20230815Technical Hearing Vol IV.pdf

BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE APPLICATION )OF AVISTA CORPORATION FOR THE )CASE NO.AVU-E-23-01AUTHORITYTOINCREASEITSRATES)CASE NO.AVU-G-23-01ANDCHARGESFORELECTRICAND)NATURAL GAS SERVICE TO ELECTRIC )AND NATURAL GAS CUSTOMERS IN THE )STATE OF IDAHO )
BEFORE
COMMISSIONER ERIC ANDERSON (Presiding)COMMISSIONER JOHN HAMMOND
COMMISSIONER EDWARD LODGE
PLACE:Commission Hearing Room11331WestChindenBlvd.Building 8,Suite 201-ABoise,Idaho
DATE:August 2,2023
VOLUME IV -Pages 32 -295
CSB REPORTINGORIGINALCertifiedShorthandReporters
PostOfficeBox9774
Boise,Idaho 83707 Reporter:[e-mail] Constance Bucy,Ph:208-890-5198 CSR
1 A PPE A R A NCES
2
3 For the Staff:Chris Burdin
Deputy Attorney General
4 IPUC
11331 W.Chinden Blvd.,
5 Bldg.No.8,Suite 201-A
PO Box 83720
6 Boise,ID 83720-0074
7
For Avista Corporation:David Meyer
8 VP &Chief Counsel
Avista Corporation
9 PO Box 3727
Spokane,WA 99220-3727
10
11 For Idaho Forest Group:Andrew Moratzka
STOEL RIVES LLP
12 33 S.Sixth Street,Suite 4200Minneapolis,MN 55402
13
14 For Walmart,Inc.:Justina Caviglia
PARSON BEHLE &LATIMER
15 50 W.Liberty Street,Suite 750
Reno,NV 89502
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17 For NW Energy Coalition F.Diego Rivas
and Idaho Conservation NW Energy Coalition
18 League:1108 Eighth AvenueHelena,MT 59601
19 -and-
Brad Heusinkveld
20 Idaho Conservation League
710 N.Sixth Street
21 Boise,ID 83702
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25
CSB REPORTING 33 APPEARANCES208.890.5198
1 I NDEX
2
3 WITNESS EXAMINATION BY PAGE
4 Elizabeth Andrews Prefiled Direct Testimony 43(Avista)Mr.Meyer (Direct)1995
Patrick Ehrbar Prefiled Direct Testimony of6(Avista)Mr.Miller 98PrefiledDirectTestimony1607PrefiledRebuttalTestimony177Mr.Meyer (Direct)2198Mr.Rivas (Cross)220CommissionerHammond2439
Donn English Mr.Burdin (Direct)20110(Staff)Prefiled Direct Testimony 203Mr.Rivas (Cross)21711
Brad Heusinkveld Mr.Rivas (Direct)25312(NWEC &ICL)Prefiled Direct Testimony 255CommissionerHammond28013Mr.Rivas (Redirect)284
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CSB REPORTING 34 INDEX208.890.5198
1 EXH I B I TS
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3 NUMBER DESCRIPTION PAGE
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FOR AVISTA CORPORATION:
5
19.Stipulation and Settlement Premarked
6 Admitted 42
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FOR THE STAFF:
8
101.Professional Qualifications of Premarked
9 Donn English Admitted 289
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CSB REPORTING 35 EXHIBITS208.890.5198
1 BOISE,IDAHO,WEDNESDAY,AUGUST 2,2023,9:02 A.M.
2
3
4 COMMISSIONER ANDERSON:Good morning.It
5 being 9:02 a.m.,August 2nd,2023,this is the time and
6 place to set a technical hearing in Case No.AVU-E-23-01
7 and AVU-G-23-01,further identified as in the matter of
8 the application of Avista Corporation for the authority
9 to increase its rates and charges for electric and
10 natural gas service to electric and natural gas customers
11 in the State of Idaho.
12 This hearing is taking place to consider
13 the general rate case filed with the Commission on
14 February 1st,2023,seeking authority to increase
15 Avista's general rates for electric and gas service in
16 Idaho.
17 My name is Eric Anderson.I'm the Chair
18 of today's proceedings.I'm joined by Commissioner John
19 Hammond to my left and Commissioner Edward Lodge to my
20 right.We comprise the Commission in this case and we
21 will collectively make a final determination in this
22 matter.
23 For today's proceedings,we have Connie
24 Bucy serving as our court reporter.Please talk slowly
25 and clearly into the microphone for her benefit.If not,
CSB REPORTING 36 COLLOQUY208.890.5198
1 she will make sure she reminds us.
2 On June 1st,2023,the Company,
3 intervenors,and Staff participated in settlement
4 negotiations which resulted in a proposed settlement on
5 June 14th,2023.A joint motion was filed notifying the
6 Commission of the proposed settlement and requesting
7 several procedural modifications to the Commission's
8 schedule.
9 The Company filed a proposed stipulation
10 settlement signed by the Company,Staff,and intervenors,
11 Clearwater Paper Corporation,Idaho Forest Group,LLC,
12 and Walmart,Inc.,collectively,the signing parties.
13 Intervenors Idaho Conservation League and NW Energy
14 Coalition did not sign the proposed settlement.
15 We're going to begin this morning by
16 taking the appearances of the parties.Let's begin with
17 the Applicant,Avista Corporation.
18 MR.MEYER:Thank you,Mr.Chairman.
19 David Meyer for Avista.
20 COMMISSIONER ANDERSON:Thank you,
21 welcome.Commission Staff.
22 MR.BURDIN:Thank you,Commissioners,
23 Chris Burdin,Deputy Attorney General,for Commission
24 Staff.
25 COMMISSIONER ANDERSON:Thank you.
CSB REPORTING 37 COLLOQUY208.890.5198
1 Clearwater Paper Corporation?
2 Idaho Forest Group?
3 MR.MORATZKA:Good morning,
4 Commissioners,Andrew Moratzka,law firm Stoel Rives,on
5 behalf of Idaho Forest Group.With me is Mr.Larry
6 Crowley from The Energy Strategies Institute.
7 COMMISSIONER ANDERSON:Welcome,and
8 Walmart?
9 MS.CAVIGLIA:Good morning,
10 Commissioners,Justina Caviglia on behalf of Walmart.
11 COMMISSIONER ANDERSON:Welcome.Are
12 there any other parties that we've missed for the
13 purposes of identification in this record?Hearing
14 none --
15 MR.RIVAS:Mr.Chair?
16 COMMISSIONER ANDERSON:Excuse me.
17 MR.RIVAS:Diego Rivas on behalf of
18 NW Energy Coalition and Idaho Conservation League.
19 COMMISSIONER ANDERSON:Forgive me,I
20 jumped right ahead.Sorry about that.
21 MR.HEUSINKVELD:And Brad Heusinkveld
22 with Idaho Conservation League.
23 COMMISSIONER ANDERSON:Welcome,also.
24 Are there any preliminary matters that need to come
25 before the Commission this morning?
CSB REPORTING 38 COLLOQUY208.890.5198
1 MR.MEYER:David Meyer with Avista.
2 Perhaps just housekeeping,order of witnesses,lay out
3 sort of our expectation and take guidance from the Chair
4 on order of witnesses,but we will have both Elizabeth
5 Andrews and Patrick Ehrbar testifying.Our proposal is
6 that Ms.Andrews take the stand first.She is just
7 offering testimony on the stipulation,per se,and not on
8 the one contested issue,which is the basic charge issue,
9 so that may or may not be fairly straightforward
10 testimony.
11 Also,Donn English has similar testimony
12 on behalf of Staff in support of the entire stipulation
13 and it might make sense just to have those two witnesses
14 go up and down and then we proceed with Mr.Ehrbar,and
15 Mr.Ehrbar will be sponsoring the direct testimony of Joe
16 Miller.Joe Miller spoke to,among other things,the
17 basic charge.
18 He will sponsor that testimony and we will
19 move to spread that testimony in the record,but more
20 precisely,Mr.Ehrbar then speaks to the basic charge
21 issues that have been raised,and he sponsored both
22 direct testimony in that regard as well as rebuttal
23 testimony in that regard,so perhaps he might be the
24 third witness in order,and then I believe that takes
25 care of the Company and Staff submissions and then that
CSB REPORTING 39 COLLOQUY208.890.5198
1 would leave the intervenor as the last party.
2 I have not spoken with other counsel about
3 this and that's just my proposal to proceed that way.
4 COMMISSIONER ANDERSON:Could you provide
5 a road map with that so I can follow the procedure?
6 MR.MEYER:Could I provide a road map?
7 COMMISSIONER ANDERSON:Well,I'll try to
8 get order --
9 MR.MEYER:Yeah,I'm sorry,so it's
10 Andrews and then Donn English,then it's Ehrbar
11 sponsoring multiple pieces of testimony,and finally the
12 intervenor.
13 COMMISSIONER ANDERSON:All right,without
14 objection,any parties object to --
15 MR.BURDIN:No objection from Staff.
16 Thank you.
17 COMMISSIONER ANDERSON:So be it then.
18 Are there any other motions or requests to be made?
19 Seeing none.Before calling the first witness,do the
20 parties intend to present direct and rebuttal testimony
21 to be spread across the record simultaneously?
22 MR.MEYER:I was going to do it witness
23 by witness,but we could by stipulation agree at the
24 outset to spread the testimony of those identified
25 witnesses in the record as well as move the admission of
CSB REPORTING 40 COLLOQUY208.890.5198
1 any attached exhibits.
2 COMMISSIONER ANDERSON:I'll move upon
3 your motions.
4 MR.MEYER:Okay,I'll ask that the
5 testimony that has been prefiled by Elizabeth Andrews in
6 support of the stipulation,as well as Joe Miller's
7 testimony sponsored by Mr.Ehrbar be spread as if read,
8 as well as the testimony,the direct testimony and
9 rebuttal testimony,of Mr.Ehrbar be spread as if read,
10 as well as attached exhibits.
11 There is an Exhibit 19 that I ask be
12 entered into the record that is a copy of the stipulation
13 that was attached to Ms.Andrews'testimony and as well
14 as the --there are no other exhibits,per se.
15 Okay,so with that and I'll move actually
16 that the other --I'll let the other lawyers ask that
17 their testimony be spread as if read.
18 COMMISSIONER ANDERSON:Just a moment.
19 Commissioner Hammond?
20 COMMISSIONER HAMMOND:I have a question.
21 The testimony that's being spread was prefiled,of
22 course.Are there any corrections,any errors,anything
23 that you need to identify for the record?I just want to
24 make it clear.Thank you.
25 MR.MEYER:Good question.Not to my
CSB REPORTING 41 COLLOQUY208.890.5198
1 knowledge.
2 COMMISSIONER ANDERSON:Thank you,and
3 when I was asking by motion,I actually intended to have
4 that after each party has testified.That's fine,
5 though.Without objection of the other parties to this
6 motion,hearing none,so be it.
7 (Avista Corporation Exhibit No.19 was
8 admitted into evidence.)
9 (The following prefiled direct testimony
10 of Ms.Elizabeth Andrews is spread upon the record.)
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CSB REPORTING 42 COLLOQUY208.890.5198
1 I.INTRODUCTION
2 Q.Please state your name,employer,and business
3 address.
4 A.My name is Elizabeth M.Andrews and I am
5 employed by Avista Corporation ("Company"or "Avista")as
6 Senior Manager of Revenue Requirements in the Regulatory
7 Affairs Department,at 1411 East Mission Avenue,Spokane,
8 Washington.
9 Q.Have you previously provided direct testimony
10 in this Case?
11 A.Yes.I filed direct testimony and exhibits in
12 this proceeding supporting various adjustments I
13 sponsored,that were included by Company witness Ms.
14 Schultz within her overall electric and natural gas
15 revenue requirement studies prepared for the Company's
16 proposed Two-Year Rate Plan effective September 1,2023,
17 through August 31,2025.The adjustments I supported
18 included the following:1)Pro Forma Wildfire Plan
19 Expenses,2)Pro Forma Insurance Expense,3)Pro Forma
20 EDIT (RSGM)1,4)Pro Forma Miscellaneous Operations and
21 Maintenance (O&M)Expense,and 5)Pro Forma Colstrip
22 Capital Additions &Amortization Expense.
23 In addition to the various accounting adjustments I
24 sponsored,I discussed the Company's requests to update
25 its Wildfire Balancing Account baseline to match pro
43 Andrews,Di 1
Avista Corporation
1 formed wildfire plan expenses,as well as the Company's
2 proposal to establish an Insurance Expense Balancing
3 Account and baseline to reflect the significant increase
4 and volatility associated with insurance expenses.
5 Finally,I discussed the accounting methodology change
6 related to the Company's Excess Deferred Income Taxes
7 (EDIT)expense that has occurred since the Company's
8 prior general rate
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24 TReverse South Georgia Method
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44 Andrews,Di la
Avista Corporation
1 case,and provided an update on the Company's electric
2 and natural gas deferred federal tax credit balances.2
3 Q.What is the scope of this testimony?
4 A.The purpose of this testimony is to describe
5 and support the electric and natural gas revenue
6 requirement elements of the Stipulation and Settlement
7 ("Stipulation")filed on June 14,2023,as well as
8 explain why the Stipulation is in the public interest.
9 The parties to the Stipulation include the Staff of the
10 Idaho Public Utilities Commission ("Staff"),Clearwater
11 Paper Corporation ("Clearwater"),Idaho Forest Group,LLC
12 ("Idaho Forest"),and Walmart Inc.These entities are
13 collectively referred to as the "Settling Parties"and
14 singularly as a "Settling Party."The remaining parties,
15 the Idaho Conservation League /NW Energy Coalition
16 ("ICL/NWEC"),do not join in the Settlement.
17 Company witness Mr.Ehrbar discusses the non-revenue
18 related elements of the Stipulation agreed to by the
19 Settling Parties,such as electric and natural gas Cost
20 of Service,Rate Spread and Rate Design,as well as other
21 Stipulation components related to the Power Cost
22 Adjustment (PCA)and Fixed Cost Adjustment (FCA)
23 authorized levels.
24 Q.Are you sponsoring any exhibits?
25 A.Yes.I am sponsoring Exhibit No.19,which is
45 Andrews,Di 2
Avista Corporation
1 a copy of the Stipulation and appendices filed with the
2 Commission on June 14,2023.
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22 2 Company witness Ms.Schultz direct testimony covered accounting and
financial data in support of the Company's Two-Year Rate Plan for the
23 period September 1,2023 through August 31,2025.In that testimony
she explained pro formed operating results,including expense and
24 rate base adjustments made to actual operating results and rate base
for the over the two-year period.
25
46 Andrews,Di 2a
Avista Corporation
1 II.SUMMARY OF ORIGINAL FILING
2 Q.Please describe the Company's general rate case
3 request,as filed.
4 A.On February 1,2023,Avista filed an
5 Application with the Commission for authority to increase
6 revenue effective September 1,2023,and September 1,
7 2024,for electric and natural gas service in Idaho.The
8 Company proposed a "Two-Year Rate Plan"with an increase
9 in electric base revenue of $37.5 million or 13.6%for
10 "Rate Year 1",and $13.2 million or 4.2%for "Rate Year
11 2".With regard to natural gas,the Company proposed an
12 increase in base revenue of $2.8 million or 6.0%for
13 "Rate Year 1",and $120,000 or 0.3%for "Rate Year 2".
14 The Company used the results of the electric and
15 natural gas cost of service studies (sponsored by Mr.
16 Garbarino and Mr.Anderson)as a guide to spread the
17 general increase.In this case,for electric operations,
18 the study showed Residential Service Schedule 01,Large
19 General Service Schedules 21/22,and Pumping Service
20 Schedule 31/32 provide less than the overall rate of
21 return under present rates.All of the other service
22 schedules provide more than the overall rate of return
23 under present rates to varying degrees.For natural gas
24 operations,the study indicated that the General Service
25 Schedule 101 (serving most residential customers)is
47 Andrews,Di 3
Avista Corporation
1 providing less than the overall rate of return (unity),
2 and Large General,and Transportation service schedules
3 (111/112 and 146)are providing more than unity.
4 Q.What are the primary factors driving the
5 Company's need for an electric and natural gas change in
6 rates?
7 A.The primary factor driving the Company's
8 electric and natural gas revenue requirements in RY1 and
9 RY2 is an increase in net plant investment
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48 Andrews,Di 3a
Avista Corporation
1 (including return on investment,depreciation and taxes,
2 and offset by the tax benefit of interest)from that
3 currently authorized.3 For RY1 and RY2,electric net
4 power supply expenses also contribute significantly to
5 the incremental electric revenue requirement.Other
6 changes impacting the Company's revenue requirement
7 requests relate to increases in distribution,operation
8 and maintenance (O&M),and administrative and general
9 (A&G)expenses for both electric and natural gas
10 operations,compared to current authorized levels.
11 Electric specific capital investments for the
12 2022/2023 period include,among other things,upgrades to
13 certain major generating facilities,such as the Long
14 Lake and Little Falls Plant Upgrades,Cabinet Gorge Dam
15 Fishway and other replacements or upgrades,the Kettle
16 Falls Fuel Yard Equipment Replacement,as well as capital
17 investment associated with the Clark Fork and Spokane
18 River License agreements,discussed by Company witness
19 Mr.Kinney.
20 For natural gas,specific capital investments over
21 the period 2022/2023 period include,among other things,
22 capital investments related to the Gas Facilities
23 Replacement (Aldyl A)and Jackson Prairie Joint Project,
24 as well as Gas Replacement Street and Highway Program,
25 discussed by Company witness Mr.DiLuciano.
49 Andrews,Di 4
Avista Corporation
1 For power supply,on direct,as discussed by Company
2 witness Mr.Kalich,the level of Idaho's share of power
3 supply expense effective with Rate Year 1 has
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20 3 The specific 2022 through August 2025 pro forma capital
expenditures undertaken by the Company to expand and replace its
21 generation,transmission,distribution and general facilities are
discussed further by Company witnesses Mr.Kinney regarding
22 production investment (including the Company's investment in Colstrip
Units 3 and 4),Mr.DiLuciano regarding transmission,distribution
23 and general investment,Mr.Kensok regarding the costs associated
with Avista's IS/IT projects,Mr.Howell regarding Wildfire Plan
24 investments,and Ms.Hydzik regarding customer technology projects.
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50 Andrews,Di 4a
Avista Corporation
1 increased by approximately $10.3 million ($29.8 million
2 on a system basis)from the level currently included in
3 base rates.
4
5 III.SUMMARY OF SETTLEMENT STIPULATION
6 Q.Would you briefly summarize the Stipulation?
7 A.Yes.Under the terms of the Stipulation,as
8 discussed further by Mr.Ehrbar,Avista would implement
9 revised tariff schedules designed to increase annual base
10 electric revenues by $22,134,000,or 8.0%,effective
11 September 1,2023,and increase base revenues by
12 $4,305,000,or 1.4%,effective September 1,2024.For
13 natural gas,the Settling Parties agree that Avista will
14 increase natural gas base revenue by $1,252,000,or 2.7%,
15 effective September 1,2023,and increase natural gas
16 base revenue $3,000,or 0.1%,effective September 1,
17 2024.These rate changes are designed to provide retail
18 revenues necessary to allow the Company the opportunity
19 to earn the rate of return agreed to in the Stipulation
20 for RY1 and RY2.
21 As noted by Mr.Ehrbar,effective September 1,2023,
22 an electric residential customer using an average of 927
23 kilowatt hours per month would see a $10.15,or 11.9%,
24 increase per month for a revised monthly bill of $95.55.
25 Effective September 1,2024,an electric residential
51 Andrews,Di 5
Avista Corporation
1 customer would see a $2.06,or 2.2%,increase per month
2 for a revised monthly bill of $97.61.
3 For natural gas,effective September 1,2023,a
4 natural gas residential customer using an average of 64
5 therms per month would see a $1.20,or 1.6%,increase per
6 month for a revised monthly bill of $74.62.Effective
7 September 1,2024,a natural gas residential customer
8 would see a $0.03,or 0.0%,increase per
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52 Andrews,Di 5a
Avista Corporation
1 month for a revised monthly bill of $74.65.
2 In determining these revenue changes,the Settling
3 Parties have agreed to various adjustments to the
4 Company's original filing,which are summarized in the
5 Stipulation,and described further in the testimony
6 below.
7 The Stipulation calls for an overall rate of return
8 of 7.19%,determined using a capital structure consisting
9 of 50%common stock equity and 50%debt,an authorized
10 return on equity of 9.4%and cost of debt of 4.97%.
11 With regard to the Two-Year Rate Plan,during the
12 September 1,2023 -August 31,2025 rate period covered
13 by this Stipulation,Avista will not file another
14 electric or natural gas general rate case to increase
15 base rates in which rates would go into effect prior to
16 September 1,2025.This does not apply to tariff filings
17 authorized by or contemplated by the terms of the PCA,
18 FCA,Purchased Gas Cost Adjustment (PGA),or other
19 miscellaneous annual/regular tariff filings.
20 Lastly,the Settling Parties agreed to certain rate
21 spread and rate design changes as described by Mr.Ehrbar
22 in his supporting testimony,as well as other Stipulation
23 components related to the PCA and FCA,as well as
24 agreed-upon meetings/conferences.
25 Q.Please explain how the Settling Parties arrived
53 Andrews,Di 6
Avista Corporation
1 at the Stipulation in this proceeding.
2 A.The Stipulation is the product of settlement
3 discussions held on June 1,2023.It represents a
4 compromise among differing points of view,with
5 concessions made by the Settling Parties,to reach a
6 balancing of interests.The Stipulation represents a
7 fair,just and reasonable compromise of the issues and is
8 in
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54 Andrews,Di 6a
Avista Corporation
1 the public interest.In addition,the Stipulation is the
2 end result of extensive audit work conducted through the
3 discovery process4,including various virtual conference
4 discussions with Commission Staff,and hard bargaining by
5 the Settling Parties in this proceeding.
6 Q.Why is the Stipulation in the public interest?
7 A.The Stipulation is in the "public interest"for
8 several reasons.The Stipulation was the product of the
9 give-and-take of negotiation that produced an "end
10 result"that is just and reasonable.In addition,it is
11 supported by the evidence,demonstrating the need for
12 rate adjustments to provide recovery of necessary
13 expenditures and investment,the costs of which are not
14 offset by a growth in sales margins.The Stipulation
15 enjoys broad-based support from a variety of
16 constituencies,including Clearwater,Idaho Forest,
17 Walmart and Staff.
18
19 IV.ELECTRIC REVENUE REQUIREMENT
ELEMENTS OF THE STIPULATION
20
21 Q.Please explain the derivation of the Electric
22 Revenue Requirement outlined in the Stipulation.
23 A.The Settling Parties agreed that electric
24 revenue increases are necessary,effective September 1,
25 2023 and September 1,2024.While Avista's filing
55 Andrews,Di 7
Avista Corporation
1 requested electric revenue requirement increases of $37.5
2 million and $13.2 million,effective September 1,2023
3 and September 1,2024,respectively,the Settling Parties
4 agreed-upon adjustments,including the agreed-upon rate
5 of return,result in recommended electric revenue
6 increases of approximately $22.1 million and $4.3
7 million,respectively.These increases are designed to
8 provide sufficient retail
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24 AAvista responded to over 400 production requests (includingsub-parts)from the Parties.
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56 Andrews,Di 7a
Avista Corporation
1 revenues for the September 1,2023 through August 31,
2 2025 two-year rate period,which would provide the
3 Company with the opportunity to earn the return agreed to
4 in the Stipulation.
5 Q.Please explain the Settling Parties'agreement
6 with regard to an Authorized Rate of Return,including
7 the Return on Equity.
8 A.The Settling Parties have agreed to an overall
9 rate of return of 7.19%,based on a return on equity of
10 9.4%(also the current authorized level),an equity
11 component at 50%and cost of debt of 4.97%.By
12 comparison,the Company's original filing requested an
13 overall rate of return of 7.59%,a return on equity of
14 10.25%,an equity component of 50%and cost of debt of
15 4.92%.
16 Q.Please provide an overview of the electric
17 revenue requirement adjustments agreed to by the Settling
18 Parties for rates effective September 1,2023 [Rate Year
19 1].
20 A.The Settling Parties agreed to an electric
21 revenue requirement effective September 1,2023,that
22 reflects the adjustments shown below in the excerpted
23 table from the Stipulation:
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57 Andrews,Di 8
Avista Corporation
1
2
Table No.1:Electric Revenue Requirement-RY1
SUMMARY TABLE OF ADJUSTMENTS TO ELECTRIC REVENUE REQUIREMENT
EFFECTIVE SEPTEMBER 1,2023
(000s of Dollars)4 Revenue
Requirement Rate Base5AmountasFiled:$37,462 $1,034,938Adjustments:
a.)Cost of Capital $(5,343)b.)Remove 2024 AMA Capital Additions $(3,051)$(17,554)
7 c.)Revise Wildtire Deferral Amortizations $(2,062)d.)Remove Officer Incentives and 2023 Officer Labor Increases $(418)e.)Remove 2024 Union and Non-Union Labor Increases $(516)f.)Update Regulatory Assessment Fee and Conversion Factor $(4)g.)Remove Pro Forma 401K Expenses $(41)h.)Remove Escalated Miscelaneous O&M Expense $(2,560)i.)Remove Pro Forma WRAP Expenses $(121)10 j.)Restate Net Pro Forma Power Supply Expense $(500)k.)Adjust Pro Forma Insurance Expense $(298)11 I.)Miscellaneous Adjustments:Board of Director expenses,Fee Free expense $(414)$(59)adjustment,cell phone savings,O&M expense,removal of Sandpoint
12 Weatherization loans and reclassification of other administrative and general
expenses.
Adjusted Amounts Effective September 1,2023 $22,134 $1,017,325
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16 As can be seen by a review of the individual line
17 descriptions provided within the summary table above,the
18 adjustments accepted for settlement purposes cover a
19 broad range of revenue and cost categories,including the
20 authorized rate of return.The individual adjustments
21 should not be viewed in isolation;rather,they should be
22 viewed in total as part of the entire Stipulation and are
23 the result of hard bargaining and compromise.
24 Q.Would you please elaborate on the individual
25 line items contained within Table No.1?
58 Andrews,Di 9
Avista Corporation
1 A.Yes.A description of the adjustments
2 resulting in the electric revenue requirement,effective
3 September 1,2023,follows.
4 Cost of Capital -(line a.)The overall revenue
5 requirement reduction related
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59 Andrews,Di 9a
Avista Corporation
1 to the cost of capital reduces the overall revenue
2 requirement for electric by $5,343,000.The agreed-upon
3 cost of capital components are shown in the table below:
4
5 Capital Weighted
Component Structure Cost Cost
6 Total Debt 50.00%4.97%2.49%
7 CommonEquity 50.00%9.40%4.70%
Total 100.00%7.19%
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9 Remove 2024 AMA Capital Additions -(line b.)This
10 adjustment removes the Company's capital additions beyond
11 August 31,2023,included by the Company for Rate Year 1,
12 reflecting only plant investment prior to the September
13 1,2023,effective date.This adjustment decreases the
14 overall revenue requirement by $3,051,000 and reduces net
15 rate base by $17,554,000.
16 Revise Wildfire Deferral Amortizations -(line c.)
17 This adjustment revises the Company's proposed
18 amortization of its two Wildfire Regulatory Deferred
19 Asset balances:1)Wildfire Resiliency Plan Expense
20 Deferral and 2)Wildfire Expense Balancing Account
21 deferral,for the period July 1,2020 through September
22 30,2022 of $8.2 million,from a two (2)year
23 amortization to a four (4)year amortization.This
24 adjustment reduces the overall revenue requirement by
25 $2,062,000.See Wildfire Balancing Account discussion at
60 Andrews,Di 10
Avista Corporation
1 Section VI."Other Settlement Components"below.
2 Remove Officer Incentives and 2023 Officer Labor
3 Increases -(line d.)This adjustment reflects the
4 removal of officer incentives and 2023 incremental
5 officer labor proposed by the Company.This adjustment
6 decreases the overall revenue requirement by $418,000.
7 /
8
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10
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12
13
14
15
16
17
18
19
20
21
22
23
24
25
61 Andrews,Di 10a
Avista Corporation
1 Remove 2024 Union and Non-Union Labor Increases -
2 (line e.)This adjustment removes 2024 union and
3 non-union labor increases included by the Company,
4 reflecting 2023 labor increases for union and non-union
5 employees.This adjustment decreases the overall revenue
6 requirement by $516,000.
7 Update Regulatory Assessment Fee and Conversion
8 Factor -(line f.)This adjustment reflects the April
9 2023 adjusted IPUC Regulatory Assessment Fee,per Order
10 No.35743,of 0.001982,and the impact on the Company's
11 Conversion Factor.This adjustment decreases the overall
12 revenue requirement by $4,000.
13 Remove Pro Forma 401K expenses -(line g.)This
14 adjustment removes certain pro formed 401K expenses,
15 leaving those actual 401K expenses per the filed
16 historical test period.This adjustment decreases the
17 overall revenue requirement by $41,000.
18 Remove Escalated Miscellaneous O&M Expenses -(line
19 h.)This adjustment removes the escalated O&M expense pro
20 formed by the Company.This adjustment decreases the
21 overall revenue requirement by $2.56 million.
