Company's purchase of 2-inch and 3-inch conduit
for the past five years. These invoices should reflect vendor narne, itern description (including
specified standard), size, quantity, and price.
RESPONSE:
Please see Avista's response 004C, which contains 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.
Please see Staff-DR-004C Confidential Attachment A for a summarized list of 2" PE pipe and 2"
and 3" PVC conduit purchased by the Company from 2017-present, including vendor, iton
description, size, unit price and quantity ordered. The Company has also provided a sampling of
approximately three to four invoices per year, approximately quarterly in Staff-PR-O04C
Confidential Attachments B-D to support the reports provided for the years 2018-2022. The
Company implonented an electronic invoice management system in 2018 and 2017 invoices
would have to be physically pulled and therefore have not been included at this time.
AVISTA CORPORATION
RESPONSE TO REQUEST FOR TNFORMATTON
ruRISDICTION:
CASE NO:
REQUESTER:
TYPE:
REQUEST NO.:
IDAHO
AVU-E-22-05
IPUC
Production Request
Staffi005
DATE PREPARED: 0412712022
WITNESS:
RESPONDER: Tia Benjamin
DEPARTMENT: Regulatory Affairs
TELEPHONE: (s09) 49s-222s
REQUEST:
Please explain the Company's purpose and need for using the term "Exceptional" in Schedule 51 -
Line Extension, Conversion and Relocation Schedule.
RESPONSE:
As discussed with Commission Staff on April 21't, the Company's purpose for adding the
language "Exceptional" into Schedule 5l- Line Extension, Conversion and Relocation Schedule is
to match the estimating tools and agreements which already include this language. The update of
this language will have no impact on the customer except to clarifu what costs are exceptional and
what costs are basic, the calculation will remain the same.
Basic costs are a component of every job; however, exceptional costs may not be required on all
jobs and therefore are added to the job on a case-by-case basis. Examples of exceptional costs
include but are not limited to flagging costs, permits, rock ditches, surveying, and tree removal.
AVISTA CORPORATION
RESPONSE TO REQUEST FOR INFORMATTON
ruRISDICTION:
CASE NO:
REQUESTER:
TYPE:
REQUEST NO.:
IDAHO
AVU-E-22-05
IPUC
Production Request
Staff-006
DATE PREPARED:
WTINESS:
RESPONDER:
DEPARTMENT:
TELEPHONE:
04t27t2022
Mike Bosshardt
Construction Services
(s09) 49s-20s8
REQUEST:
Please explain why the term "Excqrtional" in Schedule 5l - Line Extension, Conversion and
Relocation Schedule would be preferred over the term "Non-Standardu.
RESPONSE:
As discussed in the Company's meeting with Commission Staffon April 2ls, exceptional is the
term used in the Company's Schedule 51 estimating tools and agreements. Changing the term
would result in the need to update these other materials. Additionally, the term'Non-standard"
could create confusion to our project coordinators and could be misinterpreted to mean
construction that is not in the Avista construction standards.
AVISTA CORPORATION
RESPONSE TO REQUEST FOR INFORMATION
ruRISDICTION:
CASE NO:
REQUESTER:
TYPE:
REQUEST NO.:
IDAHO
AYU-E-22-05
IPUC
Production Request
Staff-007
DATE PREPARED: 0412712022
WITNESS:
RESPONDER: Mike Bosshardt
DEPARTMENT: Construction Serices
TELEPHONE: (509) 49s-2058
REQUEST:
Please provide several real-life examples explaining why new and/or existing customers have had
difficulty in understanding the provisions outlined in the Company's tariff Schedule 51 regarding
Basic Cost. Application at 5.
RESPONSE:
The confusion with the basic cost and exceptional cost language has primarily occurred intemally
amongst the Company's Construction Project Coordinators who regularly apply Schedule 5l to
new line extensions. There has been intemal confusion because the Schedule 51 estimating tools
and agreements specifi the term "exceptional cost" however, the schedule 51 tariff includes
exceptional costs within the basic cost definition and therefore only specifies basic cost. The
Company has not had specific customer concerns to date, however, customers do work with
documents which state both language variations and could experience confusion as a result. The
Company would like to avoid any possibility of confusion going forward both internally and
extemally when communicating the tarifflanguage to customers.