22 Remove Pro Forma WRAP Expenses -(line i.)This
23 adjustment removes the pro formed Western Regional
24 Adequacy Program (WRAP)expenses included by the Company.
25 This adjustment decreases the overall revenue requirement
62 Andrews,Di 11
Avista Corporation
1 by $121,000.
2 Restate Net Power Supply Expense -(line j.)This
3 adjustment revises net power supply costs as discussed
4 below,decreasing the overall revenue requirement by
5 $500,000.See Power Cost Adjustment (PCA)discussion
6 described by Mr.Ehrbar.
7 Authorized Net Power Supply (line i.)TheSettlingPartiesagreetoleavesystemnet
8 power supply expense as approved in Case No.
9 /
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16
17
18
19
20
21
22
23
24
25
63 Andrews,Di lla
Avista Corporation
1 AVU-E-21-01 totaling $149,279,000,adjusted toreflectitemsii.and iii below,resulting in a2revisedsystemnetpowersupplyexpenseof$177,585,000.Idaho's share of net power
3 supply costs reflects a production andtransmission(P/T)ratio of 34.47%.
4
5 Palouse and Rattlesnake Flat Wind (line ii.)The Settling Parties agree to include the
6 Palouse Wind and Rattlesnake Flat Wind PowerPurchaseAgreements("PPA")in base rates at790%.90%of actual net power costs for theseprojectswillthenbecomparedtothis90%8 base amount to calculate the base-to-actualdifferencethatwillbereflectedinthe PCA9mechanism.This adjustment increases systemnetpowersupplyexpense$29,313,000.10
11 Remove Columbia Basin Hydro Transmission Costs(line iii.)Remove cost of Columbia Basin Hydro12Transmissioncosts.This adjustment decreasessystemnetpowersupplyexpenseby$1,007,000.13
14 Pro Forma Insurance Expense -(line k.)This
15 adjustment reduces pro formed insurance expense for
16 certain escalated assumptions used to calculate Rate Year
17 1 insurance expense levels.This adjustment decreases the
18 overall revenue requirement by $298,000.See Insurance
19 Balancing Account discussion at Section VI."Other
20 Settlement Components"below.
21 Miscellaneous Adjustments -(line l.)The following
22 adjustment reflects the net change in operating expenses
23 related to:1)removing Board of Director expenses and
24 fees ($242,000);2)including cell phone savings
25 ($36,000);3)removing pro forma Fee Free expense
64 Andrews,Di 12
Avista Corporation
1 ($27,000);4)removal of historical Sandpoint
2 Weatherization loans5 ($5,000 expense and $59,000 rate
3 base);removal of other miscellaneous transmission O&M
4 expenses associated with the Company's Wildfire Open
5 Access Transmission Tariff ($102,000)and A&G expenses
6 ($2,000).The net
8
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13
14
15
16
17
18
19
20
21 5 Sandpoint weatherization loans relate to weatherization and DSMinvestmentincludedinratebase(FERC account 124.350).Beginning in22July1994,accumulation of allowance for funds used to conserveenergy(AFUCE)ceased on electric DSM and full amortization began on23thebalancebasedonthemeasurelivesoftheinvestment.Beginningin1995,the amortization rates were accelerated to achieve a 14-year24weightedaverageamortizationperiod,which was completed in 2010.Remaining as an Idaho rate base item is the weatherization loan25balanceofapproximately$59,000.
65 Andrews,Di 12a
Avista Corporation
1 effect of this adjustment decreases the overall revenue
2 requirement by $414,000 and rate base by $59,000.
3 Q.Please summarize the impact of these
4 adjustments on the electric revenue requirement agreed to
5 by the Settling Parties effective September 1,2023 [Rate
6 Year 1].
7 A.The adjustments discussed above,and agreed to
8 by the Settling Parties,reduce Avista's proposed RY1
9 electric revenue requirement increase of $37.5 million to
10 an electric revenue requirement increase of $22.4
11 million,resulting in an overall 8.0%electric base rate
12 increase,effective September 1,2023.The net rate base
13 agreed to by the Settling Parties for electric services
14 is $1.017 billion.Mr.Ehrbar discusses the overall net
15 bill impact to customers in RY1 of 8.7%effective
16 September 1,2023.
17 Q.Please provide an overview of the incremental
18 electric revenue requirement components agreed to by the
19 Settling Parties effective September 1,2024 [Rate Year
20 2].
21 A.The Settling Parties agreed to an incremental
22 electric revenue increase effective September 1,2024
23 (RY2),that reflects the adjustments shown below in the
24 excerpted table from the Stipulation:
25
66 Andrews,Di 13
Avista Corporation
1
2 Table No.2:Electric Revenue Requirement-RY2
3
EFFECTIVESEPTEMBER1,2024
4 (000s ofDollars)
Revenue
Requirement Rate Base5RateBaseAmountEfectiveSeptember1,2023 S 1,017,325IncrementalRevenueAdjustmenttoSeptember1,2023 Rate Change6(seeTableNo.1):
a.)Add Incrementa12023/2024Related Capaaland Expenses:
7 i.AMA 2024 CapaalAddaions
S 4.888 5 17.554ii.Propetty Tax Expense S 706
8 ä 2024 Union Labor lucrease S 410is.Employee Benefts S 255v.2024 Growth Revenue S (1.939)9 vi Revise Colstrip/CS2 Major Maintenance Expense S 247vii.Remove Expiring Fee Free Amoitization Expense S (97)10 viii.Miscellaneous Other Expense Offsets S (165)September 1,2024 Incremental Revenue Adjustment and Rate Base11Amount(above September 1,2023 Rate Change -see Table No.1)S 4,305 S 1,034,879
12
13 Q.Please elaborate on the individual line items
14 contained within Table No.2.
15 A.A description of the adjustments resulting in
16 the electric revenue requirement,effective September 1,
17 2024 for RY2,follows.
18 Add Incremental 2023/2024 Related Capital and
19 Expenses to Rate Year 2 (incremental above Rate Year 1)-
20 (line a.)This item includes certain incremental
21 increases in 2023 and 2024 related to capital and
22 expenses in RY2,above RY1 levels,as follows:
23 °AMA 2024 Capital Additions -(line i.)
24 Includes capital additions from September 1,2023 through
25 August 31,2024 on an AMA basis,prior to the Rate Year 2
I
67 Andrews,Di 14
Avista Corporation
1 September 1,2024,effective date.This adjustment
2 increases the overall revenue requirement by $4,888,000
3 and increases net rate base by $17,554,000.
4 /
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7
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10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
68 Andrews,Di 14a
Avista Corporation
1 Property Tax Expense -(line ii.)Includes
2 incremental property tax expense above Rate Year 1
3 levels,associated with 2023 capital additions.This
4 adjustment increases the overall revenue requirement by
5 $706,000.
6 2024 Union Labor Increases -(line iii.)
7 Includes the 2024 union annualized labor increases.This
8 adjustment increases the overall revenue requirement by
9 $410,000.
10 Employee Benefits -(line iv.)Includes 2024
11 incremental employee benefit expenses above Rate Year 1
12 levels.This adjustment increases the overall revenue
13 requirement by $255,000.
14 2024 Growth Revenue -(line v.)Reflects the
15 2024 incremental revenue associated with 2024 growth
16 capital,matching the inclusion of 2024 capital
17 investment.This adjustment decreases the overall revenue
18 requirement by $1,939,000.
19 °Colstrip/CS2 Major Maintenance -(line vi.)
20 Revises the Colstrip/CS2 Major Maintenance expense level
21 included in Rate Year 1 to reflect the revised expense
22 for Rate Year 2.This adjusts maintenance expense to
23 one-third of each amount deferred for calendar years 2022
24 through 2024.This adjustment increases the overall
25 revenue requirement by $247,000.
69 Andrews,Di 15
Avista Corporation
1 Fee Free Expense -(line vii.)Reflects the
2 removal of the expiring Fee Free Amortization and expense
3 on August 31,2024.This adjustment decreases the
4 overall revenue requirement by $97,000.
5 Miscellaneous O&M Expense -(line viii.)
6 Reflects an agreed-to reduction of O&M expense.This
7 adjustment decreases the overall revenue requirement by
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14
15
16
17
18
19
20
21
22
23
24
25
70 Andrews,Di 15a
Avista Corporation
1 $165,000.
2 Q.Please summarize the impact of these
3 adjustments on the electric revenue requirement agreed to
4 by the Settling Parties effective September 1,2024 [Rate
5 Year 2].
6 A.The adjustments discussed above,and agreed to
7 by the Settling Parties,reduces Avista's RY2 electric
8 revenue requirement of $13.2 million to $4.3 million,
9 resulting in a 1.4%electric base rate increase,
10 effective September 1,2024.The net rate base agreed to
11 by the Settling Parties for electric is $1.035 billion.
12 Mr.Ehrbar discusses the overall net bill impact of 1.6%
13 to customers in RY2 effective September 1,2024.
14
15 V.NATURAL GAS REVENUE REQUIREMENT ELEMENTS
OF THE STIPULATION
16
17 Q.Please explain the derivation of the Natural
18 Gas Revenue Requirement outlined in the Stipulation.
19 A.The Settling Parties agreed that natural gas
20 revenue changes are necessary,effective September 1,
21 2023 and September 1,2024.While Avista's filing
22 requested natural gas revenue requirement increases of
23 $2.8 million and $120,000,effective September 1,2023
24 and September 1,2024,respectively,the Settling Parties
25 agreed-upon adjustments,including the agreed-upon rate
71 Andrews,Di 16
Avista Corporation
1 of return,result in a natural gas revenue increase of
2 $1,252,000 effective September 1,2023,and a natural gas
3 revenue increase of $3,000 effective September 1,2024.
4 These changes in revenue are designed to provide
5 sufficient retail revenues for the September 1,2023
6 through August 31,2025 two-year rate period,which would
7 provide the Company with the
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14
15
16
17
18
19
20
21
22
23
24
25
72 Andrews,Di 16a
Avista Corporation
1 opportunity to earn the return agreed to in the
2 Stipulation.
3 Q.Is the Authorized Rate of Return,including the
4 Return on Equity the same as that explained above for
5 electric?
6 A.Yes.Consistent with that for electric,the
7 Settling Parties have agreed to an overall rate of return
8 of 7.19%,based on a return on equity of 9.4%,an equity
9 component at 50%and cost of debt of 4.97%.
10 Q.Please provide an overview of the natural gas
11 revenue requirement adjustments agreed to by the Settling
12 Parties for rates effective September 1,2023 [Rate Year
13 1].
14 A.The Settling Parties agreed to a natural gas
15 revenue requirement effective September 1,2023,that
16 reflects the adjustments shown below in the excerpted
17 table from the Stipulation:
18 /
19
20 /
21
22 /
23
24
25
73 Andrews,Di 17
Avista Corporation
1 Table No.3:Natural Gas Revenue Requirement-RY1
2 SUMMARY TABLE OF ADJUSTMENTS TO NATURAL GAS REVENUE REQUIREMENT
EFFECTIVE SEPTEMBER 1,2023
3 (000s ofDollars)
Revenue
4 Requirement Rate Base
Amount as Filed:S 2,771 S 206,562
5 Adjustments:
a.)Cost of Capital S (1.066)
6 b.)Remove 2024 AMA Capital Additions S (142)S (2,978)
c.)Remove Officerlucentives and 2023 OfficerLabor Increases S (98)
y d.)Remove 2024 Union and Non-Union Labor Increases S (115)
e.)Update Regulatory Assessment Fee and Conversion Factor S (1)
g £)Remove Pro Forma 401K Expenses S (10)
g.)Miscellaneous Adjustments:Board of Director expenses,Fee Free expenses,S (87)
9 cell phone savings,and injuries and damages expenses.
Adjusted Amounts Effective September1,2023 S 1,252 S 203,584
10
11 Q.Would you please elaborate on the individual
12 line items contained within Table No.3?
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20
21
22
23
24
25
74 Andrews,Di 17a
Avista Corporation
1 A.Yes.A description of the adjustments
2 resulting in the natural gas revenue requirement,
3 effective September 1,2023,follows.
4 Cost of Capital -(line a.)As previously described
5 (see above).This adjustment reduces the overall revenue
6 requirement by $1,066,000.
7 Remove 2024 AMA Capital Additions -(line b.)This
8 adjustment removes the Company's capital additions beyond
9 August 31,2023,included by the Company for Rate Year 1,
10 reflecting only plant investment prior to the September
11 1,2023,effective date.This adjustment decreases the
12 overall revenue requirement by $142,000 and reduces net
13 rate base by $2,978,000.
14 Remove Officer Incentives and 2023 Officer Labor
15 Increases -(line c.)This adjustment reflects the
16 removal of officer incentives and 2023 incremental
17 officer labor proposed by the Company.This adjustment
18 decreases the overall revenue requirement by $98,000.
19 Remove 2024 Union and Non-Union Labor Increases -
20 (line d.)This adjustment removes 2024 union and
21 non-union labor increases included by the Company,
22 reflecting 2023 labor increases for union and non-union
23 employees.This adjustment decreases the overall revenue
24 requirement by $115,000.
25 Update Regulatory Assessment Fee and Conversion
75 Andrews,Di 18
Avista Corporation
1 Factor -(line e.)This adjustment reflects the April
2 2023 adjusted IPUC Regulatory Assessment Fee,per Order
3 No.35743,of 0.001982,and the impact on the Company's
4 Conversion Factor.This adjustment decreases the overall
5 revenue requirement by $1,000.
6 Remove Pro Forma 401K expenses -(line f.)This
7 adjustment removes certain pro formed 401K expenses,
8 leaving those actual 401K expenses per the filed
9 /
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15
16
17
18
19
20
21
22
23
24
25
76 Andrews,Di 18a
Avista Corporation
1 historical test period.This adjustment decreases the
2 overall revenue requirement by $10,000.
3 Miscellaneous Expenses -(line g.)Reflects the net
4 change in operating expenses related to:1)removing
5 Board of Director expenses and fees ($60,000);2)
6 including cell phone savings ($6,000);3)removing pro
7 forma Fee Free expense ($18,000);and 4)injuries and
8 damages 6-year average expense ($3,000).The net effect
9 of this adjustment decreases the overall revenue
10 requirement by $87,000.
11 Q.Please summarize the impact of these
12 adjustments on the natural gas revenue requirement agreed
13 to by the Settling Parties effective September 1,2023
14 [Rate Year 1].
15 A.The adjustments discussed above,and agreed to
16 by the Settling Parties,reduce Avista's proposed RY1
17 natural gas revenue requirement increase of $52,000 to
18 $1,252,000,resulting in an overall 2.71%natural gas
19 base rate increase,effective September 1,2023.The net
20 rate base agreed to by the Settling Parties for natural
21 gas services is $203.6 million.Mr.Ehrbar discusses the
22 overall net bill impact to customers in RY1 of 1.2%
23 beginning September 1,2023.
24 Q.Please provide an overview of the incremental
25 natural gas revenue requirement components agreed to by
77 Andrews,Di 19
Avista Corporation
1 the Settling Parties effective September 1,2024 [Rate
2 Year 2].
3 A.The Settling Parties agreed to an incremental
4 natural gas revenue increase effective September 1,2024
5 (RY2),that reflects the adjustments shown below in the
6 excerpted table from the Stipulation:
7 /
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13
14
15
16
17
18
19
20
21
22
23
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25
78 Andrews,Di 19a
Avista Corporation
1 Table No.4:Natural Gas Revenue Requirement--RY2
2 SUMMARY TABLE OF ADJUSTMENTS TO NATURAL GAS REVENUE REQUIREMENT
EFFECTIVE SEPTEMBER 1,2024
3 (000s of Dollars)
Revenue
4 Requirement Rate Base
Rate Base Amount Effective September 1,2024 S 203,584
5 Incremental Revenue Adjustment to September 1,2023 Rate Change
(see Table No.1):
a.)Add Incremental 2023/2024 Related Capital and Expenses6i.AMA 2024 Capital Additions S 823 $2.978
ii.Property Tax Expense S (18)
iii.2024 Union Labor Increase $93
iv.Employee Benefits S 61
8 v.2024 Growth Revenue S (798)
vi.Remove Expiring Fee Free Amortization Expense S (158)
9 September 1,2024 Incremental Revenue Adjustment and Rate Base
Amount (above September 1,2023 Rate Change -see Table No.1)S 3 5 206,562
10
11 Q.Please elaborate on the individual line items
12 contained within Table No.4.
13 A.A description of the adjustments resulting in
14 the natural gas revenue requirement,effective September
15 1,2024 for RY2,follows.
16 Add Incremental 2023/2024 Related Capital and
17 Expenses to Rate Year 2 (incremental above Rate Year 1)-
18 (line a.)This item includes certain incremental
19 increases in 2023 and 2024 related to capital and
20 expenses in RY2,above RY1 levels,as follows:
21 °AMA 2024 Capital Additions -(line i.)
22 Includes capital additions from September 1,2023 through
23 August 31,2024 on an AMA basis,prior to the Rate Year 2
24 September 1,2024,effective date.This adjustment
25 increases the overall revenue requirement by $823,000 and
79 Andrews,Di 20
Avista Corporation
1 increases net rate base by $2,978,000.
2 Property Tax Expense -(line ii.)Includes the
3 incremental change (reduction)
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10
11
12
13
14
15
16
17
18
19
20
21
22
23
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25
80 Andrews,Di 20a
Avista Corporation
1 in property tax expense in Rate Year 2 versus Rate Year 1
2 levels.This adjustment decreases the overall revenue
3 requirement by $18,000.
4 2024 Union Labor Increases -(line iii.)
5 Includes the 2024 union annualized labor increases.This
6 adjustment increases the overall revenue requirement by
7 $93,000.
8 Employee Benefits -(line iv.)Includes 2024
9 incremental employee benefit expenses above Rate Year 1
10 levels.This adjustment increases the overall revenue
11 requirement by $61,000.
12 2024 Growth Revenue -(line v.)Reflects the
13 2024 incremental revenue associated with 2024 growth
14 capital,matching the inclusion of 2024 capital
15 investment.This adjustment decreases the overall revenue
16 requirement by $798,000.
17 Fee Free Expense -(line vi.)Reflects the
18 removal of the expiring Fee Free Amortization and expense
19 on August 31,2024.This adjustment decreases the
20 overall revenue requirement by $158,000.
21 Q.Please summarize the impact of these
22 adjustments on the natural gas revenue requirement agreed
23 to by the Settling Parties effective September 1,2024
24 [Rate Year 2].
25 A.The adjustments discussed above,and agreed to
81 Andrews,Di 21
Avista Corporation
1 by the Settling Parties,decreases Avista's RY2 natural
2 gas revenue requirement of $120,000 to $3,000,resulting
3 in a 0.01%natural gas base rate increase,effective
4 September 1,2024.The net rate base agreed to by the
5 Settling Parties for natural gas is $206.6 million.Mr.
6 Ehrbar discusses the overall net bill impact to customers
7 in RY2,
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22
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25
82 Andrews,Di 21a
Avista Corporation
1 effective September 1,2024,is 0.00%.
2
3 VI.OTHER SETTLEMENT COMPONENTS
4 Q.Please discuss the "Other Settlement
5 Components"starting at page 13 of the Stipulation?
6 A.The Settling Parties agreed to a number of
7 "Other Settlement Components"which are discussed below,
8 with the exception of electric and natural gas Cost of
9 Service,Rate Spread and Rate Design,PCA and FCA
10 authorized levels,and meetings/conferences agreed to,
11 which are discussed by Mr.Ehrbar.
12 Q.Please discuss the settlement components agreed
13 to by the Settling Parties related to the Company's
14 Wildfire O&M Expense Balancing Account and Wildfire
15 Resiliency Plan.
16 A.At paragraph 13 of the Stipulation,the
17 Settling Parties agreed to revise the two-way Wildfire
18 O&M Expense Balancing Account authorized "base"level to
19 $4.367 million annually,effective September 1,2023.
20 The incremental balance deferred,beyond the existing
21 deferred balance as of September 30,2022 being amortized
22 over a 4-year period in this proceeding (discussed
23 earlier),will be included for review and recovery in
24 future general rate cases.
25 At paragraph 14 of the Stipulation,the Settling
83 Andrews,Di 22
Avista Corporation
1 Parties agreed to the following Wildfire Resiliency Plan
2 changes:
3 (a)For the Distribution Risk Tree program,theCompanywillhaveathirdpartyconductastudy,
4 within a year of Commission Order,to see what themostefficientvegetationmanagementcycleshould be
5 in their service area (i.e.,2-or 3-year cycles).(b)The Company will develop a formal process for
6 Undergrounding Distribution Lines related to the WRPtoincludeprojectcriteria,a selection
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84 Andrews,Di 22a
Avista Corporation
1 process,and cost-benefit analysis for completed and
future undergrounding distribution line projects
2 related to wildfire mitigation prior to theCompany's next general rate case.
3 (c)The Company will develop process guidelines,including a least-cost least-risk analysis,to
4 evaluate pilot projects and to convert them to full
programs within a year of a Commission Order.
5 (d)The Company will detail all relationships (such
as BLM and Forest Service)it has that may benefit
6 the wildfire mitigation program,contribute to
program costs,or provide cost sharing opportunities
7 in its WRP.
(e)The Company will detail all funding
8 alternatives and sources it pursued in its WRP andprovideananalysisandacomparisonofalternatives
9 it considered for each pilot,project,or program
when it requests recovery for these costs,
10 including,among other sources,any availablefundingfromcurrentorfuturefederal
11 infrastructure funds.
(f)The Company will file a copy of each version of
12 its WRP with the Commission.
13
14 Q.Please discuss the settlement component agreed
15 to by the Settling Parties agreeing to an Insurance
16 Expense Balancing Account.
17 A.At paragraph 15 of the Stipulation,the
18 Settling Parties agreed to a two-way Insurance Expense
19 Balancing Account to defer the difference in actual
20 insurance expense,up or down,from the authorized "base"
21 level of insurance expense included of $4.009 million for
22 electric and $714,000 for natural gas,effective
23 September 1,2023.The balance in the deferral will be
24 included for review and recovery in future regulatory
25 proceedings.
85 Andrews,Di 23
Avista Corporation
1 Q.Please discuss the settlement component agreed
2 to by the Settling Parties related Regulatory
3 Amortizations.
4 A.At paragraph 16 of the Stipulation,the
5 Settling Parties agreed to the Regulatory Amortizations
6 as filed by the Company.These regulatory balances and
7 agreed to amortizations include the following new
8 regulatory amortizations,as discussed in the Company's
9 direct filed testimony of Company witness Ms.Schultz:
10 /
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86 Andrews,Di 23a
Avista Corporation
1 1)EIM Regulatory Asset -The EIM deferred Idahoelectricbalanceof$699,119 is to be amortized over
2 two years at $349,560 annually.This regulatory
asset relates to Avista Case No.AVU-E-20-01 (Order
3 No.34606 dated March 23,2020)which allowed theCompanytodefer,with no carrying charge,its Idaho
4 jurisdictional incremental O&M costs associated withjoiningtheCaliforniaIndependentSystemOperator's
5 (CAISO)Western Energy Imbalance Market (EIM)untilthego-live date.See Schultz,pg.43,lines 4-10.
6
7 2)COVID-19 Regulatory Asset /Liability -TheCOVID-19 deferred Idaho electric and natural gas
8 regulatory asset balances of $551,026 (electric)and$238,319 (natural gas)are to be amortized over two
9 years at $275,513 (electric)and $119,160 (naturalgas)annually.In addition,the COVID-19 deferred
10 Idaho electric and natural gas regulatory liabilitybalancesof$2,631,505 (electric)and $266,458
11 (natural gas)are also to be amortized over twoyearsat$1,315,752 (electric)and $266,458 (natural
12 gas)annually.These regulatory balances are aresultofCaseNo.GNR-U-20-03 (including13consolidatedCaseNos.AVU-E-20-03;AVU-G-20-03;
FLS-W-20-02;GSW-W-20-01;IPC-E-20-19;and
14 PAC-E-20-04),in which the Commission granted AvistaauthorityinOrderNo.34718,dated July 8,2020,to
15 account for unanticipated,emergency-relatedexpensesduetotheCOVID-19 public health emergency16asregulatoryassetsforpossiblerecoverythroughfuturerates.The Commission further ordered that
17 the utilities must analyze the CARES Act NOLprovisionandapplyanybenefittooffsetting the
18 deferral account created for emergency-related
expenses.Additional benefits,such as reduced
19 employee travel and training,etc.were to also be
accounted for,reducing COVID-19 related expense,
20 and account for these balances as regulatoryliabilities.These regulatory balances and
21 amortizations reflect the net deferred balance as ofJune30,2022,totaling a net liability owed
22 customers,of approximately $2.1 million for
electric and $28,000 for natural gas,and
23 amortization to be included in base rates andamortizedforrebatetocustomersovertwoyears
24 beginning September 1,2023 of $1.04 million
electric and $14,000 natural gas.See Schultz,pg.
25 44,lines 6-20.
87 Andrews,Di 24
Avista Corporation
1 3)Wildfire Resiliency Plan Regulatory Asset -TheWildfireResiliencyexpensedeferredIdahoelectric
2 balance of $2,543,283 is to be amortized over four
years at $635,821 annually.This regulatory balance
3 is a result of Case No.AVU-E-20-05,in which Avista
was authorized in Order No.34883,dated December
4 31,2020,to defer incremental O&M expenses andmonthlydepreciationexpenseassociatedwiththe
5 Wildfire Plan investment.See Schultz,pg.43,lines11-17.
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4)Wildfire Balancing Account Regulatory Asset -The
7 Wildfire Balancing Account expense deferred Idahoelectricbalanceof$5,673,601 is to be amortized
8 over four years at $1,418,400 annually.In theCompany's last general rate case,Case No.
9 AVU-E-21-01,the Commission approved in
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88 Andrews,Di 24a
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1 Order No.35156 a two-way Wildfire O&M ExpenseBalancingAccounttodeferthedifferenceinactual
2 O&M Wildfire expenses,up or down,from theauthorized"base"level.This amortization balance
3 includes the Idaho electric deferred costs fromSeptember1,2021 through September 30,2022,
4 totaling approximately $5.7 million.The WildfireBalancingAccountwillcontinuetoaccrueadditional
5 wildfire expense deferrals up or down over time,resulting in additional amortizations of these
6 deferrals in future rate case proceedings.SeeSchultz,pg.43,line 19 -pg 44,line 5.
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5)Idaho Earnings Test Regulatory Liability -The
8 Idaho electric Earnings Test deferred credit balanceof$686,970 is to be amortized over two years at
9 $343,485 annually.As a part of the SettlementStipulationapprovedbytheCommissioninthe10Company's 2015 general rate case,Case No.AVU-E-15-05 (Order No.33437 dated December 18,11 2015),the Company was ordered to rebate $5.6millionin2014electricrevenuesharingto12customersthroughelectricSchedule97,orapproximately$2.8 million annually through December1331,2017.This rebate was first approved in theCompany's 2012 general rate case,Case No.14 AVU-E-12-08 (Order No.32769 dated March 17,2013)6
and was extended through December 31,2015 as part15ofCaseNo.AVU-E-14-05.7 This deferred creditbalanceistheresidualbalanceremainingas of June1630,2022 to be amortized as a rebate to customers.See Schultz,pg.44,line 21 -pg 45,line 10.17
6)Tax Reform Amortization Liability -The Idaho18electricTaxReformdeferredcreditbalanceof$130,287 is to be amortized over two years at19$66,454 annually.In Case No.AVU-E-18-03,Avista
was authorized in Order No.34276,dated March 19,20 2019,beginning April 1,2019 to use Tariff Schedule74toreturntocustomers$5.766 million in21temporarytaxbenefitstheCompanyreceived underthefederalTaxCutsandJobsActof2017(TCJA)22 from January 1 -May 1,2018.This amortizationreflectstheresidualIdahoelectricbalance plus23interestthroughAugust31,2023,to be included inratesandamortizedforrebatetocustomers.See24Schultz,pg.45,lines 11-20.
25 7)AFUDC Equity Tax Balance -The Idaho natural gas
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Avista Corporation
1 AFUDC Equity Tax deferred debit balance of $59,919
is to be amortized over two years at $29,960
2 annually.As part of Case No.AVU-G-21-03 (Order No.35150 dated August 30,2021),the Commission
3 authorized the Company to refund to customersthroughSchedule178deferredcreditbalances
4 associated with
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22 6 In the Company's 2012 general rate case,Case No.AVU-E-12-08(Order No.32769 dated March 17,2013),the Commission ordered Avista23torefundtocustomersone-half of any earnings above the 9.8%return
on equity for each of the years 2013 and 2014.
24 7 Stipulation and Settlement -AVU-E-15-05 &AVU-G-15-01,p.14,paragraph 16.Electric Rebate Extension.
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1 Allowance for Funds Used During Construction(AFUDC)S,as well as depreciation expense and the
2 CARES Act benefits,effective September 1,2021.This amortization collects the residual
3 over-amortized balance.See Schultz,pg.46,lines1-8.
4
5 The net amortization of the new regulatory assets
6 and liabilities listed above for items 1)-7)result in
7 a two-year annual amortization expense agreed to by the
8 Settling Parties of $954,000 for Idaho electric and
9 $16,000 for Idaho natural gas.
10 In addition,the Settling Parties agreed to the
11 as-filed changes to the following existing regulatory
12 amortizations that were discussed and revised in my
13 direct testimony:
14 8)Colstrip Regulatory Amortization -ColstripamortizationasfiledbytheCompanyreflects the15recoveryofAvista's investment in the ColstripUnits3and4generatingfacilities(reflecting an16accelerateddepreciationrateof2027),includingtheColstripcapitaladditionsthroughDecember 31,17 2022 in the Colstrip Regulatory Asset,for recovery
over its authorized amortization period.The effect18ofthechangeintheamortizationoftheColstripRegulatoryAssetdecreasestheColstripRegulatory19amortizationexpenseto$728,000 annually.In theCompany's filed case,it explained that the recovery20ofAvista's investment in the Colstrip Units 3 and 4generatingfacilitiesandColstripRegulatoryAsset21wasperCommissionpriorOrder34276inCaseNo.AVU-E-18-03,and Case No.AVU-E-21-03.See Andrews22direct,pg.11,line 2 -pg.14,line 12.
23 9)Excess Deferred Income Tax Amortization (EDIT)
-The Company switched its method of amortizing EDIT24fromtheAverageRateAssumptionMethod(ARAM)totheReverseSouthGeorgiaMethod(RSGM)related to25costofremovalthathadpreviouslynotbeen
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Avista Corporation
1 properly accounted for as required by the IRS.To correct this inadvertent error,the Company
2 made this change in amortization method effectiveJanuary1,2022,increasing the amount of EDIT3returnedtocustomersannuallybyapproximately$1.9 million on a system basis in 2024 forward.See
4 Andrews direct,pg.32,line 20 -pg.33,line 11andExhibitNo.5,Schedule 1.
5
6 Q.Please discuss the settlement component agreed
7 to by the Settling
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24 6 In a prior Avista case,Case No.AVU-G-19-01 (Order No.34326 datedMay2,2019),the Commission approved the Company's application for25accountingandratemakingtreatmentrelatedtoitsAFUDC.
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1 Parties related the Revenue Normalization Adjustments.
2 A.At paragraph 17 of the Stipulation,the
3 Settling Parties agreed to the test year revenue
4 normalization adjustments,as included by the Company in
5 its as-filed case,inclusive of the change to 20-year
6 rolling average "normal"weather and monthly regression
7 factors.
8 Q.Finally,please discuss the settlement
9 component agreed to by the Settling Parties related the
10 Depreciation Rates.
11 A.At paragraph 18 of the Stipulation,the
12 Settling Parties agreed to the depreciation rates,as
13 included by the Company in its as-filed case,for
14 purposes of the agreed-to depreciation expense included
15 in the Company's filing and agreed to by the Settling
16 Parties in this settlement.9 The depreciation rates
17 as-filed by the Company in this proceeding include the
18 proposed depreciation rates per the Company's updated
19 Depreciation Application in Case Nos.AVU-E-23-02 and
20 AVU-G-23-02,requesting approval for its proposed change
21 to electric and natural gas book depreciation rates.10
22 To the extent depreciation rates included in this general
23 rate case,or the effective date of approved depreciation
24 rates (i.e.September 1,2023),as proposed by the
25 Company,vary from the depreciation rates or effective
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1 date ultimately approved in Case Nos.AVU-E-23-02 and
2 AVU-G-23-02,the Company will defer the difference in
3 depreciation expense included and approved in this case,
4 versus the actual depreciation expense approved per Case
5 Nos.AVU-E-23-
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20 9 Inclusion of the updated (proposed)depreciation study depreciationratesinthisproceedingresultsinanoveralldecreaseinelectric21andnaturalgasannualdepreciationexpensefromexistingdepreciationexpenselevels.
22 10 The Company also requested that the Commission approve deferredaccountingtreatmentifallocateddepreciationratesarenotapproved23byalljurisdictionspriortoSeptember1,2023,resulting in adifferencebetweenallocateddepreciationexpenseincludedinCase24Nos.AVU-E-23-01 and AVU-G-23-01,and allocated depreciation expenseultimatelyapprovedintheDepreciationCaseNos.AVU-E-23-02 and25AVU-G-23-02.
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Avista Corporation
1 02 and AVU-G-23-02 on a monthly basis,for review and
2 recovery or return to customers in a future general rate
3 case.
4
5 VII.CONCLUSION
6 Q.In conclusion,why is this Stipulation in the
7 public interest?
8 A.This Stipulation strikes a reasonable balance
9 between the interests of the Company and its customers,
10 including its low-income customers.As such,it
11 represents a reasonable compromise among differing
12 interests and points of view.
13 The terms of the Stipulation represent electric and
14 natural gas base rate changes designed to provide
15 necessary retail revenues over the Two-Year Rate Plan
16 from September 1,2023 through August 31,2025.The
17 Settling Parties have agreed that the Company has
18 demonstrated the need for the revenue changes for its
19 electric and natural gas operations,thus providing
20 recovery of its costs over the Two-Year Rate Period.
21 In the final analysis,any settlement reflects a
22 compromise in the give-and-take of negotiations.The
23 Commission has before it a Stipulation that is supported
24 by sound analysis and supporting evidence,the approval
25 of which is in the public interest.
95 Andrews,Di 28
Avista Corporation
1 Q.Does this conclude your direct testimony?
2 A.Yes,it does.
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1 (The following prefiled direct testimony
2 of Mr.Joseph Miller sponsored by Mr.Patrick Ehrbar is
3 spread upon the record.)
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CSB REPORTING 97 COLLOQUY208.890.5198
1 I.INTRODUCTION
2 Q.Please state your name,business address and
3 present position with Avista Corporation?
4 A.My name is Joseph D.Miller and my business
5 address is 1411 East Mission Avenue,Spokane,Washington.
6 I am presently assigned to the Regulatory Affairs
7 Department as Senior Manager of Rates and Tariffs.
8 Q.Would you briefly describe your educational
9 background and professional experience?
10 A.Yes.I am a 1999 graduate of Portland State
11 University with a Bachelor's degree in Business
12 Administration,majoring in Accounting.In 2005,I
13 graduated from Gonzaga University with a Master's degree
14 in Business Administration.I joined the Company in
15 March 2008,after spending eight years in both the public
16 and private accounting sector.I started with Avista as
17 a Natural Gas Accounting Analyst in the Company's
18 Resource Accounting Department.In January 2009,I
19 joined the State and Federal Regulation Department as a
20 Regulatory Analyst.My primary responsibility was
21 coordinating discovery for the Company's general rate
22 case filings.In my current role as Senior Manager of
23 Rates and Tariffs,I am responsible for the Company's
24 electric and natural gas rate design,customer usage and
25 revenue analysis,and tariff administration,among other
98 Miller,Di 1
Avista Corporation
1 things.
2 Q.What is the scope of your testimony in this
3 proceeding?
4 A.My testimony in this proceeding will cover the
5 spread of the proposed 2023 and 2024 electric and natural
6 gas base revenue increases among the Company's electric
7 and natural gas general service schedules.For the 2023
8 rate change,on a total billed revenue basis the Company
9 is proposing to increase electric customer billed rates
10 of $37.5 million
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1 or 14.7%and an increase to natural gas customer billed
2 rates of $2.8 million or 2.7%.For the 2024 rate change,
3 on a total billed revenue basis the Company is proposing
4 an increase to electric customer billed rates of $13.2
5 million,or 4.5%and an increase to natural gas customer
6 billed rates of $0.1 million or 0.1%.My testimony will
7 also detail the proposed changes to the electric and
8 natural gas Basic Charges for electric residential rate
9 schedule 1,and natural gas general service schedule 101.
10 Q.Would you please provide an overview of the
11 Company's electric and natural gas rate requests?
12 A.Yes.As discussed by Company witness Mr.
13 Vermillion,the Company is proposing a Two-Year Rate Plan
14 for years 2023 and 2024,with proposed rate changes
15 effective September 1 of each year.The Company is
16 proposing a Two-Year Rate Plan,to once again,avoid
17 annual rate cases in its Idaho jurisdiction,providing
18 benefits to all stakeholders.A Two-Year Rate Plan,
19 with rate changes in 2023 and 2024,would provide
20 benefits by providing a level of rate predictability to
21 customers over this two-year period.A two-year window
22 also provides Avista with the opportunity to manage its
23 business in order to achieve a fair rate of return within
24 known price changes.Finally,relief is provided to all
25 stakeholders (customers,the Commission and its Staff,
100 Miller,Di 2
Avista Corporation
1 intervenors,and the Company)from the administrative
2 burdens and costs of litigation of annual general rate
3 cases.
4 Accordingly,the Company has filed two sets of
5 tariffs for each of the electric and natural gas service
6 schedules.The first tariff for each rate schedule
7 provides for an effective date of March 1,2023;however,
8 in the Company's Application in this case,Avista has
9 requested that the tariffs related to the 2023 rate
10 request be suspended with a proposed effective date of
11 September 1,2023.The second set of tariffs filed for
12 each of the electric
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1 and natural gas service schedules have an effective date
2 of September 1,2024,consistent with the Company's
3 second-step rate change proposal.
4 Provided below in Table Nos.1 &2 is a summary of
5 the proposed chan<ge,by rate schedule,on a billing basis
6 (inclusive of all base and billing rate components):
Table No.1 -2023 &2024 Electric Rate Request by Schedule8
2023 Billing 2024 BillingRateSchedule
_Description Change Change10ResidentialServiceSchedule115.3%4.7%GeneralService Schedules 11 &l2 14.2%4.4%11 Large General Service Schedules 21 &22 14.1%4.3%Extra large General Service Schedule 25 14.2%4.4%12 Extra Iarge General Service 25P Schedule 25P 14.0%4.3%
Pumping Service Schedules 31 &32 14.2%4.4%13 Street &Area Lights Schedules 41 -49 _13.8%4.2%
14 Total 14.7%4.5%
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16 Table No.2 -2023 &2024 Natural Gas Rate Request by Schedule
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2023 Billing 2024 Billing18RateScheduleDescriptionChangeChangeGeneralServiceSchedule1013.5%0.1%19 large General Service Schedules 111 &l 12 0.0%0.0%InterruptibleService Schedules 131 &132 0.0%0.0%zu TransportationService Schedule 146 0.0%
_0.0%
2 1 Total 2.7%0.1%
22
23 Q.Are you sponsoring any Exhibits that accompany
24 your testimony?
25 A.Yes.I am sponsoring Exhibit No.18,Schedules
102 Miller,Di 3
Avista Corporation
1 1 through 3 related to the proposed electric increase,
2 and Schedules 4 through 6 related to the proposed natural
3 gas increase.These exhibits were prepared by me,or
4 under my supervision.A table of contents for my
5 testimony is as follows:
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1 Table of Contents
2 PageI.Introduction 1
3 II.Proposed Electric Revenue Increase 4SummaryofRateSchedulesandTariffs4
4 Proposed Rate Spread (Increase by Schedule)6ProposedRateDesign(Rates within Schedules)8
5
III.Proposed Natural Gas Revenue Increase 18
6 Summary of Rate Schedules and Tariffs 19ProposedRateSpread(Increase by Schedule)20
7 Proposed Rate Design (Rates within Schedules)22
8 IV.Residential Basic Charge 26
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10 II.PROPOSED ELECTRIC REVENUE INCREASE
11 Summary of Electric Rate Schedules and Tariffs
12 Q.Would you please explain what is contained in
13 Schedules 1 and 2 of Exhibit No.18?
14 A.Yes.Schedule 1 is a copy of the Company's
15 present and proposed electric tariffs for 2023 and 2024,
16 showing the changes (strikeout and underline)proposed in
17 this filing.Schedule 2 contains the proposed (clean)
18 electric tariff sheets for 2023 and 2024 incorporating
19 the proposed changes included in this filing.
20 Q.What is contained in Schedule 3 of Exhibit No.
21 18?
22 A.Schedule 3 contains information regarding the
23 proposed spread of the electric revenue increase among
24 the service schedules and the proposed changes to the
25 rates within the schedules.Page 1 shows the 2023 and
104 Miller,Di 4
Avista Corporation
1 2024 proposed general revenue and percentage increases by
2 rate schedule compared to the present revenue under base
3 tariff and billing rates.Page 2 shows the rates of
4 return and the relative rates of return for each of the
5 schedules before and after application of the proposed
6 2023 general increase.Pages 3 and
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1 4 show the present rates under each of the rate
2 schedules,the proposed changes to the rates within the
3 schedules,and the proposed rates after application of
4 the 2023 and 2024 rate changes.These pages will be
5 referred to later in my testimony.
6 Q.Would you please describe the Company's present
7 rate schedules and the types of electric service offered
8 under each?
9 A.Yes.The Company presently provides electric
10 service under Residential Service Schedule 1,General
11 Service Schedules 11 and 12,Large General Service
12 Schedules 21 and 22,Extra Large General Service under
13 Schedule 25 and Schedule 25P (Clearwater Paper's Lewiston
14 Plant),and Pumping Service Schedules 31 and 32.
15 Additionally,the Company provides Street Lighting
16 Service under Schedules 41-46,and Area Lighting Service
17 under Schedules 47-49.Schedules 12,22,32,and 48
18 cover residential and farm service customers who qualify
19 for the Residential Exchange Program operated by the
20 Bonneville Power Administration.The rates for these
21 schedules are identical to the rates for Schedules 11,
22 21,31,and 47,respectively,except for the Residential
23 Exchange rate credit.
24 The following table shows the type and number of
25 customers served in Idaho (as of June 2022 -the
106 Miller,Di 5
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1 Company's test year)under each of the electric service
2 schedules:
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4 Table No.3 -Customers by Service Schedule
5 Rate Schedule No.of Customers
6 Residential Schedule 1 113,144
General Service Schedules l 1/12 22,959
7 Large General Service Schedules 21/22 891
Extra Large General Service Schedule 25 11
8 Clearwater Paper Schedule 25P 1
Pumping Service Schedules 31/32 1,520
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1 Proposed Electric Rate Spread
2 Q.For 2023,what is the proposed electric revenue
3 increase,and how is the Company proposing to spread the
4 increase by rate schedule?
5 A.For 2023,the proposed electric increase is
6 $37,462,000,or 13.6%over present base tariff rates in
7 effect.The proposed general increase over present
8 billing rates,after including all other rate adjustments
9 (such as DSM and Residential Exchange),is 14.7%.The
10 proposed percentage change by rate schedule is as
11 follows:
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13 Table No.4 -Proposed %Electric Increase by Schedule -2023
14 Increase in Base Increase in
15 Rate Schedule Rates Billing Rates
ResidentialSchedule 1 13.6%15.3%
1 6 GeneralService Schedules l 1/12 13.6%14.2%
Large GeneralServiceSchedules 21/22 13.6%14.1%
17 Extra Large General Service Schedule 25 13.6%14.2%
Clearwater Paper Schedule 25P 13.6%14.0%18 PumpingService Schedules 31/32 13.6%14.2%
Street &Area Lights Schedules 41-48 13.6%13.8%19 Overall 13.6%14.7%
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23 This information is shown with more detail on page 1 of
24 Exhibit No.18,Schedule 3.
25 Q.What rationale did the Company use to develop
I
108 Miller,Di 6
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1 the proposed spread the total 2023 general revenue
2 increase request of $37,462,000 among its various rate
3 schedules?
4 A.The Company believes that the results of the
5 electric cost of service study (sponsored by Company
6 witness Mr.Garbarino)could be used as a guide to spread
7 the general increase.However,given the relative size
8 of the proposed base revenue increase,Avista is
9 proposing to spread the revenue increase on a uniform
10 percent of revenue basis at the proposed levels.The
11 spread of the proposed increase still results in the
12 rates of return for the various electric service
13 schedules moving closer to the overall rate of return
14 (unity).
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1 The Company may propose additional movement toward unity
2 in future proceedings.Table No.5 below shows the
3 relative rates of return before and after application of
4 the proposed general increase:
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6 Table No.5 -Present &Proposed Relative Rates of Return
7 Present Proposed
Relative Relative
8 Rate Schedule ROR ROR
9 Residential Schedule 1 0.87 0.91
General Service Schedules 11/12 1.24 1.16
10 Large General Service Schedules21/22 0.88 0.90
Extra Large General Service Schedule 25 1.22 1.1911ClearwaterPaperSchedule25P1.59 1.49
12 Pumping Service Schedules 31/32 0.75 0.80
Street &Area Lights Schedules 1.70 1.28
13 Overall 1.00 1.00
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16 This information is shown in detail on Page 2,
17 Schedule 3 of Exhibit No.18.
18 Q.If the Commission were to order a revenue
19 requirement lower than the Company's request,how does
20 the company propose to spread the revenue increase?
21 A.If the Commission were to order a lower revenue
22 requirement than filed for,the Company proposes to
23 allocate the same increase as the Company's initial
24 filing to Residential Service Schedule 1,Large General
25 Service Schedules 21/22,and Pumping Service Schedules
110 Miller,Di 7
Avista Corporation
1 31/32.The remaining revenue should then be applied
2 equally to Schedules 11/12,Schedule 25,Schedule 25P and
3 the Street and Area Lights Schedules as those schedules
4 are providing significantly more than their relative cost
5 of service as discussed by Mr.Garbarino.
6 Q.For 2024,what is the proposed electric revenue
7 increase,and how is the Company proposing to spread the
8 increase by rate schedule?
9 A.For 2024,the proposed electric increase is
10 $13,150,000,or 4.2%over base
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1 tariff rates.The proposed general increase over billing
2 rates,including all other rate adjustments (such as DSM
3 and Residential Exchange),is 4.5%.Consistent with the
4 2023 rate spread,the Company used a uniform percentage
5 of revenue for purposes of spreading the proposed 2022
6 electric revenue increase.The proposed percentage
7 increase by rate schedule is as follows:
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Table No.6 -Proposed %Electric Increase by Schedule -2024
10 Increase in Base Increase in
Rate Schedule Rates BillingRates
11 Residential Schedule 1 4.2%4.7%
General Service Schedules 11/12 4.2%4.4%12 Large General Service Schedules 21/22 4.2%4.3%
13 Extra Large General Service Schedule 25 4.2%4.4%
Clearwater Paper Schedule 25P 4.2%4.3%
14 Pumping Service Schedules 31/32 4.2%4.4%
Street &Area Lights Schedules 41-48 4.2%4.2%15 Overall 4.2%4.5%
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18 This information is shown with more detail on page 1 of
19 Exhibit No.18,Schedule 3.
20 Proposed Rate Design
21 Q.Where in your Exhibit do you show a comparison
22 of the present and proposed rates within each of the
23 Company's electric service schedules?
24 A.Pages 3 (for 2023)and 4 (for 2024)of Schedule
25 3 in Exhibit No.18 shows a comparison of the present and
112 Miller,Di 8
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1 proposed rates within each of the schedules,which I will
2 describe below.Column (a)shows the rate/billing
3 components under each of the schedules,column (b)shows
4 the present base tariff rates within each of the
5 schedules,column (c)shows the present rate adjustments
6 applicable under each schedule,and column (d)shows the
7 present billing rates.Column (e)shows the proposed
8 general rate increase to the rate components within each
9 of the schedules,column (f)shows the proposed billing
10 rates and column (g)shows the proposed base tariff
11 rates.
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1 Q.Is the Company proposing any changes to the
2 existing rate structures within its rate schedules?
3 A.No.The Company is not proposing any changes
4 to the present rate structures within its electric
5 schedules.
6 Q.Turning to Residential Service Schedule 1,
7 could you please describe the present rate structure
8 under this schedule?
9 A.Yes.Residential Schedule 1 has a present
10 customer or basic charge of $7.00 per month and two
11 energy rate blocks:0-600 kWhs and over 600 kWhs.The
12 present base tariff rate for the first 600 kWhs per month
13 is 9.234 cents per kWh and 10.378 cents for all kWhs over
14 600.
15 Q.How does the Company propose to spread Schedule
16 l's proposed 2023 general revenue increase of $18,298,000
17 to the rates within that schedule?
18 A.The Company proposes to apply an equal
19 percentage increase to the two energy blocks and increase
20 the Basic Charge from $7.00 per month to $15.00 per
21 month.The proposed increase for the first 600 kWhs used
22 per month under the schedule is 0.536 cents per kWh,and
23 an increase of 0.601 cents per kWh for usage over 600
24 kWhs per month.I will discuss the justification and
25 rationale for the increase in the basic charge later in
114 Miller,Di 9
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1 my testimony.
2 Q.How does the Company propose to spread Schedule
3 l's proposed 2024 general revenue increase of $6,422,000
4 to the rates within that schedule?
5 A.The Company proposes to increase the monthly
6 customer charge from $15.00 per month to $20.00 per
7 month.The remaining revenue for the schedule is
8 proposed to be recovered through a uniform percentage
9 decrease of approximately 0.4%applied to the two energy
10 block rates.The proposed decrease for the first 600
11 kWhs used per month
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1 under the schedule is 0.036 cents per kWh,and a decrease
2 of 0.040 cents per kWh for usage over 600 kWhs per month.
3 Q.For 2023,what is the proposed increase for a
4 residential electric customer with average consumption?
5 A.Inclusive of the increase to the basic charge,
6 the proposed bill change for a residential customer using
7 an average of 927 kWhs per month is $13.18 per month,or
8 an 15.4%change in their electric bill.The present bill
9 for 927 kWhs is $85.40,and that would increase to
10 $98.58.
11 Q.For 2024,what is the proposed increase for a
12 residential electric customer with average consumption?
13 A.The proposed increase for a residential
14 customer using an average of 927 kWhs per month is $4.66
15 per month,or a 4.7%increase in their electric bill,
16 resulting in an overall bill of $103.24,including all
17 rate adjustments.As noted above,this includes a $5 per
18 month increase in the monthly basic charge,offset by a
19 reduction in volumetric rates.
20 Q.Turning to General Service Schedules 11/12,
21 could you please describe the present rate structure and
22 rates under those schedules?
23 A.Yes.General Service Schedules 11/12 are the
24 service schedules typically applicable to customers with
25 an average demand of less than 20 kW per month,such as
116 Miller,Di 10
Avista Corporation
1 small retail establishments (Schedule 11),or shops for
2 residential customers which require a separate service
3 (Schedule 12).The present rate structure under the
4 schedules includes a monthly customer charge of $15.00,
5 an energy rate of 9.293 cents per kWh for all usage up to
6 3,650 kWhs per month,and an energy rate of 6.513 cents
7 per kWh for usage over 3,650 kWhs per month.There is
8 also a demand charge of $6.00 per kW for all demand in
9 excess of 20 kW per month.There is no charge for the
10 first 20 kW of demand.
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117 Miller,Di 10a
Avista Corporation
1 Q.How is the Company proposing to apply Schedule
2 11/12's proposed 2023 general revenue increase of
3 $5,960,000 to the rates within those schedules?
4 A.The Company is proposing that the customer
5 charge of $15.00 per month increase to $18.00 per month
6 and the variable demand rate of $6.00/kW per month
7 increase to $6.50/kW.The remaining revenue increase for
8 those schedules is proposed to be recovered through a
9 uniform percentage increase applied to the two energy
10 rates.The increase in the first block rate is 1.226
11 cent per kWh (the first 3,650 kWhs used per month),and a
12 0.858 cent per kWh increase to the second energy block.
13 Q.How is the Company proposing to apply Schedule
14 11/12's proposed 2024 general revenue increase of
15 $2,095,000 to the rates within those schedules?
16 A.The Company is proposing that the customer
17 charge increase by $2.00 per month,from $18.00 to
18 $20.00.The Company is also proposing that the variable
19 demand rate increase from $6.50/kW to $7.00/kW.The
20 remaining revenue increase for those schedules is
21 proposed to be recovered through a 0.334 increase to the
22 first energy block (the first 3,650 kWhs used per month),
23 and a 0.233 cent per kWh to the second energy block.
24 Q.Why is the Company proposing an 16.7%increase
25 to the demand charge for Schedule 11/12 over the rate
118 Miller,Di 11
Avista Corporation
1 plan?
2 A.The system allocated demand cost from the cost
3 of service study is approximately $13.18 per kilowatt
4 (kW)month.1 The Company's present monthly demand
5 charges range from $5.00-$6.00/kW,depending on service
6 schedule.While the exact level of costs classified as
7 demand-related can be debated,clearly the levels of
8 demand charges will continue to be well below
9 demand-related costs.
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23 1 Exhibit No.16,Schedule 3,page 3,line 21
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119 Miller,Di lla
Avista Corporation
1 In addition,the Company's transmission and
2 distribution system is constructed to meet the collective
3 peak demand of its customers.Further,the Company must
4 have adequate resources available to meet peak demand.
5 If customers reduce their peak demand,it will reduce the
6 need for additional investment in these facilities and
7 resources.Customers need to receive the proper price
8 signal to encourage a reduction in their peak demand,
9 i.e.,higher demand charges.
10 For these reasons,the Company believes that it is
11 important to increase the demand charge in this case for
12 Schedule 11/12,as well as for Schedules 21/22 and 25,by
13 a percentage greater than that applied to the energy
14 rates.If demand charges are not increased at least
15 proportionately with energy charges over the rate plan,
16 customers who have a poor load factor (high peak demand
17 compared to average energy use)would see a lower
18 percentage increase in their bill than a comparable
19 customer with a good load factor (low peak demand
20 compared to average energy use).This result would not
21 send the appropriate price signal to commercial and
22 industrial customers,nor would it reflect the fact that
23 the Company's demand charges are well below the costs
24 associated with meeting customers'peak demand.
25 Q.Turning to Large General Service Schedules
120 Miller,Di 12
Avista Corporation
1 21/22,would you please describe the present rate
2 structure under those schedules and how the Company is
3 proposing to apply Schedule 21/22's 2023 increase of
4 $6,394,000 to the rates within the schedules?
5 A.Yes.Large General Service Schedules 21/22 are
6 the service schedules applicable to customers with
7 monthly demands over 50 kW,but less than 3,000 kW.
8 Typical customers served are grocery stores,schools,and
9 office buildings on Schedule 21,with retirement homes
10 and other qualified residential load served on Schedule
11 22.
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121 Miller,Di 12a
Avista Corporation
1 These schedules consist of a minimum monthly charge
2 of $425 for the first 50 kW or less,a demand charge of
3 $5.50 per kW for monthly demand in excess of 50 kW,and
4 two energy block rates:6.583 cents per kWh for the first
5 250,000 kWhs per month,and 5.548 cents per kWh for all
6 usage in excess of 250,000 kWhs.
7 The Company is proposing that the minimum demand
8 charge for the first 50 kW of $425 per month increase to
9 $500 per month and the demand charge of $5.50/kW per
10 month increase to $6.50/kW per month.The remaining
11 revenue increase for the schedules is proposed to be
12 recovered through a uniform percentage increase of
13 approximately 12.4%applied to the two energy block
14 rates.The proposed increase for the first 250,000 kWhs
15 used per month under the schedules is 0.815 cents per
16 kWh,and an increase of 0.687 cents per kWh for usage
17 over Ž50,000 kWhs per month.
18 Q.Would you please describe how the Company is
19 proposing to apply Schedule 21/22's 2024 increase of
20 $2,243,000 to the rates within the schedule?
21 A.Yes.The Company is proposing to increase the
22 present minimum demand charge (for the first 50 kW or
23 less)by $25 per month,from $500 to $525,and increase
24 the demand charge from $6.50/kW to $7.00/kW.The
25 remaining revenue increase for the schedules is proposed
122 Miller,Di 13
Avista Corporation
1 to be recovered through a uniform percentage increase of
2 approximately 3.5%applied to the two energy block rates.
3 The proposed increase for the first 250,000 kWhs used per
4 month under the schedules is 0.259 cents per kWh,and an
5 increase of 0.220 cents per kWh for usage over 250,000
6 kWhs per month.
7 Q.Turning to Extra Large General Service Schedule
8 25,would you please describe the present rate structure
9 under that schedule,and how the Company is proposing to
10 apply Schedule 25's 2023 increase of $2,814,000 to the
11 rates within the schedule?
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123 Miller,Di 13a
Avista Corporation
1 A.Yes.Schedule 25 is applicable for customers
2 with demands in excess of 3,000 kVa per month,such as
3 large industrial customers and universities.Extra Large
4 General Service Schedule 25 consists of a minimum monthly
5 charge of $14,000 for the first 3,000 kVa or less,a
6 demand charge of $5.00 per kVa for monthly demand in
7 excess of 3,000 kVa,and two energy block rates:5.693
8 cents per kWh for the first 500,000 kWhs per month and
9 4.769 cents per kWh for all usage in excess of 500,000
10 kWhs.
11 The Company is proposing that the present minimum
12 demand charge of $14,000 per month increase to $16,000
13 per month and the volumetric demand charge of $5.00/kVA
14 per month increase to $5.75/kVA per month.The remaining
15 revenue increase for the schedule is proposed to be
16 recovered through a uniform percentage increase of
17 approximately 13.2%applied to the two energy block
18 rates.The proposed energy rate increase for the first
19 500,000 kWhs used per month is 0.754 cents per kWh and
20 the increase for usage over 500,000 per month is 0.632
21 cents per kWh.
22 Q.Would you please describe how the Company is
23 proposing to apply Schedule 25's 2024 increase of
24 $987,000 to the rates within the schedule?
25 A.Yes.The Company is proposing that the minimum
124 Miller,Di 14
Avista Corporation
1 demand charge of $16,000 be increased by $1,000 to
2 $17,000 per month.Further,the Company is proposing to
3 increase the volumetric demand charge from $5.75/kVA to
4 $6.25/kVA.The remaining revenue increase for the
5 schedule is proposed to be recovered through a uniform
6 percentage increase of approximately 3.5%applied to the
7 two energy block rates.The proposed energy rate
8 increase for the first 500,000 kWhs used per month is
9 0.224 cents per kWh and the increase for usage over
10 500,000 per month is 0.187 cents per kWh.
11 Q.Please describe the service the Company
12 provides to Clearwater Paper's Lewiston Plant under
13 Schedule 25P.
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125 Miller,Di 14a
Avista Corporation
1 A.In Commission Order No.34252,dated June 28,
2 2013,the Commission approved a five-year Electric
3 Service Agreement (Agreement)between Avista and
4 Clearwater,applicable to its Lewiston Plant.2 The
5 Agreement became effective July 1,2013 and was replaced
6 with a new Agreement effective March 1,2019.The 2013
7 Agreement provided for Clearwater to use its on-site
8 generation to serve its own load,and for Clearwater to
9 purchase from Avista all of the electric power
10 requirements that exceed the electric power generated by
11 Clearwater.This contract was not in effect with Avista
12 during the twelve months ended 2022 test year.
13 On February 27,2019 the Commission approved a new
14 Power and Purchase and Sale Agreement (Order No.34252)
15 between Avista and Clearwater that allows Avista to sell
16 to Clearwater an amount of energy equivalent to its
17 generation at a second block rate of $24.56 per MWh.In
18 turn,Clearwater sells the electricity it generates and
19 the corresponding REC's to Avista at a contract rate of
20 $24.50 per MWh (adjusted for Commission fees).Because
21 Avista buys and sells an equivalent amount of energy at
22 near equivalent prices,the new Agreement provides the
23 same benefit to Clearwater as allowing Clearwater to
24 generate into its own load under the prior Agreement.
25 Avista serves Clearwater's load requirements under
126 Miller,Di 15
Avista Corporation
1 Schedule 25P.As described in Schedule 25P,for purposes
2 of all proposals related to General Rate Case Filings,
3 "Base Revenue"will be defined as Clearwater's "net"
4 generation requirements as measured through the Block 1
5 Retail Meter.Because the effects of the Block 2
6 Generation load are removed from the Company's filing,
7 the new Agreement has no impact on the level of base
8 revenue proposed to be recovered in the Company's filing.
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23 2 On July 30,2015 the Comiission approved (Order No.33350)a Joint
Petition between Avista and Clearwater which,among other things,
24 gave approval of a contract amendment which would extend the length
of the original contract from June 30,2018 to June 30,2021 (Case
25 No.AVU-E-15-06).
127 Miller,Di 15a
Avista Corporation
1 Q.Please describe the application of the proposed
2 Schedule 25P 2023 increase of $2,602,000 to the rates
3 within the schedule.
4 A.Similar to Schedule 25,the Company is
5 proposing that the present minimum demand charge of
6 $14,000 per month increase to $16,000 per month.The per
7 month volumetric demand charges of $5.00/kVA for all kVA
8 between 3,000 and 55,000 increase to $5.75/kVA,and the
9 $2.50/kVA for all kVA over 55,000 increase to $3.00/kVA.
10 The remaining revenue increase for the schedule is
11 proposed to be recovered through an increase of 0.557
12 cents per kWh to the energy charge.
13 Q.Please describe the application of the proposed
14 Schedule 25P 2024 increase of $914,000 to the rates
15 within the schedule.
16 A.Similar to Schedule 25,the Company is
17 proposing that the present minimum demand charge of
18 $16,000 be increased by $1,000,to $17,000 per month.
19 Further,the Company is proposing to increase the
20 volumetric demand charge for the 3,000 -55,000 kVA block
21 from $5.75/kVA to $6.25/kVA.The remaining revenue
22 change for the schedule is proposed to be recovered
23 through a percentage increase of approximately 3.4%
24 applied to the single energy block rate,an increase of
25 0.162 cents per kWh.
128 Miller,Di 16
Avista Corporation
1 Q.Turning to Pumping Schedules 31/32,would you
2 please describe how the Company is proposing to apply the
3 2023 increase of $844,000 to the rates within the
4 schedules?
5 A.The Company is proposing an increase the
6 present $13.00 per month customer charge to $16.00 per
7 month in 2023.The remaining revenue increase is
8 proposed to be spread on a uniform percentage basis of
9 approximately 13.2%to the two energy rate blocks under
10 the schedules.The proposed increase in the first block
11 rate is 1.374 cents per kWh and the increase in the
12 second block rate is 1.160 cents per kWh.
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129 Miller,Di 16a
Avista Corporation
1 Q.Please describe how the Company is proposing to
2 apply Schedule 31/32's 2024 increase of $296,000 to the
3 rates within the schedules.
4 A.The Company is proposing that the customer
5 charge of $16.00 per month be increased by $2.00,to
6 $18.00 per month,and that the remaining revenue increase
7 be spread on a uniform percentage basis of approximately
8 3.8%to the two energy rate blocks under the schedules.
9 The proposed increase in the first block rate is 0.452
10 cents per kWh and the increase in the second block rate
11 is 0.382 cents per kWh.
12 Q.How is the Company proposing to spread the
13 proposed 2023 revenue increase of $550,000 applicable to
14 Street and Area Light (Schedules 41-49)?
15 A.The Company proposes to increase present street
16 and area light (base)rates on a uniform percentage
17 basis.The proposed increase for all lighting rates is
18 13.6%.The (base tariff)rates for those schedules are
19 provided in Exhibit No.18,Schedule 2.
20 Q.How is the Company proposing to spread the
21 proposed 2024 revenue increase of $192,000 applicable to
22 Street and Area Light (Schedules 41-49)?
23 A.The Company proposes to increase present
24 street and area light (base)rates on a uniform
25 percentage basis.The proposed increase for all lighting
130 Miller,Di 17
Avista Corporation
1 rates is 4.2%.The (base tariff)rates for those
2 schedules are provided in Exhibit No.18,Schedule 2.
3 Q.Is the Company proposing any other changes to
4 its Street and Area Light schedules?
5 A.Yes.The Company has made some minor
6 housekeeping type changes to clean up the Street and Area
7 Light tariffs which mostly remove lighting options that
8 are no longer being used by our customers.
9 Q.Turning now to the Company's Electric Fixed
10 Cost Adjustment Mechanism,how will new baseline
11 information be incorporated into the mechanism?
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131 Miller,Di 17a
Avista Corporation
1 A.As in prior general rate cases,the Company
2 would,as a part of its Compliance Filing at the
3 conclusion of this case,submit the final baseline values
4 for its Fixed Cost Adjustment Mechanism (for both 2023
5 and 2024)prior to new rates going into effect as a
6 result of this general rate case.
7
8 III.PROPOSED NATURAL GAS REVENUE INCREASE
9 Q.Would you please explain what is contained in
10 Schedules 4 and 5 of Exhibit No.18?
11 A.Yes.Schedule 4 of Exhibit No.18 is a copy of
12 the Company's present and proposed natural gas tariffs
13 for 2023 and 2024,showing the changes (strikeout and
14 underline)proposed in this filing.Schedule 5 of Exhibit
15 No.18 contains the proposed (clean)natural gas tariff
16 sheets for 2023 and 2024 incorporating the proposed
17 changes included in this filing.
18 Q.Would you please explain what is contained in
19 Schedule 6 of Exhibit No.18?
20 A.Schedule 6 of Exhibit No.18 contains
21 information regarding the proposed spread of the natural
22 gas revenue increase among the service schedules and the
23 proposed changes to the rates within the schedules.Page
24 1 shows the proposed general revenue and percentage
25 increase by rate schedule.Page 2 shows the rates of
132 Miller,Di 18
Avista Corporation
1 return and the relative rates of return for each of the
2 schedules before and after the proposed 2023 increase.
3 Pages 3 and 4 show the present rates under each of the
4 rate schedules,the proposed changes to the rates within
5 the schedules,and the proposed rates after application
6 of the 2023 and 2024 rate changes.These pages will be
7 referred to later in my testimony.
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133 Miller,Di 18a
Avista Corporation
1 Summary of Natural Gas Rate Schedules and Tariffs
2 Q.Would you please review the Company's present
3 rate schedules and the types of natural gas service
4 offered under each?
5 A.Yes.The Company's present Schedules 101 and
6 111 offer firm sales service.Schedule 101 generally
7 applies to residential and small commercial customers who
8 use less than 200 therms/month.Schedule 111 is
9 generally for customers who consistently use over 200
10 therms/month and Schedule 131 provides interruptible
11 sales service to customers whose annual requirements
12 exceed 250,000 therms.Schedule 146 provides
13 transportation/distribution service for customer-owned
14 natural gas for customers whose annual requirements
15 exceed 250,000 therms.
16 Q.The Company also has rate Schedules 112 and 132
17 on file with the Commission.Would you please explain
18 which customers are eligible for service under these
19 schedules?
20 A.Yes.Schedules 112 and 132 are in place to
21 provide service to customers who at one time were
22 provided service under Transportation Service Schedule
23 146.The rates under these schedules are the same as
24 those under Schedules 111 and 131 respectively,except
25 for the application of Temporary Gas Rate Adjustment
134 Miller,Di 19
Avista Corporation
1 Schedule 155.Schedule 155 is a temporary rate
2 adjustment used to amortize the deferred natural gas
3 costs approved by the Commission in the prior Purchased
4 Gas Cost Adjustment ("PGA")filing.Because of their
5 size,transportation service customers are analyzed
6 individually to determine their appropriate share of
7 deferred natural gas costs.If those customers switch
8 back to sales service,the Company continues to analyze
9 those customers individually;otherwise,those customers
10 would receive natural gas cost deferrals which are not
11 due them;thus the need for Schedules 112 and 132.There
12 are only two customers served under these schedules as
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135 Miller,Di 19a
Avista Corporation
1 of June 30,2022.
2 Q.How many customers does the Company serve under
3 each of its natural gas rate schedules in Idaho?
4 A.As of June 30,2022,the Company provided
5 service to the following number of customers under each
6 of its schedules in Idaho:
7
Table No.7 -Customers by Service Schedule
8
9 Rate Schedule No.of Customers
General Service Schedule 101 91,039
10 Large General Service Schedules 111/112 1,572
11 Interruptible Sales Service Schedules 131/132 0
Transportation Service Schedule 146 6
12
13 Q.Is the Company proposing any changes to the
14 present rate structures within its natural gas service
15 schedules?
16 A.No.The Company is not proposing any changes
17 to the present rate structures within its natural gas
18 schedules.
19 Proposed Rate Spread
20 Q.For 2023,what is the proposed natural gas
21 revenue increase,and how is the Company proposing to
22 spread the increase by rate schedule?
23 A.For 2023,the proposed base revenue increase is
24 $2,771,000,or 6.0%in base margin3 revenue.The
25 proposed general increase over present billing rates,
136 Miller,Di 20
Avista Corporation
1 after including all other rate adjustments (such as DSM
2 and PGA),is an increase of 2.7%.The proposed
3 percentage change by rate schedule is as follows:
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23 3Base margin revenue refers to the base revenue associated with the
Company's ownership and operation of its natural gas distribution
24 operations.It is the revenue related to delivering natural gas to
customers,and does not include the cost of natural gas,upstream
25 third-party owned transportation,or the effect of other tariffs.
137 Miller,Di 20a
Avista Corporation
1
2
3
Table No.8 -Proposed %Natural Gas Change by Schedule -2023
4 Increase in Increase in
Rate Schedule MarginRates BillingRates
5 General Service Schedule 101 0.3%0.1%
Large General Service Schedules ll 1/112 0.0%0.0%6 Interrupt.Sales Service Schedules 131/132 0.0%0.0%
,Transportation Service Schedule 146 0.0%0.0%
Overall 0.2%0.1%
8
9
10 Q.What information did the Company use to develop
11 the proposed spread of the overall 2023 change to the
12 various rate schedules?
13 A.The Company used the results of the cost of
14 service study (sponsored by Company witness Mr.Anderson)
15 as a guide to spread the natural gas general increase.
16 Given the modest size of the request,the Company has
17 applied the entire rate increase to General Service
18 Schedule 101,as this is the only schedule providing less
19 than their relative rate of return.The spread of the
20 proposed increase results in the rates of return for the
21 various service schedules moving towards overall rate of
22 return (unity).The relative rates of return before and
23 after application of the proposed 2023 increase by
24 schedule are as follows:
25 /
138 Miller,Di 21
Avista Corporation
1
2 Table No.9 -Present &Proposed Relative Rates of Return
Present Proposed3
Relative Relative
4 Rate Schedule ROR RORGeneralServiceSchedule1010.91 0.96
5 Large General Service Schedules 111/112 1.41 1.20TransportationServiceSchedule1461.79 1.52
6 Overall 1.00 1.00
7
8 Page 2 of Exhibit No.18,Schedule 6 shows this
9 information in more detail.
10 Q.For 2024,what is the proposed natural gas
11 revenue increase,and how is the Company proposing to
12 spread the increase by rate schedule?
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139 Miller,Di 21a
Avista Corporation
1 A.For 2024,the proposed base revenue increase is
2 $120,000,or 0.2%in base margin revenue.The proposed
3 general increase over billing rates,after including all
4 other rate adjustments (such as DSM and PGA),is an
5 increase of 0.1%.Consistent with the 2023 rate spread,
6 the Company applied the increase to General Service
7 Schedule 101.Below is a table showing the effect of the
8 Company's 2024 proposed natural gas increase by rate
9 schedule:
10
11 Table No.10 -Proposed %Natural Gas Change by Schedule -2024
12 Increase in Increase in
Rate Schedule MarginRates BillingRates13GeneralServiceSchedule1010.3%0.1%
14 Large General Service Schedules 111/112 0.0%0.0%
Interrupt.Sales Service Schedules 131/132 0.0%0.0%
15 Transportation Service Schedule 146*0.0%0.0%
Overall 0.2%0.1%16
17
18
19 This information is also shown on page 1 of Exhibit No.
20 18,Schedule 6.
21 Proposed Rate Design
22 Q.Would you please explain the present rate
23 design within each of the Company's present natural gas
24 service schedules?
25 A.Yes.General Service Schedule 101 generally
140 Miller,Di 22
Avista Corporation
1 applies to residential and small commercial customers who
2 use less than 200 therms/month.The schedule contains a
3 single rate per therm for natural gas usage and a monthly
4 customer/basic charge.
5 Large General Service Schedule 111 has a four-tier
6 declining-block rate structure and is generally for
7 customers who consistently use over 200 therms/month,
8 such as schools,restaurants,and office buildings.The
9 schedule consists of a monthly minimum charge plus a
10 usage charge for the first 200 therms or less,and block
11 rates for 201-1,000 therms/month,1001-10,000
12 therms/month and usage over 10,000 therms/month.
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141 Miller,Di 22a
Avista Corporation
1 Interruptible Sales Service Schedule 131 contains a
2 single rate per therm for natural gas usage.The
3 schedule also has an annual minimum (deficiency)charge
4 based on a usage requirement of 250,000 therms per year.
5 There are presently no customers taking service under
6 this rate schedule.
7 Transportation Service Schedule 146 contains a $300
8 per month customer charge and contains a single rate per
9 therm for natural gas usage.The schedule also has an
10 annual minimum (deficiency)charge based on a usage
11 requirement of 250,000 therms per year.
12 Q.Where in your Exhibit No.18 do you show the
13 present and proposed rates for the Company's natural gas
14 service schedules?
15 A.Pages 3 and 4 of Schedule 6 shows the present
16 and proposed rates under each of the rate schedules,
17 including all present rate adjustments (adders)for the
18 2023 and 2024 rate changes.Columns (g,h,&i)on those
19 pages show the proposed changes to the rates contained in
20 each of the schedules.
21 Q.How does the Company propose to spread Schedule
22 101's proposed 2023 general revenue increase of
23 $2,771,000 to the rates within that schedule?
24 A.Similar to electric,the Company proposes to
25 increase the monthly customer charge from $7.00 per month
142 Miller,Di 23
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1 to $15.00 per month.The remaining revenue change for
2 the schedule would be recovered through a 19.2%decrease,
3 or 8.444 cents per therm reduction in the volumetric
4 energy rate.This is shown in columns (g),page 3,
5 Schedule 6 of Exhibit No.18.
6 Q.How does the Company propose to spread Schedule
7 101's proposed 2024 general revenue increase of $120,000
8 to the rates within that schedule?
9 A.The Company proposes to increase the monthly
10 customer charge from $15.00 per month to $20.00 per
11 month.The remaining revenue change for the schedule
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143 Miller,Di 23a
Avista Corporation
1 would be recovered through a 21.4%decrease,or 7.598
2 cents per therm reduction in the volumetric energy rate.
3 This is shown in column (g),page 4,Schedule 6 of
4 Exhibit No.18.
5 Q.For 2023,what is the proposed monthly change
6 for a residential natural gas customer with average
7 usage?
8 A.Inclusive of the customer charge increase,the
9 bill impact for a residential customer using an average
10 of 64 therms of natural gas per month would be $2.60 per
11 month,or 3.5%.A bill for 64 therms per month would be
12 increased from the present level of $73.42 to a proposed
13 level of $76.02.As noted earlier,this includes an $8
14 per month increase in the monthly basic charge,offset by
15 a reduction in the volumetric rate.
16 Q.For 2024,what is the proposed monthly increase
17 for a residential natural gas customer with average
18 usage?
19 A.Inclusive of the customer charge increase,the
20 increase for a residential customer using an average of
21 64 therms of natural gas per month would be $0.14 per
22 month,or 0.2%,resulting in an overall bill of $76.16,
23 including all rate adjustments.As noted earlier,this
24 includes a $5 per month increase in the monthly basic
25 charge,offset by a reduction in the volumetric rate.
144 Miller,Di 24
Avista Corporation
1 Q.Would you please explain the proposed changes
2 in the rates for Large General Service Schedules 111?
3 A.Yes.The present rates for Schedules 101 and
4 111 provide guidance for customer placement:customers
5 who generally use less than 200 therms/month should be
6 placed on Schedule 101,customers who consistently use
7 over 200 therms per month should be placed on Schedule
8 111.Not only do the rates provide guidance for customer
9 schedule placement,they provide a reasonable
10 classification of customers for analyzing the costs of
11 providing service.The Company is not proposing to
12 change the total revenue collected for
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1 Schedule 111 in either 2023 or 2024.
2 The proposed 2023 decrease to the minimum charge for
3 Schedule 111 (for 200 therms or less)of $16.16 per month
4 is a function of the volumetric charge change under
5 Schedule 101.This methodology maintains the present
6 relationship between the schedules and will minimize
7 customer shifting.In order for the Schedule to remain
8 revenue neutral,the remaining revenue requirement for
9 the schedules is proposed to be recovered through a
10 uniform percentage change of approximately 5.5%to blocks
11 2,3 and 4.
12 The proposed 2024 change to the Schedule 111 minimum
13 charge for Schedule 111 (for 200 therms or less)is a
14 reduction of $10.19 per month.In order for the Schedule
15 to remain revenue neutral,the remaining revenue
16 requirement for the schedule is proposed to be recovered
17 through a uniform percentage increase of approximately
18 3.3%to blocks 2,3 and 4.
19 Q.Did the Company propose a revenue increase for
20 Schedules 131/132?
21 A.No customers are presently served on these
22 schedules.The Company is not proposing any changes to
23 the rates under Schedules 131/132 over either year of the
24 rate plan.
25 Q.Is the Company proposing a change to the rates
146 Miller,Di 25
Avista Corporation
1 under Transportation Schedule 146?
2 A.No.The Company is not proposing to change the
3 rates for Schedule 146 over either year of the rate plan.
4 Q.Is the Company proposing any other changes to
5 its natural gas service schedules?
6 A.No,it is not.
7 Q.Turning now to the Company's Natural Gas Fixed
8 Cost Adjustment Mechanism,how will new baseline
9 information be incorporated into the mechanism?
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1 A.As in the prior general rate case,the Company
2 would,as a part of its Compliance Filing at the
3 conclusion of this case,submit the final baseline values
4 for its Fixed Cost Adjustment Mechanism (for both 2023
5 and 2024)prior to new rates going into effect as a
6 result of this general rate case.
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8 IV.RESIDENTIAL BASIC CKARGE
9 Q.As part of Settlement approved in the Company's
10 last general rate case,did the Parties agree to "meet
11 and confer"on the appropriate level of basic charges?
12 A.Yes.Provision 24 of the Settlement
13 Stipulation in Case No.AVU-E-21-01 stated the following:
14 Electric Cost of Service and Basic Charge Workshop -
The Parties agree,prior to the Company's next15generalratecasefiling,to meet and conferregardingtheCompany's electric cost of service16studyandtheappropriatelevelofbasiccharges.The purpose of the workshop will be to discuss the17meritsofdifferingcostofservicemethodologiesandbasicchargelevels.The Company will provide18availableinformation,studies and data requested byanyofthePartiessoastoenablemeaningful19workshopparticipationanddiscussionofissues.NoPartyshallbeboundbyworkshopdiscussionsandmay20contestcostofserviceandratespreadorratedesignissuesinsubsequentproceedings.21
22 In compliance with that agreement,the Parties held a
23 virtual meeting on May 4,2022,to discuss the merits of
24 differing basic charge levels.Based on discussion from
25 that meeting and the Company's own analysis,the Company
148 Miller,Di 26
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1 is proposing higher basic charge levels in this
2 proceeding.
3 Q.Please summarize your proposal for the basic
4 charge proposals in this proceeding.
5 A.The Company is proposing to make substantive
6 changes to both the electric and natural gas basic
7 charges in order to design rates that better align with
8 the actual fixed
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149 Miller,Di 26aAvistaCorporation
1 costs to serve customers.The Company envisions a
2 five-year plan that increases the basic charges each year
3 until they more closely align with the actual fixed costs
4 to serve customers as discussed below.The first two
5 increases are discussed below and included in the rate
6 design components in this proceeding.The remaining
7 changes are illustrative and will be proposed in
8 subsequent general rate case filings by the Company.
9 Table No.11 below details the basic charge changes over
10 the next five years.
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12 Table No.11-Proposed Basic Charge Changes
Schedule 001 Electric Schedule 101 Natural Gas13Present$7.00 $7.00
14 2023 -Rate Year 1 $15.00 $15.00
2024 -Rate Year 2 $20.00 $20.00
15 2025 -Future GRC $25.00 $22.00
2026 -Future GRC $30.00 $24.00
16 2027-FutweGRC $35.00 $26.00
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18 Q.Why is the Company proposing a multiyear
19 transition for the basic charge changes?
20 A.The Company is proposing a multiyear transition
21 in order to temper the bill impacts for lower use
22 customers and avoid rate shock.The Company is attempting
23 to balance moving towards the alignment of fixed costs in
24 customer rates,recognizing that these changes will have
25 an impact on its customers.
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150 Miller,Di 27
Avista Corporation
1 Q.What proportion of revenues from residential
2 customers is recovered through the fixed basic charge?
3 A.At present levels,approximately only 6.3%of
4 base revenue is recovered through the basic charge for
5 electric customers and approximately 18.5%for natural
6 gas customers.
7 Q.Why is the Company proposing to increase the
8 Schedule 001 monthly basic charge for electric customers?
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1 A.A significant portion of the Company's costs
2 are fixed and do not vary with customer usage.These
3 costs include distribution plant and operating costs to
4 provide reliable service to customers.Upon evaluation
5 of the total customer allocated costs,as shown in Mr.
6 Garbarino's Exhibit No.16,Schedule 3,Page 4,line 26,
7 those costs are $19.24 per customer per month.Factoring
8 in distribution demand cost per customer per month of
9 $23.84,as shown in Mr.Garbarino's Exhibit No.16,
10 Schedule 3,Page 4,line 29,the total customer and
11 distribution demand monthly cost is $43.08.These are
12 essentially fixed costs that are allocated based on the
13 number of customers served.Given the large disparity
14 between the level of customer and demand costs and the
15 present level of the basic charge,the Company believes
16 that it is appropriate to recover more of these fixed
17 customer costs through the basic charge.The result of a
18 basic charge that does not adequately recover the fixed
19 costs of customers is those costs are then recovered
20 through a higher volumetric charge.The effect of a low
21 basic charge is that customers with low monthly usage are
22 being subsidized by customers with higher monthly usage.
23 Q.Has the Company prepared an analysis to
24 determine how the proposed change in the basic charge
25 levels would impact customers bills at different usage
152 Miller,Di 28AvistaCorporation
1 levels?
2 A.Yes.Table No.12 below shows the Rate Year 1
3 residential bill impact at differing usage levels
4 inclusive of the increased revenue proposed in this
5 proceeding.
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153 Miller,Di 28aAvistaCorporation
1
2 Table No.12 -Electric Bill Impact
Schedule 001 Present Schedule 001 ProposedUsageLem!Basic Charge Block 1 Block 2 Total Bin Basic Charge Block 1 Block 2 Total Bill Bill impact %Change$7.00 $0.08088 50.09135 $15.00 50.08624 $0.097364100$7.00 $8.09 $15.09 $15.00 $8.62 $23.62 $8.53 56.5%200 $7.00 $16.18 $23.18 $15.00 $17.25 $32.25 $9.07 39.1%300 $7.00 $24.26 $31.26 $15.00 $25.87 $40.87 $9.61 30.7%5 400 $7.00 $32.35 $39.35 $15.00 $34.50 $49.50 $10.15 25.8%500 $7.00 $40.44 $47.44 $15.00 $43.12 $58.12 $10.68 22.5%600 $7.00 $48.53 $55.53 $15.00 $51.74 $66,74 $11.21 20.2%6 700 $7.00 $48.53 $9.14 $64.67 $15.00 $51.74 $9.74 $76.48 $11.81 18.3%800 $7.00 $48,53 $18.27 $73.80 $15.00 $51.74 $19.47 $86.21 $12.41 16.8%900 $7.00 $48.53 $27.41 $82.94 $15.00 $51.74 $29.21 $95.95 $13.01 15.7%927 $7.00 $48.53 $29.87 $85.40 $15.00 $51.74 $31.84 $98.58 $13.18 15.4%1000 $7.00 $48.53 $36.54 $92.07 $15.00 $51.74 $38.94 $105.68 $13.61 14.8%1100 $7.00 $48.53 $45.68 $101.21 $15.00 $51.74 $48,68 $115.42 $14.21 14.0%1200 $7.00 $48.53 $54.81 $110.34 $15.00 $51.74 $58.42 $125.16 $14.82 13.4%1300 $7.00 $48.53 $63.95 $119.48 $15.00 $51.74 $68.15 $134.89 $15.41 12.9%1400 $7.00 $48.53 $73.08 $128.61 $15.00 $51.74 $77.89 $144.63 $16.02 12.5%1500 $7.00 $48.53 $82.22 $137.75 $15.00 $51.74 $87.62 $154.36 $16.61 12.1%
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11 As is shown in the table,a customer with average usage
12 of 927 kWh's per month would receive the approximate
13 average increase being requested in this case.Those
14 customers who use less than the average would see larger
15 bill impacts and those customers with higher usage would
16 see lower than average bill impacts.
17 Q.Why is the Company proposing to increase the
18 Schedule 101 monthly basic charge for natural gas
19 customers?
20 A.Similar to electric,a significant portion of
21 the Company's costs are fixed and do not vary with
22 customer usage.Upon evaluation of the total customer
23 allocated costs,as shown in Mr.Anderson's Exhibit No.
24 17,Schedule 6,Page 4,line 24,those costs are $21.96
25 per customer per month at current rates.Factoring in
154 Miller,Di 29AvistaCorporation
1 distribution demand cost per customer per month of $7.56,
2 as shown in Mr.Anderson's Exhibit No.17,Schedule 2,
3 Page 8,the total customer and distribution demand
4 monthly cost is $29.51.Like electric,there is a large
5 disparity between the level of customer and demand costs
6 and the present level of the basic charge,the Company
7 believes that it is appropriate to recover more of these
8 fixed customer costs through the basic charge.The
9 effect of a low basic charge is that customers with low
10 monthly usage are subsidized by customers with higher
11 monthly usage.
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155 Miller,Di 29aAvistaCorporation
1 Q.Has the Company prepared an analysis to
2 determine how the proposed change in the basic charge
3 levels would impact natural gas customers bills at
4 different usage levels?
5 A.Yes.Table No.13 below shows the natural gas
6 Rate Year 1 residential bill impact at dif fering usage
7 levels inclusive of the increased revenue proposed in
8 this proceeding.
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10 Table No.13 ---Natural Gas Bill Impact
11 Schedule 101 Present Schedule 101 ProposedUsageLew!Basic Charge Block 1 Total Bill Basic Charge Block 1 Total Bill Bill impact %Change$7.00 $1.03788 $15.00 $0.953441210$7.00 $10.38 $17.38 $15.00 $9.53 $24.53 $7.16 41.2%20 $7.00 $20.76 $27.76 $15.00 $19.07 $34.07 $6.31 22.7%1 3 30 $7.00 $31.14 $38.14 $15.00 $28.60 $43.60 $5.47 14.3%40 $7.00 $41.52 $48.52 $15.00 $38.14 $53.14 $4.62 9.5%50 $7.00 $51.89 $58.89 $15.00 $47.67 $62.67 $3.78 6.4%14 60 $7.00 $62.27 $69.27 $15.00 $57.21 $72.21 $2.93 4.2%64 $7.00 $66.42 $73.42 $15.00 $61.02 $76.02 $2.60 3.5%15 70 $7.00 $72.65 $79.65 $15.00 $66.74 $81.74 $2.09 2.6%80 $7.00 $83.03 $90.03 $15.00 $76.28 $91.28 $1.24 1.4%90 $7.00 $93.41 $100.41 $15.00 $85.81 $100.81 $0.40 0.4%16 100$7.00 $103.79 $110.79 $15.00 $95.34 $110.34 $(0.44)-0.4%110 $7.00 $114.17 $121.17 $15.00 $104.88 $119.88 $(1.29)-1.1%17 120 $7.00 $124.55 $131.55 $15.00 $114.41 $129.41 $(2.13)-1.6%130 $7.00 $134.92 $141.92 $15.00 $123.95 $138.95 $(2.98)-2.1%140 $7.00 $145.30 $152.30 $15.00 $133.48 $148.48 $(3.82)-2.5%18 150 $7.00 $155.68 $162.68 $15.00 $143.02 $158.02 $(4.67)-2.9%
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21 As is shown in the table,a customer with average usage
22 of 64 therms per month would receive the approximate
23 average increase being requested in this case.Those
24 customers who use less than the average would see larger
25 bill impacts and those customers with higher usage would
156 Miller,Di 30AvistaCorporation
1 see lower than average bill impacts or rate reductions.
2 While the Company acknowledges that these rate
3 design changes will impact customers bills,the changes
4 to both the electric and natural gas basic charges will
5 better align customers rates with the actual fixed costs
6 to serve customers and reduce the intra-class
7 subsidization that presently exists within customers
8 rates.
9 Q.Does this conclude your pre-filed,direct
10 testimony?
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157 Miller,Di 30aAvistaCorporation
1 A.Yes,it does.
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158 Miller,Di 31AvistaCorporation
1 (The following prefiled direct and
2 rebuttal testimony of Mr.Patrick Ehrbar is spread upon
3 the record.)
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CSB REPORTING 159 COLLOQUY208.890.5198
1 I.INTRODUCTION
2 Q.Please state your name,employer,and business
3 address.
4 A.My name is Patrick D.Ehrbar and I am employed
5 as the Director of Regulatory Affairs for Avista
6 Utilities ("Company"or "Avista"),at 1411 East Mission
7 Avenue,Spokane,Washington.
8 Q.Have you previously filed direct testimony in
9 this proceeding?
10 A.No,I have not.
11 Q.Please provide information pertaining to your
12 educational background and professional experience?
13 A.I am presently assigned to the Regulatory
14 Affairs Department as the Director of Regulatory Affairs.
15 I am a 1995 graduate of Gonzaga University with a
16 Bachelor of Business Administration degree.In 1997 I
17 graduated from Gonzaga University with a Master of
18 Business Administration degree.I started with Avista in
19 April 1997 as a Resource Management Analyst in the
20 Company's Demand Side Management (DSM)department.
21 Later,I became a Program Manager,responsible for energy
22 efficiency program offerings for the Company's
23 educational and governmental customers.In 2000,I was
24 selected to be one of the Company's key Account
25 Executives,where I was responsible for,among other
160 Ehrbar,Di 1AvistaCorporation
1 things,being the primary point of contact for numerous
2 commercial and industrial customers.
3 I joined the State and Federal Regulation
4 Department as a Senior Regulatory Analyst in 2007.
5 Responsibilities in that role included being the
6 discovery coordinator for the Company's rate cases,line
7 extension policy tariffs,as well as miscellaneous
8 regulatory issues.In November 2009,I was promoted to
9 Manager of Rates and Tariffs,and later promoted to be
10 Senior Manager of Rates and Tariffs.My
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161 Ehrbar,Di laAvistaCorporation
1 primary areas of responsibility included electric and
2 natural gas rate design,decoupling,power cost and
3 natural gas rate adjustments,customer usage and revenue
4 analysis,and tariff administration.In October 2017,I
5 was promoted to my present position,where I am
6 responsible for all matters related to general rate
7 cases,tariff filings,rulemakings,and other regulatory
8 activities.
9 Q.What is the scope of this testimony?
10 A.The purpose of my testimony is to describe and
11 support the non-revenue requirement portions of the
12 Stipulation and Settlement ("Stipulation"),filed on June
13 14,2023 between the Staff of the Idaho Public Utilities
14 Commission ("Staff"),Clearwater Paper Corporation
15 ("Clearwater"),Idaho Forest Group,LLC ("Idaho Forest"),
16 and Walmart Inc.These entities are collectively referred
17 to as the "Settling Parties"and singularly as a
18 "Settling Party."The remaining joint party,the Idaho
19 Conservation League /NW Energy Coalition ("ICL/NWEC"),
20 did not join in the Settlement.In my testimony I will
21 explain the Settlement components related to Rate Spread
22 and Rate Design,and certain Other Settlement Items.
23 Q.Are you sponsoring any exhibits?
24 A.No,I am not.Company witness Ms.Andrews is
25 sponsoring Exhibit No.19,which is a copy of the
162 Ehrbar,Di 2AvistaCorporation
1 Stipulation and Settlement filed on June 14,2023,with
2 the Commission.
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4 II .RATE SPREAD &RATE DESIGN
5 Q.Please explain the settlement terms relating to
6 electric and natural gas cost of service.
7 A.In this case,for electric operations,the
8 Company prepared an electric
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1 cost of service analysis that incorporated,among other
2 things,a system load factor peak credit method of
3 classifying production costs,allocating 100%of
4 transmission costs to demand,and allocating transmission
5 costs on a twelve-month coincident peak allocation
6 factor.The Parties do not agree on any particular cost
7 of service methodology.In recognition,however,that
8 certain rate schedules are generally above their relative
9 cost of service,the Parties agree that Schedule 25P
10 should receive 35%of the overall percentage base rate
11 changes.Schedules 1,21/22 and 31/32 should receive
12 130%of the overall percentage base rate changes and the
13 remaining revenue requirement will be spread to Schedules
14 11/12,25,and Street and Area Lights.
15 For natural gas,the Settling Parties agreed to
16 apply the margin increase on September 1,2023 and
17 September 1,2024 solely to Schedule 101.
18 Q.How did the Stipulation address rate design?
19 A.For settlement purposes,the Parties agreed to
20 the rate design changes proposed by Company witness Mr.
21 Miller in his direct testimony for the September 1,2023,
22 and September 1,2024,base rate increases with two
23 exceptions.First,the basic charge for Schedule 31/32
24 will increase from $13.00 to $18.00 in Rate Year 1 and
25 from $18.00 to $20.00 in Rate Year 2.Second,the
164 Ehrbar,Di 3AvistaCorporation
1 primary voltage discount will increase from $0.20 per kW
2 to $0.30 per kW in Rate Year 1,and from $0.30 per kW to
3 $0.40 per kW in Rate Year 2 for all applicable rate
4 schedules.Appendix F of the Stipulation (Exhibit No.
5 19)provides a summary of the current and proposed rates
6 and charges for both electric and natural gas service.
7 Q.Do the agreed upon rate design changes include
8 increases to the residential basic charges for Schedules
9 001 and 101?
10 A.Yes.For Rate Year 1 the residential basic
11 charge will increase from
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1 $7.00 per month to $15.00 per month,and for Rate Year 2
2 will go from $15.00 per month to $20.00 per month for
3 both electric and natural gas customers.
4 Q.Did the Company provide support for the basic
5 charge levels in its opening testimony?
6 A.Yes.As discussed by Company witness Mr.
7 Miller,a significant portion of the Company's costs are
8 fixed and do not vary with customer usage.These costs
9 include distribution plant and operating costs to provide
10 reliable service to customers.For electric,the total
11 customer allocated costs,as shown in Company witness Mr.
12 Garbarino's Exhibit No.16,Schedule 3,Page 4,line 26,
13 those costs are $19.24 per customer per month.Factoring
14 in distribution demand cost per customer per month of
15 $23.84,as shown in Mr.Garbarino's Exhibit No.16,
16 Schedule 3,Page 4,line 29,the total customer and
17 distribution demand monthly cost is $43.08.
18 For natural gas,the total customer allocated costs,
19 as shown in Company witness Mr.Anderson's Exhibit No.
20 17,Schedule 6,Page 4,line 24,those costs are $21.96
21 per customer per month at current rates.Factoring in
22 distribution demand cost per customer per month of $7.56,
23 as shown in Mr.Anderson's Exhibit No.17,Schedule 2,
24 Page 8,the total customer and distribution demand
25 monthly cost is $29.51.These are essentially fixed
166 Ehrbar,Di 4
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1 costs that are allocated based on the number of customers
2 served.Given the large disparity between the level of
3 customer and demand costs and the present level of the
4 basic charge,it is appropriate to recover more of these
5 fixed customer costs through the basic charge.The result
6 of a basic charge that does not adequately recover the
7 fixed costs of customers is those costs are then
8 recovered through a higher volumetric charge.The effect
9 of a low basic
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1 charge is that customers with low monthly usage are being
2 subsidized by customers with higher monthly usage.
3 While the Company acknowledges that these rate
4 design changes supported by the Settling Parties will
5 impact some customers bills more than others,the changes
6 to both the electric and natural gas basic charges will
7 better align customers rates with the actual fixed costs
8 to serve customers and reduce the intra-class
9 subsidization that presently exists within customers
10 rates.
11 Q.Did the Commission recently approve an in
12 increase in the residential customer service charge for
13 Rocky Mountain Power?
14 A.Yes.In Order No.35802 the Commission approved
15 Rocky Mountain Power's request to increase the Customer
16 Service Charge from $8.00 to $29.25 per month,over five
17 years.In its Order supporting the increase to the
18 Customer Service Charge the Commission stated:
19 This represents a gradual step toward accuratelyassigningcosts,which is a fair component of rate20designasthemisalignmentofcostscancreate
revenue recovery distortions and give an incorrect21perceptionofthecostandvalueoftheCompany'sservices.While certain customers may end up paying22morepermonthunderthemodifiedCustomerServiceCharge,this modification helps to ensure all23customersarepayingaproperamountofthe fixedcostsrequiredtoservethem.We believe there may24beadditionalbenefitsforcustomerswhowilllikely
see their summer and winter bills more levelized.25
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1 Q.Please explain the other rate design issues
2 agreed upon in the Settlement Stipulation.
3 A.Avista agrees to conduct a Primary Voltage
4 Discount study prior to its next general rate case
5 filing.The purpose of the study will be to inform the
6 proper Primary Voltage Discount levels in the Company's
7 next general rate case.Second,the Company agrees to
8 evaluate the rate design of Schedule 111,including the
9 minimum
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1 charge level,and include any changes or modification in
2 its next general rate case filing.
3 Q.What is the effect on retail rates,by rate
4 schedule,of the proposed settlement?
5 A.Table Nos.1 and No.2 reflect the agreed-upon
6 percentage increases by schedule for electric service:
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Table No.1 --Electric Change for Rate Year I
Increase in Base Increase in9RateScheduleRevenueBiningRevenue
10 Residential Schedule 1 10.4%l 1.8%General Service Schedules l 1/12 2.9%3.0%11 Large General Service Schedules21/22 10.4%10.8%Extra Large General Service Schedule 25 2.9%3.0%12 Clearwater Paper Schedule 25P 2.8%2.9%Pumping Service Schedules 31/32 10.4%10.9%13 Street &Area Lights Schedules41-48 2.9%2.9%14 Overall 8.0%8.7%
15 Table No.2 -Electric Change for Rate Year 2
16 Increase in Base Increase inRateScheduleRevenueBillingRevenue17ResidentialSchedule11.9%2.1%
18 General Service Schedules 11/12 0.4%0.5%Large General Service Schedules21/22 1.9%1.9%19 Extra Large General Service Schedule 25 0.4%0.5%Clearwater Paper Schedule 25P 0.5%0.5%20 Pumping Service Schedules31/32 1.9%2.0%
21 Street &Area Lights Schedules41-48 0.4%0.4%Overall 1.4%1.6%22
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25 changes by schedule for natural gas service:
170 Ehrbar,Di 6
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Table No.3 -Natural Gas Change for Rate Year 1
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Increase in Increase in
4 Rate Schedule Maipin Revenue Billing RevenueGeneralServiceSchedule1013.3%1.6%5 Large General Service Schedules 111/112 0.0%0.0%
Interrupt.Sales Service Schedules 131/132 0.0%0.0%6 Transportation Service Schedule 146 0.0%0.0%
7 Overall 2.7%1.2¼
8 Table No.4 -Natural Gas Change for Rate Year 2
Increase in Increase in
10 Rate Schedule MarginRevenue BillingRevenue
Genera1Service Schedule 101 0.01%0.00%
11 Large General Service Schedules 111/112 0.00%0.00%
Interrupt.Sales Service Schedules 131/132 0.00%0.00%12 Transportation Service Schedule 146 0.00%0.00%Overall 0.01%.0.00%13
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15 Q.What are the residential bill impacts if the
16 Commission approves the Settlement Stipulation?
17 A.Effective September 1,2023,an electric
18 residential customer using an average of 927 kilowatt
19 hours per month would see a $10.15,or 11.9%,increase
20 per month for a revised monthly bill of $95.55.
21 Effective September 1,2024,an electric residential
22 customer would see a $2.06,or 2.2%,increase per month
23 for.a revised monthly bill of $97.61.
24 Effective September 1,2023,a natural gas
25 residential customer using an average of 64 therms per
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1 month would see a $1.20,or 1.6%,increase per month for
2 a revised monthly bill of $74.62.Effective September 1,
3 2024,a natural gas residential customer would see a
4 $0.03,or 0.0%,increase per month for a revised monthly
5 bill of $74.65.
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1 III.OTHER ELEMENTS OF THE STIPULATION
2 Q.Please explain the settlement terms relating to
3 the Power Cost Adjustment (PCA)authorized level of
4 expenses.
5 A.The new level of power supply revenues,
6 expenses,retail load and Load Change Adjustment Rate
7 resulting from the September 1,2023 settlement revenue
8 requirement,for purposes of monthly PCA mechanism
9 calculations,are detailed in Appendix A of the
10 Stipulation (Exhibit No.19).The Settling Parties agree
11 to the following:
12 i.Authorized Net Power Supply.The Settling
13 Parties agree to leave system power supply expense
14 as approved in Case No.AVU-E-21-01 totaling
15 $149,279,000 (Power Supply),adjusted to reflect
16 these items:(a.)90%Palouse Wind and Rattlesnake
17 Flat Wind;and (b.)Remove Columbia Basin Hydro
18 Transmission Project,discussed below,resulting in
19 a revised system net power supply expense of
20 $177,585,000.
21 a.Palouse and Rattlesnake Flat Wind.Asnotedin¶7.j.ii.of the Stipulation,the22SettlingPartiesagreetoincludethePalouseWindandRattlesnakeFlatWindPowerPPAin23baseratesat90%.90%of actual net powercostsfortheseprojectswillthenbecompared24tothis90%base amount to calculate the
base-to-actual difference that will be25reflectedinthePCAmechanism.This
173 Ehrbar,Di 8
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1 adjustment increases system net power supplyexpense$29,313,000.
2
3 b.Remove Columbia Basin Hydro TransmissionCosts.As noted in ¶7.j.iii.in the
4 Stipulation,the Settling Parties agree to
remove the cost of Columbia Basis Hydro
5 Transmission costs.This adjustment decreasessystemnetpowersupplyexpenseby$1,007,000.
6
7 ii.Authorized Transmission Revenues.The Settling
8 Parties agree to leave system transmission revenues
9 as approved in Case No.AVU-E-21-01 totaling
10 $23,471,000.
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1 iii.Adjust Columbia Basin and Chelan 2023 -2033
2 Contracts.The Settling Parties agree that the
3 actual cost of the Chelan and the Columbia Basin
4 contracts will be included in the PCA using the
5 lower of market cost or contract cost,with the PCA
6 description and methodology as follows:
7 a.Avista agrees to protect Idaho customersagainstitsexecutedcontractsresulting from8the2022All-Source RFP with Columbia BasinHydro(CBH)and Chelan Public Utility District9(Chelan),from the potential of costs of eachcontractbeinghigherthanthespot-market10valueofpower.Avista will ensure the cost ofeachcontractdoesnotexceedthetime-valued11deliveryofpowercalculatedonadailybasisusingtheonandoff-peak prices at the12Mid-Columbia trading hub,as reported by theIntercontinentalExchange's on-and off-peak13firmenergyindices.The Settling Parties agreetomeetandconfertodetermineacalculation14methodpriortotheCompanyfilingits2024PCAapplication.
15
16 b.Avista will recover some or all of theapproximately$1.007 million annual cost of17ColumbiaBasinHydrotransmissionnotincludedinbaseratestotheextentthatmarketprices18arehigherthantheColumbiaBasinHydrogenerationcontractpriceasdeterminedin19sectioniii.a.above.The Settling Partiesagreetomeetandconfertodeterminethe20calculationmethodpriortotheCompanyfilingits2024PCA.21
22 Q.Please explain the settlement terms relating to
23 the authorized base for the Electric and Natural Gas
24 Fixed Cost Adjustment Mechanism.
25 A.The new level of baseline values for the
175 Ehrbar,Di 9AvistaCorporation
1 electric and natural gas fixed cost adjustment mechanism
2 resulting from the September 1,2023 and September 1,
3 2024 settlement revenue requirement are detailed in the
4 Stipulation as follows:
5 *Appendix B -2023 Electric FCA Base*Appendix C -2024 Electric FCA Base
6 *Appendix D -2023 Natural Gas FCA Base*Appendix E -2024 Natural Gas FCA Base
7
8 Q.Does this conclude your direct testimony?
9 A.Yes,it does.
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1 I.INTRODUCTION
2 Q.Please state your name,employer,and business
3 address.
4 A.My name is Patrick D.Ehrbar,and I am employed
5 as the Director of Regulatory Affairs for Avista
6 Utilities ("Company"or "Avista"),at 1411 East Mission
7 Avenue,Spokane,Washington.
8 Q.Have you previously filed direct testimony in
9 this proceeding?
10 A.Yes,I filed testimony in support of the
11 Settlement Stipulation on July 12,2023.
12 Q.Are you sponsoring any exhibits?
13 A.No,I am not.
14 Q.What is the scope of your rebuttal testimony?
15 A.The purpose of my testimony is to support the
16 portion of the Settlement Stipulation related to the
17 agreed-upon basic charges,and to rebut Idaho
18 Conservation League/NW Energy Coalition ("ICL/NWEC")
19 witness Lauren McCloy's filed testimony urging "the
20 Commission to reject the rate design portions of the
21 settlement."1
22 Q.Would you please provide a brief summary of
23 your rebuttal testimony?
24 A.Yes.As I will discuss in this testimony,(1)
25 the proposed increases in the residential Schedule 1 and
177 Ehrbar,Reb 1
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1 101 basic charges is not a wholesale conversion to
2 straight fixed variable rate design;at best,only a
3 small movement in that direction (still only 18%
4 (electric)and 41%(gas)of direct customer costs
5 recovered after
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1 increase in basic charge);(2)is not prejudicial to
2 interests of low income customers;indeed,prior analysis
3 suggests that the opposite may in fact be true;(3)
4 increase will not detract from conservation efforts.
5 Q.Before addressing the residential basic charges
6 agreed to by the Settling Parties2 for Schedules 1 and
7 101,do you understand witness McCloy to take issue with
8 the rate design changes for any other rate schedules
9 contained in the Settlement Stipulation?
10 A.No,witness McCloy does not appear to take
11 issue with any other rate design components,but for the
12 basic charges for Schedules 1 and 101.Appendix F of the
13 Stipulation (Exhibit No.19)provides a summary of the
14 current and proposed rates and charges for both electric
15 and natural gas service.
16 Q.Would you please provide a summary of what was
17 agreed to for basic charges for Schedules 1 and 101 for
18 the two-year rate plan?
19 A.Yes.For settlement purposes,the Settling
20 Parties agreed that for Rate Year 1,the residential
21 basic charge would increase from $7.00 per month to
22 $15.00 per month,and for Rate Year 2 will go from $15.00
23 per month to $20.00 per month for both electric (Schedule
24 1)and natural gas (Schedule 101)customers.These are
25 the same increases that were originally proposed by the
179 Ehrbar,Reb 2
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1 Company when it filed this case.
2 Q.Are the proposed increases in the basic charges
3 arbitrary or otherwise "not meet the basic principles of
4 cost causation"?3
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23 2 The parties to the Stipulation include the Staff of the IdahoPublicUtilitiesCommission("Staff"),Clearwater Paper Corporation24("clearwater"),Idaho Forest Group,LLC ("Idaho Forest"),and WalmartInc.
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1 A.No,they are not arbitrary,and very much meet
2 the basic principles of cost causation.As discussed by
3 Company witness Mr.Miller,a significant portion of the
4 Company's costs are fixed and do not vary with customer
5 usage.These costs include distribution plant and
6 operating costs to provide reliable service to customers.
7 For electric,the total customer allocated costs,as
8 shown in Company witness Mr.Garbarino's Exhibit No.16,
9 Schedule 3,Page 4,line 26,those costs are $19.24 per
10 customer per month.Factoring in distribution demand
11 cost per customer per month of $23.84,as shown in Mr.
12 Garbarino's Exhibit No.16,Schedule 3,Page 4,line 29,
13 the total customer and distribution demand monthly cost
14 is $43.08.For natural gas,the total customer allocated
15 costs,as shown in Company witness Mr.Anderson's Exhibit
16 No.17,Schedule 6,Page 4,line 24,those costs are
17 $21.96 per customer per month at current rates.
18 Factoring in distribution demand cost per customer per
19 month of $7.56,as shown in Mr.Anderson's Exhibit No.
20 17,Schedule 2,Page 8,the total customer and
21 distribution demand monthly cost is $29.51.These are
22 essentially fixed costs that are allocated based on the
23 number of customers served.
24 The values detailed above are based on a reasoned
25 and long-standing methodology,developed through robust
181 Ehrbar,Reb 3AvistaCorporation
1 cost of service studies,which calculate the level of
2 costs applicable to various rate schedules (the very
3 definition of cost causation).The underlying costs are
4 directly related to the cost of providing service to
5 customers,whether or not these customers actually even
6 use the applicable energy.Put another way,the fixed
7 costs detailed above,which are well above the levels
8 agreed-to in the settlement,are caused by customers
9 connected to our systems.They include the costs
10 detailed by witness McCloy,but also
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1 important fixed costs including service lines,service
2 drops,regulation,transformation,and other items.
3 Q.Is there a rule or law that you are aware of
4 that strictly limits what should make up a customer
5 charge?4
6 A.No I am not aware of a rule or law limiting the
7 makeup of a customer or basic charge.For this
8 proceeding,relevant information comes from the recent
9 Commission in Order No.35802 the Commission approved
10 Rocky Mountain Power's request to increase the Customer
11 Service Charge from $8.00 to $29.25 per month,over five
12 years.In that case the Commission notes:5
13 The Commission is persuaded by the Company'stestimonyontheaveragecostofservicefor a14residentialcustomer,and the Company's 2021Cost-of-Service Study.The analysis shows fixed15costsrepresent77percentoftheaveragecost ofserviceforSchedule1residentialcustomers,and16thecurrent$8.00 per month Customer Service Chargerecoversonlyninepercentofthefixedcostsfor17Schedule1and36customers.
18
19 Q.Has the Company conducted a similar analysis
20 showing the percentage of a residential customers costs
21 are fixed?
22 A.Yes.One only needs to look at the Company's
23 Fixed Cost Adjustment (FCA)mechanisms proposed
24 authorized baseline values included as Appendix B
25 (electric)and Appendix D (natural gas)to the Settlement
183 Ehrbar,Reb 4AvistaCorporation
1 Stipulation.As stated in its very name,the Fixed Cost
2 Adjustment mechanisms track the level of fixed costs
3 approved in general rate cases and compare that value on
4 a per customer basis to the revenue paid by actual
5 customers in the rate effective period.
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5 Order 35802,PAC-E-22-15,p.10.
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184 Ehrbar,Reb 4a
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1 For electric operations,as shown on p.1 of
2 Appendix B,the total level of fixed costs either tracked
3 through the FCA,or recovered through the monthly Basic
4 Charge,is the difference between "Total Rate Revenue"
5 (line 3)and "Variable Power Supply Revenue"(line 6).
6 That amount for Residential Schedule 1 is $117,342,364,
7 shown on line 7.Dividing that value by the number of
8 annual bills for customers served on Schedule 1 (line 8)
9 results in fixed costs of $84.95 per month.A $15 per
10 month basic charge represents only 18%of total fixed
11 monthly costs.
12 For natural gas operations,as shown in Appendix D,
13 all of the costs included in the natural gas FCA are
14 fixed in nature,and wholesale natural gas costs and
15 interstate pipeline transportation are tracked in the
16 Purchased Gas Cost Mechanism.For General Service
17 Schedule 101 (which is primarily made up of residential
18 customers),the total fixed costs shown on p.1 of
19 Appendix D (line 3)is $39,382,000.That value divided
20 by the number of annual customer bills (line 8)results
21 in fixed costs of $36.48 per month.A $15 per month basic
22 charge represents only 41%of total fixed monthly costs.
23 Given the large disparity between the level of fixed
24 costs,and the present basic charge levels,we believe it
25 is appropriate to recover more of these fixed customer
185 Ehrbar,Reb 5
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1 costs through the basic charge.And the proposed charges
2 are not "randomly selected"nor have Avista anywhere near
3 recovering "all of Avista's fixed costs"in a basic
4 charge.6
5 Q.Will increasing the fixed charge "increase net
6 revenue because
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186 Ehrbar,Reb 5aAvistaCorporation
1 each additional customer will take on costs that are
2 already being paid by other customers"?7
3 A.No,Avista will not recovery more "net revenue"
4 with higher basic charges,whether from existing or new
5 customers.The FCA is actually the protection against
6 that.While all customers will pay a higher basic charge,
7 higher use customers will actually see a lower revenue
8 increase resulting from this case,while lower use
9 customers will see a higher overall increase.This is
10 not new to the Commission,who addressed this issue in
11 the Rocky Mountain Power case:
12 While certain customers may end up paying more permonthunderthemodifiedCustomerServiceCharge,13 this modification helps to ensure all customers arepayingaproperamountofthefixedcostsrequired14toservethem.We believe there may be additionalbenefitsforcustomerswhowilllikelyseetheir15summerandwinterbillsmorelevelized.S
16
17 Turning back to the revenue of Avista,under the
18 design of the FCA mechanisms,the FCA revenue per
19 customer determination is made by taking total rate
20 revenue,as a schedule,and removing from that any
21 variable power supply-related costs,and the revenue from
22 fixed monthly charges,to ultimately determine the
23 authorized,or baseline FCA Revenue.To the extent less
24 revenue is covered by the fixed monthly charge,the
25 higher the FCA Revenue would be,and vice versa.So,in
187 Ehrbar,Reb 6AvistaCorporation
1 aggregate,basic charges and the FCA are complementary,
2 and not "belt and suspenders."9 And,with higher basic
3 charges,there will be less volatility in any FCA
4 deferrals,resulting in smaller bill effects,as compared
5 to the alternative.
6 Q.Do customers actually benefit with higher basic
7 charges,contrary
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188 Ehrbar,Reb 6a
Avista Corporation
1 to witness McCloy's assertions?io
2 A.Absolutely.Increases in fixed monthly basic
3 charges will benefit high users of energy and will cause
4 customers who use less energy to pay more,on a monthly
5 basis.It's as simple as this -when the fixed costs of
6 providing service are high,but those fixed costs are
7 recovered more in a variable,usage based energy rate(s),
8 then high users will pay more fixed costs vis-a-vie low
9 energy users.A higher basic charge starts to fix that
10 inequity.
11 Q.Would you say that higher basic charges are
12 more equitable for all customers,including low-income
13 customers?
14 A.Yes,especially for low-income customers.In
15 Section IV of her testimony,witness McCloy states that
16 "higher fixed charged disproportionately impact
17 low-income customers because in many jurisdictions they
18 tend to have lower than average energy use".11 One only
19 need to look at an analysis conducted in this
20 jurisdiction to see that the opposite is true for
21 low-income electric users.Given the short turnaround
22 time for rebuttal testimony the Company was unable to run
23 a fresh analysis of low income usage as compared to the
24 general residential customer population.But,
25 historically speaking,the prior analysis the Company
189 Ehrbar,Reb 7
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1 conducted has shown low income customers use the same,or
2 more energy,than the general residential customer
3 population.Most recently,in Case No.
4 AVU-E-15-05/AVU-G-15-01,I provided the following
5 testimony:12
6 The Company recently conducted an analysis whichshowsthatlimitedincomecustomers,on average,do
7 use more electricity than other residentialcustomers.For the analysis,the Company looked at
8 those limited income
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190 Ehrbar,Reb 7a
Avista Corporation
1 customers who received a LIHEAP grant during theJanuary-December 2014 time period,and compared2theirannualusagetotheusageofalloftheotherresidentialcustomers.13 The results of the
3 analysis are shown in the Table 13 below:
4
5
6 Table No.13
7 Idaho Residential Electric Usage Analysis (Billed Usage -Not Weather Corrected)Year Calendar 2014
Average Annual Average Monthly
Sarnple Size kWh Usage kWh UsageElectricOnlyCustomers-Limited Income (LlHEAP)2,615 13,160 1,097ElectricOnlyCustomers-AllOther Residential Customers 34,641 12,800 1,067ŒŒerexe3603010
Dual Fuel Customers -Limited Income (LIHEAP)1,727 9,828 81911DualFuelCustomers-All Other Residential Customers 44,235 10,507 876reme-679 -57
12 Total Limited Income (LlHEAP)4,342 11,835 986TotalAllOtherResidentialCustomers78,876 11,514 96013Däreme32127
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18 The analysis shows that limited income customers whoonlyhaveelectricserviceuse360kWhsmoreper19yearthanthe"All Other Residential Customers"population.For the combined limited income20population,the analysis shows that they used 321kWhsmorein2014than"Total All Other Residential21Customers"population.
22 This analysis shows that limited income customersmaybeharmedbyhavingaratedesignwithalower23basicchargeandahighertail-block rate,as thesecustomersaremoresusceptibletouseinthe24tail-block.A higher basic charge,on the otherhand,would result in lower volumetric rates (than25wouldotherwisebethecase),providing some relief
191 Ehrbar,Reb 8
Avista Corporation
1 to these high-use customers during the wintermonths.(emphasis added)
2
3 Q.How else is an increased basic charge more
4 equitable for customers?
5 A.We build our distribution system to serve all
6 customer's peak load.These costs are essentially fixed,
7 and all customers should share in those costs.The
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21 13 Customer usage extracted from the Company's billing system were
from Schedule 1 customers that had their account open during the22entiretestyear,i.e.,from January 1,2014 through December 31,2014.Any accounts opened for a partial year were excluded.The23companyacknowledgesthatthelimitedincomepopulationusedfor thisanalysisisnotcomprehensive.However,because the Company does not24trackcustomerincomes,it is based on the best information
available.
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192 Ehrbar,Reb 8a
Avista Corporation
1 electric distribution system is available to all
2 customers whether they use 1 or 3,000 kWh's per month
3 (and likewise for natural gas customers and the gas
4 distribution system).Recovering those fixed costs based
5 on their variable energy use is not cost based and is
6 inequitable,as it results in some customers paying less
7 for distribution services than others,even though they
8 are using the same infrastructure.Including these costs
9 in the basic charge is an equitable approach to ensure
10 all customers pay their fair share of the costs of
11 maintaining and upgrading the distribution system.
12 Beyond the discussion about low income customers
13 noted earlier,one should also think about the number of
14 customers Avista serves who are seasonal in nature.The
15 Company has a number of customers who have second,or
16 vacation homes,in our service territory.For the vast
17 majority of the year,while the Company incurs
18 approximately $85 of monthly fixed costs to serve those
19 customers,they only pay $7 of that presently.The
20 remaining revenue is ultimately recovered from all other
21 customers,including low income customers.
22 Q.Do you view the increase in basic charges to
23 cause Avista "to have a decreased incentive to pursue
24 conservation"?i4
25 A.No,the Company does not have a decreased
193 Ehrbar,Reb 9
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1 incentive.One need only review Appendix F to the
2 Settlement to see that,for Residential Schedule 1 as
3 shown on pp.2-3,the base rate decreases over the
4 two-year time period for the present level of 10.378
5 cents to kWh to 10.286 cents per kWh in Rate Year 2.
6 This 0.092 cents per kWh is a decrease of less than 1
7 percent in the second block variable rate.That miniscule
8 difference will not affect utility conservation planning,
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194 Ehrbar,Reb 9a
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1 nor affect customer participation in energy efficiency
2 projects,in my view.Importantly,though,it does send
3 the proper cost causation price signal to customers,as
4 noted by the Commission.15 Finally,it should be
5 remembered that electric Schedule 1 also is an inclining
6 block rate schedule,where the higher prices noted above
7 in the second block will continue to serve as an energy
8 efficiency price signal to customers.
9 Q.Witness McCloy provides three recommendations
10 the Commission require if the Settlement Stipulation is
11 approved in whole.16 Would you please respond to those
12 recommendations?
13 A.Yes.The first recommendation is related to a
14 proposal that Avista alter its cost-effectiveness
15 calculation to account for any decrease in energy
16 efficiency (specifically for electric operations,given
17 the reference to the Northwest Power Act).As I
18 discussed earlier in this testimony,there is almost no
19 impact to customer's electric volumetric rates as a
20 result of the combination of the rate increase and basic
21 charge modernization.As such,we do not believe there
22 will be any impact to electric DSM program participation,
23 and importantly nor was there any evidence provided by
24 NWEC/ICL to support such an assertion (for electric or
25 natural gas).
195 Ehrbar,Reb 10
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1 Second,witness McCloy asks for an increase in
2 low-income weatherization funding,coupled with a bill
3 discount for low-income customers.For low-income
4 weatherization,the Company through its energy efficiency
5 offerings has a budget of $875 thousand for
6 weatherization (electric and natural gas).In 2022,only
7 $467
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1 thousand was utilized by our CAP agency partners who
2 deliver those programs.In any event,the proper venue
3 for determining a proper level of weatherization funding
4 is through the long-standing Energy Efficiency Advisory
5 Group,of which ICL,NWEC,and Commission Staff are all
6 members.
7 Also included in NWEC/ICL's second recommendation is
8 a recommendation for low-income bill discounts.As the
9 Commission is aware,Idaho Code 61-315 strictly prohibits
10 rate discrimination.That law has been the primary
11 impediment for Avista and other regulated utilities from
12 offering low-income rate assistance of any kind in the
13 State of Idaho.
14 Finally,witness McCloy proposed the Commission open
15 a docket relating to "the interplay between high fixed
16 charges and revenue decoupling".17 Avista views this to
17 be unnecessary,given the testimony provided above that
18 clearly describes the interplay between fixed charges and
19 the FCA.Put succinctly,if all fixed costs were
20 included in a fixed monthly charge (so called
21 straight-fixed variable rates),the FCA/decoupling no
22 longer be necessary.To the extent variable charges are
23 used to recover fixed costs,then the FCA/decoupling
24 comes more into effect.
25 Q.Does this conclude your testimony?
197 Ehrbar,Reb 11
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1 A.Yes,it does.
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1 (The following proceedings were had in
2 open hearing.)
3 COMMISSIONER ANDERSON:All right,then,
4 we will call our first witness today.
5 MR.MEYER:Elizabeth Andrews,please.
6 COMMISSIONER ANDERSON:Thank you.
7
8 ELIZABETH ANDREWS,
9 produced as a witness at the instance of the Avista
10 Corporation,having been first duly sworn to tell the
11 truth,was examined and testified as follows:
12
13 DIRECT EXAMINATION
14
15 BY MR.MEYER:
16 Q Good morning.For the record,please
17 state your name and your employer.
18 A Elizabeth Andrews and Avista Corp.
19 Q And you have prefiled testimony that has
20 by motion been spread into the record as if read;is that
21 correct?
22 A That's correct.
23 Q And just confirm that you do not have any
24 changes or corrections to that?
25 A I do not.
CSB REPORTING 199 ANDREWS (Di)208.890.5198 Avista Corporation
1 MR.MEYER:Thank you,and Ms.Andrews is
2 available for any questions.
3 COMMISSIONER ANDERSON:Thank you.
4 Commission Staff.
5 MR.BURDIN:No questions from Staff.
6 COMMISSIONER ANDERSON:No questions.Any
7 of the intervenors wish to asks questions at this time?
8 Seeing none,thank you for your testimony.
9 (The witness left the stand.)
10 MR.MEYER:Thank you.
11 COMMISSIONER ANDERSON:At this time we're
12 going to,I guess,shift over to Staff and have you
13 call --
14 MR.BURDIN:Yeah,Staff would call Donn
15 English to the stand.
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CSB REPORTING 200 ANDREWS208.890.5198 Avista Corporation
1 DONN ENGLISH,
2 produced as a witness at the instance of the Staff,
3 having been first duly sworn to tell the truth,was
4 examined and testified as follows:
5
6 DIRECT EXAMINATION
7
8 BY MR.BURDIN:
9 Q Could you please state your name and spell
10 your last name for the record?
11 A Donn English,E-n-g-1-i-s-h.
12 Q Are you the same Donn English that filed
13 supporting testimony in this case consisting of
14 approximately 14 pages and one exhibit?
15 A Yes,I am.
16 Q Do you have any corrections or
17 modifications to your testimony?
18 A No,I do not.
19 Q If I were to ask you the same questions
20 today included in your filed testimony,would your
21 answers remain the same?
22 A Yes.
23 MR.BURDIN:I now move to have his
24 testimony spread on the record,that may have already
25 been covered in the original motion,as if read.
CSB REPORTING 201 ENGLISH (Di)208.890.5198 Staff
1 COMMISSIONER ANDERSON:Without objection,
2 so be it.
3 (The following prefiled direct testimony
4 of Mr.Donn English is spread upon the record.)
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CSB REPORTING 202 ENGLISH (Di)208.890.5198 Staff
1 Q.Please state your name and business address.
2 A.My name is Donn English.My business address
3 is 11331 W.Chinden Blvd.,BLDG 8,STE 201-A,Boise,
4 Idaho 83714.
5 Q.By whom are you employed and in what capacity?
6 A.I am employed by the Idaho Public Utilities
7 Commission ("Commission")as a Program Manager overseeing
8 the Accounting and Finance Department in the Utilities
9 Division.
10 Q.Please describe your educational background and
11 professional experience.
12 A.I was hired by the Commission in 2003 and I
13 have provided testimony in numerous proceedings.My
14 educational background and professional experience are
15 provided in more detail in Exhibit No.101.
16 Q.What is the purpose of your testimony in this
17 proceeding?
18 A.The purpose of my testimony is to describe the
19 Application of Avista Corporation ("Avista"or "Company")
20 to increase its rates and charges for electric and
21 natural gas service in Idaho,describe the proposed
22 comprehensive Stipulation and Settlement ("Settlement")
23 reached by the
24
25
203 ENGLISH,D (Stip)107/12/23 STAFF
1 signing parties in this case,and explain Staff's support
2 for the settlement.
3 Q.How is your testimony organized?
4 A.My testimony is subdivided under the following
5 headings:
6 Background Page 2
7 Staff Investigation Page 4
8 Settlement Evaluation Page 6
9 Settlement Overview Page 7
10 Background
11 Q.Please describe Avista's original filing.
12 A.Avista made its original filing with the
13 Commission on February 1,2023,proposing a two-year rate
14 plan to increase its revenue.The Company requested
15 authority to increase its electric base revenue in Idaho
16 by $37.5 million,or 14.7%,effective September 1,2023
17 ("Rate Year 1"),and an additional $13.2 million,or
18 4.5%,effective September 1,2024 ("Rate Year 2").For
19 natural gas,the Company requested an increase in Idaho
20 base revenues of $2.8 million (4.5%)for Rate Year 1,and
21 $0.1 million (0.1%)for Rate Year 2.
22 The Company's requested increases were based on
23 a
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204 ENGLISH,D (Stip)207/12/23 STAFF
1 historical test period ending June 30,2022,with pro
2 forma adjustments through August 31,2023,for the first
3 increase in the two-year plan,and August 31,2024,for
4 the second increase.Capital additions through August
5 31,2024,were included in the Company's proposed Rate
6 Year 1 and calculated on an Average of Monthly Averages
7 ("AMA")basis.For Rate Year 2,capital additions were
8 included through August 31,2025,and were also
9 calculated on an AMA basis.
10 The Company proposed using a capital structure
11 of 50%equity and 50%debt,and a return on common equity
12 ("ROE")of 10.25%for an overall weighted average cost of
13 capital of 7.59%.
14 Additionally,the Company requested to increase
15 its monthly Basic Charges for electric and natural gas
16 service to $15 per month in Rate Year 1 and $20 per month
17 is Rate Year 2.
18 Q.How was this case processed after the Company's
19 filing was received?
20 A.The Commission issued a combined Notice of
21 Application and Notice of Intervention Deadline
22 ("Notice")on February 21,2023,establishing an
23 Intervention Deadline of March 14,2023.Intervenor
24 status was subsequently
25
205 ENGLISH,D (Stip)307/12/23 STAFF
1 granted to Clearwater Paper Corporation ("Clearwater"),
2 Idaho Forest Group,LLC ("IFG"),Walmart Inc.
3 ("Walmart"),the Idaho Conservation League and NW Energy
4 Coalition ("ICL and NWEC").The Parties participated in
5 a settlement conference on June 1,2023,which resulted
6 in the Settlement filed with the Commission on June 14,
7 2023.The Stipulation was signed by representatives for
8 Clearwater,IFG,Walmart,and Staff ("Signing Parties").
9 ICL and NWEC did not sign the Stipulation.
10 Staff Investigation
11 Q.What type of investigation did Staff conduct to
12 evaluate the Company's rate increase request?
13 A.Staff's approach in any general rate case is to
14 extensively review the Company's Application and
15 associated testimony and workpapers,identify adjustments
16 to the proposed revenue requirement,and prepare to file
17 testimony for a fully-litigated proceeding.There were
18 15 Staff members analyzing this case consisting of
19 auditors,engineers,utility analysts,and consumer
20 investigators.Additionally,five supervisors reviewed
21 the results of all analysis.
22 Staff auditors reviewed the Company's test year
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206 ENGLISH,D (Stip)407/12/23 STAFF
1 results of operations,capital budgets,capital spending
2 trends,operations and maintenance ("O&M")expenses and
3 trends,and verified all of the Company's calculations
4 and assumptions with regard to the overall revenue
5 requirement.The auditors reviewed thousands of
6 transactions,selected samples,and performed transaction
7 testing in accordance with standard audit procedures.
8 Staff reviewed the Company's labor expense,incentive
9 plans,and employee benefits to ensure the appropriate
10 level of expenditures are included in rates.
11 Staff reviewed both completed and proposed
12 Company investments to determine the prudency of capital
13 additions.Expenditures including pension expense,
14 salaries,and O&M expenses were also examined.
15 Additionally,Staff investigated the Company's cost of
16 capital,actual and proposed capital structure,cost of
17 service,and revenue normalization.In total,Staff
18 submitted over 200 production requests,performed an
19 onsite audit of the Company's books,and held several
20 virtual meetings with Company personnel as a part of its
21 comprehensive investigation.
22 Based on the success of its investigation,
23 Staff
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207 ENGLISH,D (Stip)507/12/23 STAFF
1 proposed 21 separate revenue requirement adjustments
2 during settlement discussions,20 of which were either
3 completely or partially accepted by the Company.
4 Settlement Evaluation
5 Q.How did Staff determine that the overall
6 Settlement was reasonable?
7 A.In every settlement evaluation,Staff and other
8 parties must examine the risks of losing positions at
9 hearing and determine if the Settlement is a better
10 overall outcome.Staff must evaluate each individual
11 adjustment and determine the likelihood of the Commission
12 accepting or rejecting Staff's rationale for the
13 adjustment.Ultimately,Staff's intent in every
14 settlement conference is to negotiate the best possible
15 outcome for customers.
16 Q.Does Staff support the Settlement as
17 reasonable?
18 A.Yes,after a comprehensive review of the
19 Company's Application,a thorough audit of the Company's
20 books and records,an analysis of the Company's class
21 cost of service study,and extensive negotiations with
22 the parties to the case,Staff supports the proposed
23 Settlement.The Settlement offers a reasonable balance
24 between the Company's opportunity to earn a reasonable
25
208 ENGLISH,D (Stip)607/12/23 STAFF
1 return on its investment and affordable rates for
2 customers.Staff believes the Settlement is in the
3 public interest;is fair,just,and reasonable;and
4 should be approved by the Commission.
5 Settlement Overview
6 Q.Would you please describe the terms of the
7 Settlement?
8 A.The proposed Settlement provides a reduction in
9 the Company's requested revenue requirement.Instead of
10 the Company's proposed electric base rate increase of
11 $37.5 million (13.6%)and natural gas base rate increase
12 of $2.8 million (6.0%)for the first year of the two-year
13 rate plan,base rates under the proposed Settlement for
14 Idaho electric customers will increase by $22.1 million
15 (8.03%),and base rates for natural gas customers will
16 increase by $1.25 million (2.7%)effective September 1,
17 2023.On September 1,2024,Idaho electric customers'
18 base rates under the proposed Settlement will increase by
19 $4.3 million (1.4%)compared to the requested $13.2
20 million (4.2%),while natural gas customers'base rates
21 will increase by $3,000 (0.01%)compared to the requested
22 $120,000 (0.3%).
23 Q.How was the stipulated revenue requirement
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209 ENGLISH,D (Stip)707/12/23 STAFF
1 derived?
2 A.For Rate Year 1,the Settlement revenue
3 requirement was calculated by starting with the Company's
4 proposed revenue requirement and subtracting the agreed
5 upon adjustments proposed by Staff and the Parties.The
6 calculation of the Settlement revenue requirement is
7 shown on Table No.1 (electric)and Table No.3 (natural
8 gas)of the Settlement.Table No.2 (electric)and Table
9 No.4 (natural gas)illustrate the additional pro form
10 adjustments accepted by the Signing Parties to come to a
11 revenue requirement for Rate Year 2.Several agreed upon
12 adjustments to the Company's revenue requirement include
13 timing differences based on when capital investments
14 would be included for recovery or amortization periods
15 that were extended,while other adjustments were based on
16 different calculation methods or the removal of expenses
17 for recovery.Rather than discuss every adjustment that
18 was proposed and agreed upon,I will highlight the
19 adjustments that had a significant impact to the revenue
20 requirement.
21 Q.Please explain the cost of capital and return
22 on equity components of the Settlement.
23 A.In its Application,Avista proposed a 50%
24 common
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210 ENGLISH,D (Stip)807/12/23 STAFF
1 equity ratio and a 10.25%ROE.The Signing Parties
2 agreed to remain at the currently authorized ROE of 9.4%
3 while accepting the 50%common equity ratio.A 9.4%ROE
4 reduces the Company's requested first-year electric
5 revenue requirement by approximately $5.3 million and
6 requested first-year natural gas revenue requirement by
7 approximately $1.1 million.
8 Q.How does the Settlement account for the
9 Company's capital investments included in net rate base?
10 A.In its Application,the Company proposed to
11 include capital investments through August 31,2024,in
12 the calculation of net rate base for Rate Year 1.
13 Consistent with prior Commission orders,the Signing
14 Parties agree that only capital investments scheduled to
15 be placed in service before August 31,2023,will be
16 included in the Rate Year 1 revenue requirement.Those
17 capital additions will be in service and benefiting
18 customers when new rates are effective on September 1,
19 2023.
20 For the Rate Year 2 increase,the Company
21 proposed capital additions through August 31,2025,to be
22 included in the calculation of net rate base.The
23 Signing Parties agreed that any capital investment
24 scheduled to be
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211 ENGLISH,D (Stip)907/12/23 STAFF
1 placed in service after August 31,2024,would be
2 excluded,and the net rate base for Rate Year two would
3 be calculated on an Average of Monthly Averages ("AMA")
4 basis.
5 Q.Will you please summarize how employee labor
6 and incentive payments are accounted for in the
7 Settlement?
8 A.For executive compensation,all incremental
9 wage increases and incentive payments were removed
10 consistent with Staff's recommendation in other rate
11 cases.The Company will recover the Idaho jurisdictional
12 portion of executive salaries at the 2022 test year
13 level.
14 For non-executive labor,the revenue
15 requirement includes the 2022 test year wages plus the
16 incremental wage increase awarded in 2023.On September
17 1,2024,the Company will begin recovering the Idaho
18 jurisdictional portion of the contractually obligated
19 2024 increases for bargaining unit ("union")employees.
20 Q.Please discuss the adjustment to the Company's
21 proposed recovery of deferred Wildfire Deferral.
22 A.This adjustment revises the Company's proposed
23 amortization of its Wildfire Regulatory Deferred Asset
24 balances as of September 30,2020 ($8.2 million)from a
25 two-year amortization to a four-year amortization.This
212 ENGLISH,D (Stip)1007/12/23 STAFF
1 adjustment also establishes a new base level of Wildfire
2 Resiliency Plan expenses to be recovered through base
3 rates at $4.4 million annually.
4 Q.Will you please explain the escalation of
5 miscellaneous O&M expenses.
6 A.The Company applied an annual 7.22%escalation
7 factor to increase certain O&M expenses beyond the
8 historical June 30,2022,test year end ("Base Year").
9 Staff and this Commission have historically opposed
10 escalation factors and Staff would have recommended an
11 adjustment removing the escalation factor in a litigated
12 hearing.For purposes of the Settlement,the Signing
13 Parties agreed to increase the previously unadjusted O&M
14 accounts from the June 30,2022,Base Year amounts to the
15 December 31,2022,year-end values to mitigate the impact
16 of inflation and regulatory lag.
17 Q.Will you please discuss the level of Net Power
18 Supply Expense ("NPSE")to be included in base rates?
19 A.The Signing Parties agreed to include in base
20 rates the system NPSE approved in Case No.AVU-E-21-01
21 totaling $149,279,000 with some adjustments.The Palouse
22 and Rattlesnake Flat Wind Power Purchase Agreements that
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213 ENGLISH,D (Stip)1107/12/23 STAFF
1 have historically been excluded from base rates and
2 recovered at 90%through the Power Cost Adjustment
3 ("PCA")will now be included in base rates at 90%.
4 Additionally,the Columbia Basin Hydro Transmission costs
5 will be removed from system NPSE included in base rates.
6 The total system NPSE included in base rates will be
7 $177,585,000.Idaho's share of NPSE is 34.47%,and the
8 authorized PCA Expense and Retail Sales revenue is
9 provided in Appendix A to the Settlement.
10 Q.How does the Settlement allocate the revenue
11 requirement among the different customer classes?
12 A.While the Signing Parties did not agree to a
13 specific electric cost of service study or methodology,
14 there was a general recognition that certain customer
15 classes were paying more than their relative cost of
16 service.The Signing Parties agreed that Schedule 25P
17 (Clearwater)should receive 35%of the overall percentage
18 base rate increase each year.Schedules 1 (Residential),
19 21/22 (General Service),and 31/32 (Pumping)will receive
20 130%of the overall percentage base rate increase.The
21 remaining revenue requirement increase will be spread to
22 all other rate schedules.
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214 ENGLISH,D (Stip)1207/12/23 STAFF
1 For natural gas,the Signing Parties agreed to
2 apply the increase solely to Schedule 101 (Residential)
3 customers.The percentage increase to each customer
4 class for both electric and natural gas is shown on pages
5 18-19 of the Settlement.
6 Q.Will you address the increase in the monthly
7 Basic Charge?
8 A.Yes.In recognition that the current Basic
9 Charge does not allow the Company to recover the fixed
10 costs associated with customer charges (billing and meter
11 reading)or distribution,the Signing Parties agreed to
12 an increase in the Basic Charge.For residential
13 customers,the Basic Charge will increase from $8.00 per
14 month to $15.00 per month on September 1,2023,and to
15 $20.00 per month on September 1,2024.The different
16 charges for each rate schedule are included on Appendix F
17 to the Settlement.
18 Q.Do you have any other comments on the
19 Settlement?
20 A.Yes.Staff believes that an important aspect
21 of a two-year rate plan is to provide rate stability and
22 certainty to customers.Although not explicitly stated
23 in the Settlement,the Signing Parties understand that
24 other than this two-year rate plan,base rates from a
25 general
215 ENGLISH,D (Stip)1307/12/23 STAFF
1 rate case filing will not increase before September 1,
2 2025.Staff believes that the rate stability and
3 certainty,along with the reduced revenue increases,
4 provided in the Settlement,that it represents a fair,
5 just,and reasonable compromise of the positions put
6 forth by the parties and is in the public interest.
7 Therefore,Staff recommends that the Commission approve
8 the Settlement without material changes or modifications.
9 Q.Does this conclude your testimony in this
10 proceeding?
11 A.Yes,it does.
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216 ENGLISH,D (Stip)1407/12/23 STAFF
1 (The following proceedings were had in
2 open hearing.)
3 MR.BURDIN:Mr.English is now available
4 for cross-examination.
5 COMMISSIONER ANDERSON:Thank you.Do
6 intervenors have questions at this point?We'll start
7 with --excuse me.Any questions at this time from
8 intervenors?
9 MR.RIVAS:Yes,Mr.Chair,just a couple.
10 COMMISSIONER ANDERSON:Okay,please.
11
12 CROSS-EXAMINATION
13
14 BY MR.RIVAS:
15 Q Hello,Mr.English.Diego Rivas on behalf
16 of NW Energy Coalition and Idaho Conservation League.
17 Good morning.
18 A Good morning.
19 Q Just a couple very quick questions here.
20 You mention in your rebuttal testimony that Staff had
21 extensive analysis of both the initial proposal and the
22 settlement and you discuss briefly your support of the
23 customer charge issue in this case.
24 Did Staff consider any other rate design
25 proposals or other rate design principles when analyzing
CSB REPORTING 217 ENGLISH (X)208.890.5198 Staff
1 the settlement or is it just based on the proposal
2 itself?
3 A Staff considered several different options
4 of the basic charge.Ultimately,we settled on what the
5 Company proposed,because it was most in line with the
6 current customer allocations,and then made movement
7 towards the customer allocated costs.
8 MR.RIVAS:Thank you.No further
9 questions.
10 COMMISSIONER ANDERSON:Thank you.Any
11 other questions from intervenors?Hearing none.
12 Any direct --redirect?
13 MR.BURDIN:Nothing from Staff.Thank
14 you.
15 COMMISSIONER ANDERSON:Thank you.Thank
16 you very much for your testimony.
17 (The witness left the stand.)
18 MR.MEYER:I call to the stand
19 Mr.Patrick Ehrbar.
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CSB REPORTING 218 ENGLISH (X)208.890.5198 Staff
1 PATRICK EHRBAR,
2 produced as a witness at the instance of the Avista
3 Corporation,having been first duly sworn to tell the
4 truth,was examined and testified as follows:
5
6 DIRECT EXAMINATION
7
8 BY MR.MEYER:
9 Q For the record,please state your name and
10 your employer.
11 A It's Patrick Ehrbar.Last name is
12 E-h-r-b-a-r and Avista.
13 Q And your position at Avista?
14 A I'm the director of regulatory affairs.
15 Q Have you prepared your own direct
16 testimony in this case as well as rebuttal testimony?
17 A I have.
18 Q Any corrections to that?
19 A No.
20 Q Are you also here to sponsor the direct
21 testimony of Mr.Joe Miller?
22 A Yes,I am.
23 Q And so if the questions were asked in
24 those three batches of testimony,would your answers be
25 the same?
CSB REPORTING 219 EHRBAR (Di)208.890.5198 Avista Corporation
1 A They would.
2 MR.MEYER:Okay.With that,that has
3 been spread by motion and he is available for cross.
4 COMMISSIONER ANDERSON:Staff?
5 MR.BURDIN:Nothing from Staff.Thank
6 you,Commissioner.
7 COMMISSIONER ANDERSON:Clearwater?Idaho
8 Forest Group?Walmart?NW Energy Coalition?
9 MR.RIVAS:Yes,Mr.Chair,I have some
10 questions.Thank you.
11
12 CROSS-EXAMINATION
13
14 BY MR.RIVAS:
15 Q Good morning,Mr.Ehrbar.I'm Diego Rivas
16 on behalf of NW Energy Coalition and Idaho Conservation
17 League.I want to start just some basic questions to set
18 the table here.Just to confirm,Avista in its initial
19 filing proposed a two-year rate plan in this case;
20 correct?
21 A Correct.
22 Q And in the first year of that two-year
23 rate plan,Avista proposed an increase to the customer
24 charge or the basic charge from $7.00 a month to $15.00 a
25 month for the electric side;is that correct?
CSB REPORTING 220 EHRBAR (X)208.890.5198 Avista Corporation
1 A Correct.
2 Q And in the second year of the electric
3 two-year rate plan,the customer charge would increase,
4 again,from $15.00 a month to $20.00 a month;correct?
5 A Yes.
6 Q And so in total over two years in moving
7 from $7.00 to $20.00 a month,that customer charge would
8 increase nearly 300 percent;correct?
9 A That is correct.
10 Q And for historical context,you would
11 agree that the customer charge has been in the four or
12 five to $7.00 range or so for the last couple of
13 decades?
14 A Yes,it has.
15 Q Okay,and so it follows that an increase
16 from $7.00 to $20.00,a 300 percent increase as we've
17 established,would be a substantive deviation from
18 historical norms;is that right?
19 A It's a substantial increase in that
20 component of rate design,so yes.
21 Q So you would agree that it's a substantive
22 deviation from --a substantive change from historical
23 practice?
24 A It's a substantive change from historical
25 levels.
CSB REPORTING 221 EHRBAR (X)208.890.5198 Avista Corporation
1 Q Thank you.All right,and to confirm,
2 Avista's proposal to increase the customer charge was
3 indeed incorporated into the settlement without any
4 change;correct?
5 A Correct.
6 Q And it is in fact Avista's long-term plan
7 to raise the customer charge by over 500 percent to
8 $35.00 a month over five years;is that right?
9 A It's correct in that we laid out what the
10 plan would look like over a five-year period in
11 Mr.Miller's testimony that I now sponsor,but in this
12 case,we just made those two proposals,because it was
13 just a two-year rate plan.
14 Q Okay,but you would agree that that is
15 looking forward Avista's plan for subsequent rate
16 cases?
17 A That was the thinking at the time we filed
18 the testimony.
19 Q Great,thank you.Would you agree that
20 increasing the basic charge provides the Company more
21 assurance of revenue than does lower basic charges and
22 correspondingly higher volumetric rates?
23 A No,I would disagree with that,if I can
24 expand on that a little bit.So in an era where we have
25 fixed cost adjustment mechanisms here in Idaho,
CSB REPORTING 222 EHRBAR (X)208.890.5198 Avista Corporation
1 decoupling is another term for it,the level of fixed
2 cost recovered from customers is either done so in a
3 fixed basic charge or through the fixed cost adjustment
4 mechanism,and so as the fixed charge goes up,the
5 corresponding level of fixed cost in the decoupling
6 mechanism drops,so that it's basically net neutral to
7 the Company from a revenue perspective.What it affects
8 is customers --high use customers are benefited,low use
9 customers are more affected by having a higher basic
10 charge.
11 Q Right,would you agree,let's --so absent
12 the issue of total revenues,which is adjusted by the
13 fixed COST adjustment mechanism,the decoupling
14 mechanism,the basic charge provides more assurances to
15 the Company of revenue brought in without any adjustments
16 in the future;correct?
17 A No,I would disagree.I don't think
18 there's more assurance.I think it's just the level
19 that's paid by customers is more equitable from a cost
20 causation standpoint,but for revenue to the Company,the
21 FCA also has to be factored into that.
22 Q So Mr.Ehrbar,we can perhaps use a little
23 math here and get to the same answer,I think.Avista
24 has roughly 115,000 residential customers,thereabouts;
25 correct?
CSB REPORTING 223 EHRBAR (X)208.890.5198 Avista Corporation
1 A Subject to check.
2 Q So let's --you know,just hypothetically
3 rounding to 100,000,if the customer charge were $5.00 a
4 month,then Avista would be guaranteed a revenue from
5 100,000 customers at $5.00 a month of $500,000;
6 correct?
7 A Yes.
8 Q And if that customer charge were $10.00 a
9 month,Avista would be guaranteed a million dollars in
10 customer charge payments;correct?
11 A From that component.
12 Q From that component,yes.
13 A There would be a corresponding decrease in
14 what's booked as it relates to the fixed cost adjustment
15 mechanism.
16 Q All right,thank you.Would you agree
17 that financial analysts and credit agencies generally
18 react favorably to increased customer charges?
19 A I don't know if I can speak to that in my
20 role.
21 Q Okay,and just to confirm,the settlement,
22 if approved,would keep Avista's authorized return on
23 equity at 9.4 percent;correct?
24 A Correct.
25 Q All right,I want to move to some
CSB REPORTING 224 EHRBAR (X)208.890.5198 Avista Corporation
1 questions on the topic of --topics of energy
2 conservation and low income customers,and then I'll turn
3 to more specific questions on cost of service.Would you
4 agree with the basic premise,Mr.Ehrbar,that
5 cost-effective energy efficiency benefits all customers
6 whether they participate in utility efficiency programs
7 or not?
8 A Yes.
9 Q And you agree that customers respond to
10 price signals,at least to some degree?
11 A Yes,to some degree.
12 Q In your rebuttal testimony,you state on
13 pages 9 and 10,the bottom of page 9 and the bottom of --
14 and the top of page 10,I'll give you a second to get
15 there --
16 A I'm there.
17 Q --you state that the minuscule decline in
18 the variable charge will not affect customer
19 participation in efficiency programs;is that right?
20 A That is correct.
21 Q And yet,if the basic charge were held
22 constant in this case,that is,remained at $7.00 a
23 month,consistent with methods outlined by other
24 testimony,Avista would have proposed an increase to the
25 variable charge in both year one and year two of the
CSB REPORTING 225 EHRBAR (X)208.890.5198 Avista Corporation
1 two-year rate plan;is that right?
2 A That is correct,but just to make sure
3 that the cited testimony you're referencing at the bottom
4 of page 9 and top of page 10 was related specifically to
5 a statement in Ms.McCloy's testimony that talked about
6 it being --that there being a decreased incentive,not
7 what would an increased incentive look like,so I was
8 only addressing the fact that I don't believe that there
9 would be a decreased incentive because the variable rate
10 essentially is unchanged.
11 Q Okay,but you would agree that the price
12 signal would be different.It would be a higher price
13 signal with a $7.00 a month basic charge?
14 A Yes.To the extent that the revenue then
15 is put into that second inclining block,yes,there would
16 be more of a price signal at that level.
17 Q Okay,thank you.I want to turn to page 7
18 of your rebuttal testimony starting on page --I'm sorry,
19 on line 2.Give me a second to get there as well.On
20 line 2 there,that first full sentence starting with
21 "Increases,"could you read that for me,please?
22 A Sure."Increases in fixed monthly basic
23 charges will benefit high users of energy and will cause
24 customers who use less energy to pay more,on a monthly
25 basis."
CSB REPORTING 226 EHRBAR (X)208.890.5198 Avista Corporation
1 Q Mr.Ehrbar,you stated earlier that all
2 customers benefit from cost-effective energy efficiency
3 and conservation,and on the other end of the spectrum,
4 isn't it true that high use customers actually contribute
5 to increased costs for all customers because of the need
6 for increased investment in generation or market
7 purchases in order to serve that load?
8 A Can you restate that?
9 Q Sure,so if cost-effective energy
10 efficiency and decreased usage benefits all customers,
11 would the opposite not be true that increased usage harms
12 customers due to the need to invest more in generation or
13 market purchases to serve that load?
14 A I suppose it would depend on what the cost
15 of that variable power supply component would be to serve
16 that load,so I think it's dependent.I'm not trying to
17 be tricky,but I think it's dependent.
18 Q Okay,and isn't it true,Mr.Ehrbar,that
19 high use customers require the Company to invest more in
20 upgrades to transmission and distribution systems in
21 order to serve that load?
22 A I think you have to look at --I'm not a
23 cost of service expert,but I think you have to look at
24 these components on a system basis,because we're
25 building the system to serve coincident peaks so that on
CSB REPORTING 227 EHRBAR (X)208.890.5198 Avista Corporation
1 the peak day we're able to serve all customers,so high
2 use customers are in the mix,low use customers are in
3 the mix,but we're building to serve that peak and have
4 the infrastructure available to do so.
5 Q And you would agree,then,that high use
6 customers are very likely to contribute to that peak
7 load;correct?
8 A That's fair.
9 Q And isn't it true that avoided
10 transmission and distribution upgrade costs are indeed
11 included as a benefit in DSM,in demand side management,
12 energy efficiency cost-effective analysis?
13 A That's my understanding.I don't do DSM
14 on a regular basis,but I believe that is factored in.
15 Q Okay,and even without changes to rate
16 design,absent this particular case,Avista expects loads
17 to increase in the near term due to transportation
18 electrification and building electrification;isn't that
19 right?
20 A I think the IRP says that we will have
21 increased electric usage for a number of reasons,
22 including infill and growth on top of electrification and
23 other issues.
24 Q So for various reasons,Avista expects
25 increased load,load growth,on the system absent any
CSB REPORTING 228 EHRBAR ()C208.890.5198 Avista Corporation
1 changes to rate design or anything else?
2 A Correct.
3 Q And consistent with the reasoning put
4 forth by Avista in this case,when a utility makes
5 investments in generation,transmission,or distribution
6 that the utility will seek cost recovery,plus a rate of
7 return on those investments;correct?
8 A Correct.
9 Q I want to turn to page 29 of the direct
10 testimony that you are sponsoring,Miller's direct
11 testimony,and there's a table,Table No.12,on that
12 page.
13 A I'm there.
14 Q Okay,and this table shows the bill impact
15 for various levels of usage;correct?
16 A Correct.
17 Q And 927 kilowatt-hours outlined there
18 represents the average user on Avista's system;is that
19 right?
20 A That's right.
21 Q And Avista did not --you did not put
22 forward an update to this table with the settlement;is
23 that right?
24 A No,this table was not otherwise modified
25 in the testimony I sponsored around the settlement.
CSB REPORTING 229 EHRBAR (X)208.890.5198 Avista Corporation
1 Q Great,that's fine.I'm less concerned
2 about the raw numbers here and just the pattern,so I
3 will use this table for now,even though the raw numbers
4 will have changed for the settlement,but as you stated
5 in testimony as well,this table confirms that with the
6 increased customer charge,low usage users will see a
7 larger bill increase than high usage customers;
8 correct?
9 A Correct,which would make sense,because,
10 you know,more broadly,the level of fixed costs that,
11 you know,we have to serve customers were being
12 disproportionately charged at a lower level under the
13 $7.00 basic charge premise versus moving to the 15 as
14 shown in the table.
15 Q Okay,any usage below that 927 kilowatts
16 will receive that higher bill increase?
17 A That's correct,as compared to those
18 above.
19 Q And the general pattern,even though the
20 raw numbers will have changed,the general pattern would
21 be the same under the settlement numbers for this table;
22 is that correct?
23 A It would.
24 Q Okay.Mr.Ehrbar,isn't it likely that
25 customers that have invested in energy efficiency have
CSB REPORTING 230 EHRBAR (X)208.890.5198 Avista Corporation
1 moved from above average users,say,the 1,000
2 kilowatt-hour month block,to below average users or 800
3 kilowatt-hour range?
4 A I can't say that,so you could have had
5 some of the high users that were at,say,1,500
6 kilowatt-hours per month level drop to 1,300
7 kilowatt-hours per month level by having instituted
8 energy efficiency measures.
9 Q Correct,but the likelihood is that due to
10 energy efficiency investments by customers,it is likely
11 that customers have shifted blocks on this table downward
12 in usage?
13 A Downward,but I don't that they
14 necessarily started at the 927 and dropped below.
15 Q Fair enough,but you would agree that no
16 matter where they started on this table,investments in
17 energy efficiency would move them down or up the table
18 but down in usage?
19 A Correct.
20 Q Okay,so in essence,Avista --before I
21 get there,Avista also,as we've established,has an
22 energy efficiency program that does provide rebates for
23 customers,incentive payments by the Company for making
24 energy efficiency investments;correct?
25 A Yes,it does.
CSB REPORTING 231 EHRBAR (X)208.890.5198 Avista Corporation
1 Q And so putting those two together,in
2 essence,Avista has previously incentivized customers to
3 reduce their energy use only to come back in this case
4 and as a result of this case and this settlement,you're
5 asking those same customers to pay a larger increase than
6 higher energy users precisely because you previously
7 rewarded them for using less energy;isn't that true?
8 A I don't know that I completely agree with
9 the premise.I think rate design is complicated.I
10 think some of us know there's these principles,the
11 Bonbright principles,of rate design to where you take
12 into account a number of issues.One of them is a
13 conservation price signal,and the other is making sure
14 that you also have proper cost causation and that
15 customers are paying for their fair share of the system,
16 so in this hypothetical,are some customers who have done
17 energy efficiency measures who are now lower users now
18 paying a little bit more than they otherwise would have
19 had they had higher usage,yes,but are they better off
20 for still having had done the energy efficiency measure
21 than the slight increase that would occur in this case,
22 they're better off having had done the energy efficiency
23 measure overall.
24 Q Mr.Ehrbar,you would agree that Avista
25 has previously incented customers to use less energy and
CSB REPORTING 232 EHRBAR (X)208.890.5198 Avista Corporation
1 now are asking those same customers to have a higher bill
2 impact?
3 MR.MEYER:I object to the question.I
4 think this question has been asked and answered
5 sufficiently.
6 MR.RIVAS:That's fine,Mr.Chair.I can
7 move on.
8 Q BY MR.RIVAS:I want to turn now to the
9 issue of low income really briefly.You stated in your
10 rebuttal that the most recent data for low income usage
11 in Idaho was presented by you in Avista's 2015 rate case;
12 is that right?
13 A That's correct.
14 Q And in that case,you claimed that low
15 income users used the same or more energy than the
16 general population;is that right?
17 A Low income electric users in that analysis
18 and previous analyses that I provided in previous rate
19 cases early to mid that decade.
20 Q And yet,a settlement in that case did not
21 accept that low income energy usage analysis and required
22 Avista to conduct further evaluations on low income
23 energy usage;isn't that right?
24 A I think that case in particular and
25 several cases before where we put forth the proposal to
CSB REPORTING 233 EHRBAR (X)208.890.5198 Avista Corporation
1 increase the basic charge for the reasons similar to what
2 we did here was settled and so it was part of the give
3 and take of any settlement negotiation.There were
4 several considerations given for us moving off that,
5 because we got consideration for something else.
6 Q And that settlement actually kept the
7 basic charge flat at $5.25 a month,did it not?
8 A I don't recall that,but subject to check,
9 yes.
10 Q You have no reason to believe that's not
11 true?
12 A That's correct.
13 Q Okay,and that settlement included
14 representatives from the low income community,did it
15 not?
16 A I believe ICL was a party in that case.
17 Q And was CAPAI also a member --
18 A Yes,sorry.
19 Q And in Avista's next general rate case in
20 2017,after a time period in which the Company was
21 supposed to conduct and present more information on the
22 usage patterns of low income customers based on that 2015
23 settlement,the Company proposed and settled for a 25
24 cent increase to the customer charge;isn't that
25 correct?
CSB REPORTING 234 EHRBAR (X)208.890.5198 Avista Corporation
1 A I don't have that in front of me,but I'll
2 agree,take your word.
3 Q Okay,thank you,Mr.Ehrbar.I want to
4 move now into more of the rationale of the --behind the
5 proposed increase of the customer charge.Before we get
6 there,I did want to mention that I will be asking you
7 some questions on Mr.Garbarino's cost of service study
8 and may need to reference the Excel spreadsheet that
9 you --that goes along with that study.I don't know if
10 you have that in front of you or if we should take a
11 moment to get that in front of you.
12 MR.MEYER:Well,let's --I think this
13 takes us sort of far afield.I'm not sure how detailed
14 the questioning will go.The purpose of offering limited
15 admission of prefiled exhibits was to hone in on this
16 particular issue,the basic charge,and not rediscuss or
17 reinvent cost of service,so this witness can speak to it
18 to the extent he knows.If he doesn't,he will so
19 indicate.
20 COMMISSIONER ANDERSON:Counsel?
21 MR.RIVAS:That's fine,Mr.Chair.
22 Mr.Ehrbar has referenced Mr.Garbarino's cost of service
23 study in two separate testimonies,the initial testimony
24 by Mr.Miller and his own testimony,and pulls a number
25 from that.I'm totally fine if he does not know the
CSB REPORTING 235 EHRBAR (X)208.890.5198 Avista Corporation
1 answers,that is fine and he's certainly welcome to say
2 so.
3 COMMISSIONER ANDERSON:Please continue.
4 Q BY MR.RIVAS:Okay,Mr.Ehrbar,before we
5 get to the actual cost of service study,you mention on
6 page 28 of your testimony,and I believe this is page 28
7 of your direct testimony,you used Mr.Garbarino's cost
8 of service study to outline those fixed costs that you
9 believe should be included in the basic charge;
10 correct?
11 A Yes.Just to clarify,Mr.Miller's
12 testimony that I'm sponsoring page 28.
13 Q Correct,yes.
14 A Yes,yes.Page 28 provides the total
15 customer allocated costs and the distribution demand
16 cost.
17 Q And you repeat those in your rebuttal
18 testimony,do you not?
19 A I do,at page 3.
20 Q Okay,thank you.Would you agree that
21 cost of service studies are not absolute and that they
22 can be categorized as both an art and science?
23 A Absolutely.
24 Q And the settling parties did not agree on
25 a cost of service methodology in this case;is that
CSB REPORTING 236 EHRBAR (X)208.890.5198 Avista Corporation
1 right?
2 A That's right.
3 Q Okay,and so on that page 28 of
4 Mr.Miller's testimony,you list three dollar figures
5 from the electric cost of service study in that first
6 exchange on page 28.Can you read those off,please?
7 A Yes,so starting on line 3,it says --
8 I'll just read it --upon evaluation of the total
9 customer allocated costs,as shown in Mr.Garbarino's
10 Exhibit No.16,Schedule 3,page 4,line 26,those costs
11 are $19.24 per month.Factoring in distribution demand
12 cost per customer per month of $23.84,the total customer
13 and distribution demand monthly cost is $43.08.
14 Q And you cite a figure of $43.08 as the
15 total;correct?
16 A Yes.
17 Q Okay,and so $15.00 was not one of those
18 figures;is that correct?
19 A That's correct.
20 Q And $20.00 was not one of those figures;
21 correct?
22 A It is not.I think if I could elaborate
23 briefly,these are indicative --I mean,I mentioned
24 earlier the cost of service study is art and math and
25 science,but I would argue that under almost all
CSB REPORTING 237 EHRBAR (X)208.890.5198 Avista Corporation
1 permutations of any cost of service study,you would
2 probably land at levels similar to these that I read into
3 the record.They wouldn't materially deviate from these
4 levels,so these provide guidance and provided Mr.Miller
5 who worked with me guidance as to what our proposal was
6 in this case and so no,it doesn't --the cost of service
7 study won't spit out a number that we would then just
8 automatically pick and make that our proposal.We gauged
9 it based on our own feeling of the cost of service study
10 of what would work in this case,as well as having
11 followed the Rocky Mountain Power case that looked at
12 similar issues.
13 Q Thank you.In that same paragraph,
14 Mr.Ehrbar,on page 28 there,at the end of line 7,could
15 you read that sentence starting with "These are"?
16 A "These are essentially fixed costs that
17 are allocated based on the number of customers served."
18 Q So you mention the word "essentially."Am
19 I correct in assuming that the word essentially is used
20 there because over the long term,any continually
21 occurring cost could be considered a fixed cost?
22 A I think the word essentially used there is
23 that in the short term,these are all fixed costs.In
24 the long run,everything is variable.I believe that was
25 the thinking,but for this case for ratemaking here,
CSB REPORTING 238 EHRBAR (X)208.890.5198 Avista Corporation
1 these are fixed costs.
2 Q Okay,thank you.Okay,I want to turn to
3 the Garbarino Exhibit 16,schedule 3,page 4,that you
4 reference in your testimony.
5 MR.MEYER:Do you have that in front of
6 you?
7 THE WITNESS:I do not.
8 MR.MEYER:Okay,may we have a moment?
9 MR.RIVAS:And while we're there --
10 MR.MEYER:May I approach the witness?
11 COMMISSIONER ANDERSON:Yes,you may.
12 (Mc.Meyer approached the witness.)
13 MR.RIVAS:It may make sense as well,the
14 spreadsheet that was provided with that testimony,it's
15 probably easier on a computer --
16 COMMISSIONER ANDERSON:Is that available?
17 MR.RIVAS:--if he could pull that up.
18 MR.MEYER:What spreadsheet?
19 MR.RIVAS:It's the cost of service model
20 spreadsheet that the exhibit is pulled from.
21 COMMISSIONER ANDERSON:Let's direct it to
22 the Chair,please.
23 MR.RIVAS:We're happy --this was the
24 cost of service model provided in this case,the
25 spreadsheet provided by Avista and was --and is the
CSB REPORTING 239 EHRBAR (X)208.890.5198 Avista Corporation
1 foundation for the exhibit referenced in Mr.Ehrbar's
2 testimony,Exhibit 16.
3 MR.MEYER:Mr.Chair,I don't believe
4 that's part of the record and we don't have that before
5 us now that was provided,unless it's part of what you
6 have there,Mr.Ehrbar.Is it?
7 THE WITNESS:If this is what you're going
8 to question,if it's because it's tiny,I can read it,if
9 that's his question.If it's getting into the
10 formulas --
11 MR.RIVAS:That's correct,so the
12 questions on where these numbers come from.
13 THE WITNESS:I think I can quickly answer
14 that,because I didn't do the study and I've actually
15 never done a cost of service study,so I wouldn't be able
16 to answer.
17 MR.RIVAS:Okay,that's fine.I can be
18 flexible here,Mr.Chair,and I think I can ask my
19 questions in a different way.
20 COMMISSIONER ANDERSON:Let's try real
21 hard to do that.
22 MR.RIVAS:Thank you.
23 Q BY MR.RIVAS:Okay,let's see,where was
24 I?Okay,so on that Exhibit 16,schedule 3,page 4,that
25 you reference in your testimony,can you read the heading
CSB REPORTING 240 EHRBAR (X)208.890.5198 Avista Corporation
1 there at the top of the page that's in bold underneath
2 Idaho Electric?
3 A Yes,it says,"Meter,Services,Meter
4 Reading &Billing Costs by Schedule at Proposed Rate of
5 Return."
6 Q And moving down to line 24,the label for
7 that row is Average Unit Cost;correct?
8 A Correct.
9 Q And then under column D,which is the
10 Residential Service Schedule 1,the total average unit
11 cost for the residential customer class is $6.61;
12 correct?
13 A It is $6.61 for specifically just meter,
14 services,meter reading,and billing costs.
15 Q And that's a monthly figure;correct?
16 A That's correct.
17 Q Thank you.Would you --okay,let's see
18 here.Can you agree that these numbers --okay,so the
19 numbers that you reference in your testimony,the $43.00,
20 the $19.00,the $23.00,and the $43.00,those figures are
21 found below that on the page;correct?
22 A Yes,they're shown at line 26,28,and
23 29.
24 Q And are you familiar with the inputs that
25 create those figures,those dollar amounts?
CSB REPORTING 241 EHRBAR (X)208.890.5198 Avista Corporation
1 A I am not.
2 Q Okay,so could you tell me what
3 non-revenue distribution costs would include?
4 A I don't know what those come from in cost
5 of service,but non-revenue distribution costs would be
6 costs of the distribution system that I'm surmising are
7 not caused by new customer hookups,they're not related
8 to new revenue,and line extension allowance policies,
9 but,again,I'm over my skis by going that far.
10 MR.RIVAS:Thank you.I will leave it
11 there.Thank you,Mr.Chair.I have no more questions.
12 COMMISSIONER ANDERSON:Thank you.Any
13 redirect?
14 MR.MEYER:No redirect.
15 MR.BURDIN:Nothing from Commission
16 Staff.Thank you.
17 COMMISSIONER ANDERSON:Thank you very
18 much.Commissioner Hammond,please.
19
20
21
22
23
24
25
CSB REPORTING 242 EHRBAR (X)208.890.5198 Avista Corporation
1 EXAMINATION
2
3 BY COMMISSIONER HAMMOND:
4 Q So I just want to confirm,I think what I
5 heard you say is first,if the fixed charge goes up as
6 proposed,the FCA gets reset or those numbers offset?
7 A That is correct,and so the settlement
8 stipulation exhibits for the FCA,if the fixed cost had
9 remained at seven,then the fixed cost per customer
10 that's tracked through the FCA would be higher,vis-a-vis
11 the alternative,so what's being tracked in the FCA will
12 be lower than it otherwise would have been because more
13 of the fixed costs are being recovered in the fixed
14 monthly charge.
15 Q Is that a dollar-for-dollar adjustment?
16 Maybe I'm getting too deep into the weeds.
17 A It does,yes,at a global level,not a per
18 customer level.
19 Q And is raising the fixed charge versus
20 keeping it the same,leaving the FCA,is it a timing
21 difference,then,in when the costs or when those
22 revenues are received?
23 A Technically,I'm sure there's a little bit
24 of deviation,but the FCA is booked accounting-wise on a
25 monthly basis based on actual number of customers,so I
CSB REPORTING 243 EHRBAR (Com)208.890.5198 Avista Corporation
1 think it's within weeks.
2 Q Okay,yeah,thank you.That helps me
3 understand that.As far as does this settlement have any
4 impact on the PCA?
5 A Does this settlement have any impact?So
6 we did reset power supply.There is a new power supply
7 base as part of the settlement stipulation.
8 Q So would the PCA potentially,that reset,
9 it depends on variable costs what the Company purchases,
10 but are we starting out at a lower level in the PCA
11 because some of those costs have now been shifted over to
12 the base case?
13 A Yes,so the PCA was reset.It has really
14 nothing to do with the fixed costs tracked in the FCA.
15 It's tracked there at the newer lower level of what the
16 PCA is.
17 Q Thanks.Thank you,and then although the
18 proposal in this case is that variable rates to some
19 degree will go up,would variable rates have gone up more
20 had the fixed costs stayed lower?Would the Company's
21 proposal been --I shouldn't say would it.Would the
22 Company's proposal have been that the variable rates may
23 have been higher if the fixed costs or the fixed charge
24 stayed lower?
25 A Yes,to balance out revenue in each
CSB REPORTING 244 EHRBAR (Com)208.890.5198 Avista Corporation
1 schedule and playing with the different billing
2 components,if the fixed charge stayed at seven,then we
3 would have sought to recover the revenue requirement
4 associated with residential Schedule 1 from the two
5 variable rates,the first 600 kilowatt-hours and then
6 everything above 600 kilowatt-hours.
7 Q And forgive me if I've missed it,but
8 we've talked about high use customers and in regard to
9 the residential class,are we saying that a high use
10 customer is anybody that is above the average 927 number;
11 is that --
12 A Yes.
13 Q --a fair definition?
14 A Yes.
15 Q Okay,is there any --does the Company
16 have some idea of the percentage of who is below and
17 who's above that line?
18 A I'm sure we have studies that we've done.
19 I don't have them here,but we would know by decrement of
20 kilowatt-hours,by 50 kilowatt-hours per month,how many
21 customers fit into each,but I don't have that
22 information in front of me.
23 Q Okay.One second.You had said,I
24 believe,in response to a question from Mr.Rivas that a
25 customer that has invested or participated,directly
CSB REPORTING 245 EHRBAR (Com)208.890.5198 Avista Corporation
1 participated,in energy efficiency programs is better off
2 even with the customer charge.I think I understand
3 that,but can you give me a little more detail on why
4 that --what that thinking is?
5 A Sure,and a lot is dependent on who the
6 customer is,the measure that they undertook,and where
7 they were in terms of their usage before and after,but
8 just anecdotally is what I would reference here,so the
9 settlement calls for an increase of $8.00 per month or
10 $96.00 a year in the basic charge is what my quick math
11 works,$96.00 a year.
12 I know just from personal life having done
13 energy efficiency measures in my home,the savings that
14 accrue because you've done those measures,whether gas or
15 electric,typically anecdotally tend to be far more
16 substantial than just that increase in the basic charge,
17 plus you've already accrued depending on when you did the
18 project a lot of the benefits from having installed those
19 measures before this basic charge would even take into --
20 would go into effect.
21 Q Then last question,I think the
22 questioning from Mr.Rivas has gone to generally what
23 should be in the bucket,and I'll call them buckets,
24 bucket of fixed charges and bucket of variable.I think
25 the contention from NW Energy Coalition is that there's a
CSB REPORTING 246 EHRBAR (Com)208.890.5198 Avista Corporation
1 limited set of items that should go in the fixed cost
2 bucket.Can you tell me,I'm getting a little into the
3 weeds,I guess,is the Company's proposal to include
4 things in that fixed cost bucket more than what NW Energy
5 Coalition is advocating for?
6 A I believe that's right.I think there's a
7 little bit of --kind of going back to that cost of
8 service dialogue,there's art and science.One view is
9 something called straight fixed variable rate design
10 where one would argue,and I've done this in other
11 testimony,where you look at all other utilities that
12 were all subscribers of water,sewer,garbage,telecom,
13 where there are big fixed monthly charges and really no
14 variable rate associated with it,because what you're
15 trying to do is recover the cost of the infrastructure
16 that is there built to serve customers.Whether they use
17 it or not,it has to be there,so one thought could be
18 going full straight fixed variable rate design to where
19 all the fixed costs go into a fixed charge and only the
20 variable rate would cover a variable like PCA deviations,
21 variable energy costs.Everything would go into the
22 fixed charge.
23 That would put you in the $80.00 range on
24 electric and $40.00 range on gas,and so I would argue
25 that's too far.You know,maybe over a long period of
CSB REPORTING 247 EHRBAR (Com)208.890.5198 Avista Corporation
1 time you transition,but that's shocking.That would be
2 rate shock for low use customers,but we also know that
3 seven,at least from our perspective,seven,five,four,
4 where it's been for many,many years,is seemingly too
5 low versus knowing that the customer cost to serve
6 customers,the cost associated with serving customers,
7 the distribution costs of having transformers,lines,
8 poles,all that fixed infrastructure doesn't vary based
9 on usage,but having that disproportionately recovered
10 from higher use customers through variable rates also
11 isn't fair from a cost causation,and so what this does
12 by going to 15 and then to 20 is kind of balance out the
13 high use customers,bringing them down,low use
14 customers,bringing them up,because they've been frankly
15 not paying their fair share of all the distribution costs
16 and customer-related costs to serve them.
17 COMMISSIONER ANDERSON:Thank you.
18 COMMISSIONER HAMMOND:Thank you.
19 COMMISSIONER ANDERSON:Other questions?
20 Any redirect on that?
21 MR.MEYER:No redirect.
22 COMMISSIONER ANDERSON:Okay.Any other
23 questions of Mr.Ehrbar?With no objection,he will be
24 excused.Thank you.
25 THE WITNESS:Thank you.
CSB REPORTING 248 EHRBAR (Com)208.890.5198 Avista Corporation
1 (The witness left the stand.)
2 COMMISSIONER ANDERSON:Do we have any
3 other witnesses?
4 MR.MEYER:We do not.
5 MR.BURDIN:No one from Staff.Thank
6 you.
7 COMMISSIONER ANDERSON:It looks as though
8 we have exhausted our --wait,excuse me,please,
9 Northwest.
10 MR.RIVAS:Thank you,Mr.Chair.I'm not
11 sure the normal procedure here.It seems like other
12 parties are not giving an opening statement.I was
13 prepared to do so,if that pleases the Chair.
14 COMMISSIONER ANDERSON:You may give an
15 opening statement,yes.
16 MR.RIVAS:Thank you,Mr.Chair.
17 Mr.Chair and Commissioners,on behalf of the NW Energy
18 Coalition and Idaho Conservation League,we appreciate
19 the opportunity to present our case in opposition to
20 particular elements of the settlement and stipulation as
21 proposed by the Company and other parties in this case.
22 NW Energy Coalition and Idaho Conservation
23 League have two main concerns:one procedural and one
24 substantive.Regarding the process,we would first like
25 to acknowledge that settlements can present an effective
CSB REPORTING 249 COLLOQUY208.890.5198
1 and efficient outcome to a general rate case.When
2 parties are able to reach agreement on a course of
3 action,a potential outcome is a give-and-take compromise
4 that presents a complex solution to a complex problem.
5 However,that complex solution is by no
6 means supposed to be a guarantee.It is the job of the
7 Commission to weigh the merits of the settlement and make
8 a final decision that is in the public interest,not the
9 interests of the parties signing on to the settlement.
10 Indeed,settlements are often presented in a
11 take-it-or-leave-it manner.The Commission should always
12 reject that proposition.
13 The same is true here.The Commission
14 should weigh each issue and determine if the proposed
15 settlement addresses the particular issue in a way that
16 meets the public interest standard.The problem in this
17 case as we see it is that the Commission appears to be
18 even more in a bind.That is,because a settlement was
19 reached among some,but not all,of the parties before
20 the filing of intervenor testimony,the Commission lacks
21 a complete record on which to base a decision that might
22 fall outside the confines of the settlement.
23 In essence,the Commission has all but
24 backed itself into the very take-it-or-leave-it premise
25 that should be rejected.Going forward,we encourage the
CSB REPORTING 250 COLLOQUY208.890.5198
1 Commission and parties to ensure that comprehensiveness
2 is not superseded by expediency.Nevertheless,the
3 evidence in this case will show that the Commission
4 should indeed reject the rate design component of the
5 proposed settlement.
6 The testimony from Lauren McCloy adopted
7 for the sake of the hearing by Brad Heusinkveld will show
8 that a move to high customer charges is not in the public
9 interest for several reasons.First,arbitrarily set
10 fixed charges do not follow the principle of cost
11 causation.
12 Second,high fixed charges send a negative
13 price signal for energy efficiency and conservation;
14 thus,exacerbating reliability and resource adequacy
15 issues.
16 Third,high fixed charges most negatively
17 impact low income and low use customers.The evidence
18 will show that a move in the direction of straight fixed
19 variable rate design is the antithesis of sound energy
20 policy and is not necessary for investor-owned utilities.
21 To conclude,Mr.Chair,a settlement that
22 punishes customers attempting to do their part to benefit
23 the system,keep rates low,and ensure reliability is in
24 no way in the public interest.We believe that other
25 solutions are available to address concerns the Company,
CSB REPORTING 251 COLLOQUY208.890.5198
1 interested parties,or the Commission may have.
2 We encourage the Commission to reject the
3 rate design elements of the settlement and fashion an
4 outcome that directly ties the basic charge to costs
5 related to serving a specific customer,encourages energy
6 conservation,and protects low income customers.
7 Thank you,Mr.Chair.
8 COMMISSIONER ANDERSON:Thank you,and --
9 excuse me.
10 MR.RIVAS:And with that,we would call
11 Brad Heusinkveld to the stand.
12 COMMISSIONER ANDERSON:Thank you very
13 much.
14
15
16
17
18
19
20
21
22
23
24
25
CSB REPORTING 252 COLLOQUY208.890.5198
1 BRAD HEUSINKVELD,
2 produced as a witness at the instance of the NW Energy
3 Coalition and Idaho Conservation League,having been
4 first duly sworn to tell the truth,was examined and
5 testified as follows:
6
7 DIRECT EXAMINATION
8
9 BY MR.RIVAS:
10 Q Mr.Heusinkveld,can you state your name
11 and business address for the record,please?
12 A My name is Brad Heusinkveld of the Idaho
13 Conservation League.The address is on 6th and Hays
14 Street.The number escapes me at the moment.
15 Q And what is your position with the Idaho
16 Conservation League?
17 A I am the energy associate at the Idaho
18 Conservation League.
19 Q And for the purposes of this hearing,are
20 you sponsoring testimony by,prefiled direct testimony
21 by,Ms.Lauren McCloy in this case?
22 A I am.
23 Q And do you have a copy of that testimony
24 in front of you?
25 A Before me.
CSB REPORTING 253 HEUSINKVELD (Di)208.890.5198 NWEC &ICL
1 Q And if I were to read you those same
2 questions today,would your answers be the same?
3 A They would.
4 Q Do you have any changes to make to that
5 direct testimony?
6 A No.
7 MR.RIVAS:Thank you,Mr.Chair.I ask
8 that the testimony of Lauren McCloy be entered into
9 record and spread as if read.
10 COMMISSIONER ANDERSON:Without objection,
11 so be it.
12 MR.MEYER:No objection.
13 (The following prefiled direct testimony
14 of Ms.Lauren McCloy,sponsored by Brad Heusinkveld,is
15 spread upon the record.)
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CSB REPORTING 254 HEUSINKVELD (Di)208.890.5198 NWEC &ICL
1 I.INTRODUCTION
2 Q.Please state your name and business address.
3 A.My name is Lauren McCloy,my business address is
4 811 1st Ave,Suite 305,Seattle,WA 98014.
5 Q.Please state your employer and position.
6 A.I am the Policy Director for the NW Energy
7 Coalition.
8 Q.Please describe your educational and professional
9 background.
10 A.As Policy Director for NW Energy Coalition,I
11 support and guide the Coalition's policy work in the four
12 Northwest states,including Idaho,and also our work on
13 regional and federal issues,including regional planning,
14 markets,and federal infrastructure funding.I have
15 appeared as an expert witness before the Washington
16 Utilities and Transportation Commission and the Oregon
17 Public Utilities Commission.Previously,I worked as
18 Senior Policy Advisor to Washington Governor Jay Inslee,
19 where I led and managed a broad range of issues in
20 support of the Governor's energy priorities.In this
21 role,I also represented Washington state on the Western
22 Interstate Energy Board,and the Northwest Energy
23 Efficiency Alliance Board.Prior to serving in that role,
24 I was the Legislative Director for the Washington
25 Utilities and Transportation Commission ("UTC"or
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1 "Commission"),where I served as the Commission's liaison
2 to the Washington state Legislature and the Governor's
3 office,coordinated the UTC's legislative activities,and
4 advised Commissioners on energy policy and legislative
5 issues.Before joining the UTC's policy staff,I worked
6 as a Compliance Investigator in the UTC's Consumer
7 Protection Division.I completed Utility Regulation 101
8 training with the National Regulatory Research Institute
9 in 2015 and Rate Spread and Rate Design training with
10 EUCI in 2016.I have a B.A.from the University of
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1 North Carolina at Chapel Hill and an M.S.in
2 International Development from Tulane University Law
3 School.My CV is included as Attachment 1,Exhibit No.
4 701.This is my first time filing testimony before the
5 Idaho Public Utilities Commission.
6 Q.What is the purpose of your testimony in this
7 proceeding?
8 A.The purpose of my testimony is to explain how
9 specific elements of the proposed settlement in this case
10 are not in the public interest.Specifically,I encourage
11 the Commission to reject the rate design portions of the
12 settlement,as straight-fixed variable rate design
13 provides a negative price signal for energy efficiency
14 and conservation,and disproportionately impacts
15 lower-income and lower-usage customers.Lastly,I note
16 that straight-fixed variable rate design is a form of
17 decoupling and is duplicative given Avista's revenue
18 decoupling through the Fixed Cost Adjustment mechanism
19 (FCA).
20 Q.Please provide a summary of Avista's initial rate
21 design proposal in this case.
22 A.In its initial application and testimony,Avista
23 proposed to increase the customer charge for Schedule one
24 (residential)from $7.00/month to $15.00/month in
25 rate-year one,of its proposed two-year rate plan.2 This
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1 would be accompanied by an increase in the variable rate
2 for each of the two rate blocks.3 In rate-year two,the
3 customer charge would be increased again,to
4 $20.00/month,with a miniscule decrease to the variable
5 charge (less than one-tenth of one cent per kwh)
6 necessary to meet the proposed revenue requirement.4 As
7 a result of the increase to the revenue requirement and
8 the rate design,the average customer using 927 kwhs per
9 month would see an increase to their electric bill of
10 $13.18/month
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24 2 Miller,Di-9,line 14
3 Id.at lines 15-16
25 4 Miller Di-9-10,lines 21-2.
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1 (representing a 15.4%increase)in 20235 and an
2 additional increase of $4.66/month (4.7%increase)on
3 2024.6
4 Q.Does the settlement address Avista's rate design
5 proposal?
6 A.It does,very briefly.Paragraph 20 of the
7 settlement accepts all of the changes to rate design for
8 the residential class.Appendix F to the Settlement
9 confirms the increase of the customer charge as proposed
10 by Avista -$15 in rate-year one,and $20 in rate-year
11 two.
12 Q.Do you support the settlement's rate design
13 provisions?
14 A.I do not.Arbitrarily increasing the customer
15 charge to a figure that "more closely"aligns with the
16 entirety of fixed costs to serve customers does not meet
17 the basic principle of cost causation,a principle that
18 the utility and settling parties appear to
19 inappropriately value over other principles of rate
20 design.7
21 Q.Please explain.
22 A.The customer charge (also called the basic
23 charge,or fixed charge)has a specific purpose.That
24 purpose is indeed to recover costs.However,those costs
25 are limited to the costs of customer service,metering
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1 and billing.The Regulatory Assistance Project,leading
2 experts in the field of rate design,confirm this
3 definition of Customer Charge:"A fixed charge to
4 consumers each billing period,typically to cover
5 metering,meter reading and billing costs that do not
6 vary with size or usage.Also known as a basic service
7 charge or
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21 5 Miller Di-10,lines 6-7.
6 Id.at line 12 .
22 7 For a thorough examination of rate design,the Commission should
consider James Bonbright's Principles of Public Utility Rates.The23seminalworkwasupdatedbytheRegulatoryAssistanceProjectin
Smart Rate Design for a Smart Future.Karl Rábago and Radina Volova
24 also revisited Bonbright's work in Revisiting Bonbright's principles
of public utility rates in a DER world.
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1 standing charge."8 The Idaho PUC has also accepted this
2 definition:"Customer Charge -a recurring or fixed
3 charge to recover a portion of the cost of meter reading
4 and billing."9
5 Generally speaking,"cost causation"means that
6 costs should be paid for by the customers who cause the
7 utility to incur the expense.In this case,the costs
8 incurred by the utility to provide customer service,
9 metering and billing to residential customers should be
10 the only costs included in the basic charge.The
11 settlement's proposed basic charges -$15 in year one and
12 $20 in year two -violate the principle of cost
13 causation.These charges do not relate to the costs of
14 meter reading and billing,but instead appear to be
15 randomly selected,and are intended to move closer to
16 recovering all of Avista's fixed costs customer charge.
17 Q.Are there other reasons why utilities favor high
18 basic charges?
19 A.Yes.Most importantly to utilities,high fixed
20 charges provide a higher guarantee of revenue.Simply,
21 the utility can know exactly how much revenue they will
22 bring in even if every customer failed to use any energy
23 at all.That equation is simply:number of customers x
24 fixed charge =guaranteed revenue.Increasing either of
25 the inputs will inherently lead to a higher end number,
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1 or product.However,when the customer charge is set
2 appropriately,by including only the appropriate costs as
3 I describe above,changing the number of customers does
4 not change net revenue because the utility must incur the
5 cost of serving each additional customer.Increasing the
6 fixed charge,on the other hand,does
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23 6 Lazar,J.,Chernick,P.,Marcus,W.,and Lebel,M.(Ed.)(2020,January).Electric cost allocation for a new era:A manual.24 Montpelier,VT:Regulatory Assistance Project.P.259.
9 https://puc.idaho.gov/FileRoom/PublicFiles/tariff/water/Rocky%2025Mountain%20Utility%20Company.pdf .
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1 increase net revenue because each additional customer
2 will take on costs that are already being paid for by
3 other customers,at least until the next rate case.
4 Utilities prefer this outcome because:a)higher
5 guaranteed revenue means less risk,and b)there is an
6 increased chance that they can over-recover fixed costs
7 not related to customer service,billing,and metering.
8 That is the reason why the customer charge can be
9 described as such,and "should not exceed the
10 customer-specific costs associated with an additional
11 customer"being added to the system.10
12 Q.Has the Idaho Commission recently weighed in on
13 the issue of basic charges?
14 A.Yes.The Idaho Commission recently issued Order
15 No.35802 in Docket PAC-E-22-15,approving Rocky Mountain
16 Power's request to institute a "Rate Modernization Plan"
17 and increasing the customer charge from $8.00 to $29.25
18 over five years.
19 Q.What was the rationale for that decision?
20 A.In that order the Commission stated that high
21 customer charges provide for "energy bill
22 stabilization"11 and "summer and winter bills [that are]
23 more levelized."12
24 Q.Do you agree with this rationale?
25 A.While I agree that rate stabilization is a
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1 principle of sound rate design,I don't believe that
2 higher fixed charges will achieve that goal.
3 Q.Why do increased fixed charges not equate with
4 rate stabilization?
5 A.Simply put,fixed costs are not responsible for
6 much of the variability in utility costs,and thus rates.
7 Rather,it is the volatility of fuel inputs (namely,
8 natural gas)and market
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23 10 Lazar,J.and Gonzalez,W.(2015).Smart Rate Design for a SmartFuture.Montpelier,VT:Regulatory Assistance Project.24 http://www.raponline.org/document/download/id/7680.11 Order No.35802,page 11.
25 i2 Id.,page 10.
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1 purchases -i.e.variable costs -that are the primary
2 culprit for price volatility.Indeed,according to an
3 industry-focused energy consulting firm:"A key factor to
4 keep top of mind is the fact that electricity is closely
5 tied to natural gas.The general rule of thumb is that
6 where natural gas prices go,electricity prices follow.
7 Retail electricity prices are largely driven by natural
8 gas prices,which are driven by several related factors,
9 including supply &demand.We're currently experiencing
10 both rising demand and a tighter supply"13 (emphasis
11 added).The increase in occurrences of extreme weather
12 events attributable to climate change impact both supply
13 and demand.
14 As a result,increasing the fixed charge,which is
15 tied to fixed costs,is not going to provide much in the
16 form of rate stability.Conversely,if the Commission is
17 concerned about price volatility -and it should be -it
18 should give more scrutiny to the Power Cost Adjustment
19 mechanism (PCA)which relates to volatile variable costs.
20 Q.Are there other considerations the Commission
21 should take into account when establishing the customer
22 charge?
23 A.Yes.Aside from the fundamental tenet that the
24 customer charge should include only the costs of customer
25 service,metering,and billing,the Commission should
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1 consider the interplay between high fixed charges and the
2 Fixed Cost Adjustment mechanism (FCA),as well as
3 negative impacts to energy efficiency acquisition and
4 low-income customers.
5
6 II.HIGH FIXED CHARGES AND THE FIXED COST ADJUSTMENTMECHANISM
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24 13 APPI Energy.Why do natural gas and electricity go hand-in-hand?https://www.appienergy.com/whats-causing-volatility-in-the-energy-25 market/
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1 Q.What do you mean when say the interplay between
2 high fixed charges and the FCA?
3 A.The proposal to increase the customer charge is a
4 move in the direction of straight-fixed variable ("SFV")
5 rate design.Simply put,under a SFV paradigm,the
6 utility collects all its "fixed costs"in fixed charges
7 and all its variable costs in variable charges.The
8 problem with that is that anything can be considered a
9 fixed cost if looked at from a long enough time period.
10 As I note throughout my testimony,there are inherent
11 problems with SFV,or any increase to the customer charge
12 that is outside of its purpose of collecting costs
13 related to serving an additional customer.
14 On top of that,the Commission should take note that
15 SFV rate design is a form of decoupling.When all of the
16 fixed costs are paid through a fixed rate,the company's
17 revenues are not reliant on the amount of kilowatt-hours
18 sold.Thus,revenue is decoupled from sales.However,
19 this form of decoupling is not preferred because of the
20 inability for customers to control costs,as I discuss
21 below,as well as the likelihood that the utility earns
22 above its authorized revenue requirement through
23 increased customer growth.
24 In this case,the Commission should take note that
25 Avista is already decoupled,through a mechanism known as
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1 "revenue decoupling."The Fixed Cost Adjustment (FCA)
2 ensures that Avista's authorized fixed costs are
3 recovered,nothing more and nothing less.If the utility
4 over-collects the authorized amount that it needs to
5 recover its fixed cost investments (plus a rate of
6 return),customers are afforded a rebate.Conversely,if
7 the utility under-collects due to cost-effective
8 investments in energy efficiency,a surcharge is
9 assessed.This two-way arrangement ensures that both the
10 utility and its customers are protected from volatility
11 in sales.
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1 Higher fixed charges,however,represent a one-way
2 street,in favor of the utility.This is because,as
3 previously discussed,high fixed charges provide only a
4 floor for utility recovery,but there is no ceiling
5 whereby customers are provided a rebate if the utility
6 over-collects its revenue requirement.
7 If the Commission were to accept the settlement,it
8 would be authorizing a move toward SFV rate design for a
9 company that already has a decoupling mechanism in place.
10 Essentially,it would be providing the utility both a
11 belt and suspenders.
12 Q.How do high fixed charges impact recovery under
13 the FCA?.
14 A.SFV rate design,or any move in that direction -
15 by which I mean any increase in the customer charge that
16 includes costs not associated with customer service,
17 metering and billing -inherently provides a benefit to
18 the utility without a corresponding benefit to customers.
19 This is also true when considering a utility that has
20 already been granted revenue decoupling,like Avista.If
21 granted,customers could be saddled with a double
22 surcharge:the first via the increase to the customer
23 charge,and the second due to any under-collection and
24 thus surcharge via the FCA.There is no possibility for a
25 double rebate however.The best a customer could hope for
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1 is offsetting charges,with the increase in the customer
2 charge offset by a decrease in rates due to
3 overcollection and the accompanying rebate via the FCA.
4 The likelihood that this happens every year,however,is
5 miniscule.Either way,customers are always assessed a
6 surcharge via the increase in the basic charge.
7
8 III.ENERGY EFFICIENCY AND CONSERVATION
9 Q.How does the customer charge relate to energy
10 efficiency and conservation?
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1 A.The importance of energy efficiency and
2 conservation stems from the fact that not only does the
3 resource reduce individual customer bills,it reduces
4 overall system cost by reducing peak demands and avoiding
5 expensive generation and transmission upgrades.14
6 However,higher fixed charges,and thus lower energy
7 charges,means customers have less incentive to reduce
8 their electricity use because they are required to pay
9 the higher fixed charge regardless of energy use.15 As
10 noted by the National Association of Regulatory Utility
11 Commissioners (NARUC),"it may be more reasonable to
12 lower the fixed costs and increase the volumetric rate,
13 which would send a more efficient price signal."16
14 Q.How does the settlement impact energy efficiency
15 and conservation?
16 A.Because the settlement,by simply agreeing to
17 Avista's rate design proposals,significantly increases
18 the customer charge over the two-year rate plan,utility
19 customers and the utility itself will have a decreased
20 incentive to pursue energy conservation.
21 Q.How would customers have a decreased incentive to
22 pursue energy efficiency and conservation as a result of
23 the settlement?
24 A.As proposed in the settlement,an increased fixed
25 charge is accompanied by a decrease in what would have
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1 been collected in the variable charge.However,the
2 variable charge is the only one of the two in which
3 customers can control their costs.The fixed customer
4 charge remains the same no matter how much a customer
5 uses.Thus,if the fixed charge is high and the variable
6 charge is low,or lower,customers will not save as much
7 on
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20 14 Baatz,E.Everyone Benefits:Practices and Recommendations forUtilitySystemBenefitsofEnergyEfficiency,ACEEE.June 2015.21 https://www.aceee.org/research-report/ul50515SouthernEnvironmentalLawCenter,A Troubling Trend in Rate22Design:Proposed Rate Alternatives to Harmful Fixed Charges.https://legacy.uploads.southernenvironment.org/news-feed/A Troubling23TrendinRateDesign.pdf
16 NARUC Manual on Distributed Energy Resources Rate Design and24Compensation.https://pubs.naruc.org/pub/19FDF48B-AA57-5160-DBAl-
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1 their energy bill by choosing to either use less energy
2 (conservation)or investing in more efficient equipment
3 (efficiency).As a result,customers are less motivated
4 to participate in utility efficiency programs,and less
5 able to control their bills by reducing their usage.This
6 could also affect customer adoption of distributed
7 generation,with a high fixed charge extending the
8 payback period for residential investment in solar.
9 Q.How would the utility have a decreased incentive
10 to pursue energy conservation?
11 A.The utility would have a decreased incentive
12 because it must prove to the Commission that its energy
13 efficiency expenditures are cost-effective.Any
14 cost-effectiveness calculation must consider the amount
15 of savings a measure would achieve.As noted above,the
16 decreased price signal in the variable energy charge will
17 inherently lessen the desire for customers to
18 participate.As a result,when a utility plugs in less
19 anticipated (or realized)savings into their
20 cost-effectiveness equation,fewer measures will pass the
21 test with a ratio of 1.0 or higher.
22 Q.Why should the Commission be concerned about a
23 decreased incentive to invest in energy efficiency and
24 conservation as a result of the settlement?
25 A.Simply put,cost-effective energy efficiency is
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1 inherently the cheapest energy resource.It's also the
2 most reliable,since as once installed,the resource is
3 all but guaranteed to show up.Any concern about price
4 volatility should be coupled with energy efficiency as
5 the number-one solution.The price of a resource that is
6 not needed is in inherently the least volatile,as its
7 cost remains a flat $0.00.Furthermore,as commissions
8 and utilities express
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1 concern about resource adequacy and the ability to meet
2 peak load,energy efficiency and conservation is the
3 cheapest and fastest way to ensure that reliability is
4 maintained.
5
6
7 IV.LOW-INCOME
8 Q.How does the settlement relate to issues
9 concerning low-income customers?
10 A.Simply put,higher fixed charges
11 disproportionately impact low-income customers because in
12 many jurisdictions they tend to have lower than average
13 energy use.il High fixed charges increase total costs
14 for lower energy users while decreasing costs for high
15 energy users.As a result,the higher fixed charge means
16 that low-income customers will see an increased energy
17 burden (percentage of income spent on energy bills)and a
18 decrease in the ability to spend dollars in other parts
19 of the economy.
20 The impact to low-income customers is compounded
21 when taking into consideration weatherization and
22 efficiency efforts will have a significantly lower
23 benefit due to the requirement to pay the higher fixed
24 charge regardless of energy usage.For these reasons,
25 thirty-three33 groups representing consumer,low-income,
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1 environmental,and technology-specific advocates signed a
2 letter to NARUC stating,"We are also concerned that
3 imposing increased fixed charges...may stifle development
4 of nascent technology,discourage
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22 17 See Low Income Home Energy Data for FY 2017,U.S.Department ofHealthandHumanServices,p.3,showing that non-low income23householdsuse,on average,64.1 MMBTU of electricity per year,whilelow-income households use 50.4 MMBTU,and LIHEAP recipients using2453.7 MMBTU.See also Lebel,Mark et al.,Smart Rate Design forDistributedEnergyResources,Regulatory Assistance Project,November252021,p.50.
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1 innovation,reduce customer control over electricity
2 costs and disproportionately harm low-use and low-income
3 users."18
4 Q.Would an increase to the revenue requirement
5 without changes in rate design also hurt low-income
6 customers?
7 A.Yes.Any increase in costs passed onto customers
8 without a meaningful increase in weatherization,bill
9 discount,and bill assistance will disproportionately
10 impact low-income customers.That impact is compounded
11 with rate design changes that require lower energy users
12 to pay a higher share of the total costs.
13
14 V.RECOMMENDATIONS AND CONCLUSIONS
15 Q.What are your recommendations regarding the
16 settlement?
17 A.While I don't have a position on other elements
18 of the settlement,I recommend the Commission reject the
19 rate design portion and keep the customer charge at
20 $7.00/month.If the Commission accepts the settlement in
21 whole,I recommend the Commission also require the
22 following:
23 °Require Avista to alter its cost-effectiveness
24 calculation for energy efficiency to account for any
25 decrease in participation in its DSM programs as a
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1 result of the increase in the customer charge.This
2 could include instituting a 10%conservation
3 preference adder as directed by the Northwest Power
4 Act of 1980 in order to account for hard-to-
5 quantify benefits of energy efficiency.
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1 °Require Avista to increase funding for low-income
2 weatherization,and provide a bill discount to help
3 offset the increase in the customer charge for
4 low-income customers.
5 °Open an investigatory docket into the interplay
6 between the high fixed charges and revenue
7 decoupling.
8 Q.Does this conclude your testimony?
9 A.Yes it does.
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1 (The following proceedings were had in
2 open hearing.)
3 MR.RIVAS:This witness is available for
4 cross-examination.Thank you,Mr.Chair.
5 MR.MEYER:I have no cross-examination.
6 MR.BURDIN:No questions from Staff.
7 Thank you.
8 COMMISSIONER ANDERSON:Other intervenors?
9 None?Commissioners?Commissioner Hammond.
10
11 EXAMINATION
12
13 BY COMMISSIONER HAMMOND:
14 Q Since I jumped in with Mr.Ehrbar and
15 asked some questions,I feel like I need to ask you some
16 of those same questions to get both sides and I feel much
17 better seeing Mr.Rivas struggle with your last name.
18 A Of course.
19 Q I apologize,so I was glad to hear you say
20 it,so I didn't --I'm not even going to try even though
21 I think my brain says I know how to say it.
22 A Harder to read than to say.
23 Q Harder to read than to say.Thank you
24 very much,really appreciate it.Again,going back to
25 the buckets I was talking about and maybe that's too
CSB REPORTING 280 HEUSINKVELD (Com)208.890.5198 NWEC &ICL
1 simplistic,but I believe the testimony that you were
2 sponsoring today advocates that there is a limited number
3 of items that should be included in fixed cost recovery;
4 is that correct?
5 A That's correct,and that is the essence of
6 our objection to the rate design proposed and is the
7 foundation of which we base our testimony on here.
8 Q And as far as you are aware --let me ask
9 you,are you an attorney,too?
10 A Not an attorney.I went to law school.
11 Q Okay,so you're smart.You didn't take
12 the Bar,that's awful,so for purposes of this testimony,
13 are you aware of any authority or requirement in the
14 Commission history here that would prevent the Commission
15 from considering other items that are for fixed cost
16 recovery specifically related to Avista?
17 A Not aware and that is of the Commission's
18 consideration.You know,the rate design would be
19 adopted by the Commission itself as proposed in the
20 application.I don't see any rules that would prevent
21 that.We offer our viewpoint and our objections to the
22 proposed.
23 Q So with regard to the proposed fixed
24 charge that is in this case being set forth in the
25 settlement,did you take into consideration in your
CSB REPORTING 281 HEUSINKVELD (Com)208.890.5198 NWEC &ICL
1 analysis any of the potential offsets that might result
2 for variable rates or the FCA and those offsets that
3 may --I think there's an analysis in this testimony of
4 how much the customer's bill would go up.Were those
5 factors included,the offset of the FCA,the offset of
6 maybe a reduction in the variable rate?
7 A And just to clarify,we're talking about
8 changes in the basic or customer charge?
9 Q Included in the --let me see if I can
10 find the page number.Maybe that would help.I think
11 there's a reference in the testimony to --oh,yeah,on
12 page 2 of the testimony,the last sentence on page 2,it
13 says,"As a result of the increase to the revenue
14 requirement and the rate design,the average customer
15 using 927 kilowatt-hours per month would see an increase
16 to their electric bill of $13.18 a month."
17 Does that calculation take into account
18 any offsets that might occur as a result of the FCA
19 adjustments or the change in the variable?I assume you
20 used the variable rate from the proposed settlement
21 agreement in this calculation.
22 A Those numbers were taken from the Miller
23 direct offered in the application.
24 Q Okay,so the number may be different.It
25 may be higher,it may be lower,I suppose,using updated
CSB REPORTING 282 HEUSINKVELD (Com)208.890.5198 NWEC &ICL
1 numbers from the settlement agreement;is that fair to
2 say?
3 A I can't comment on that.I'm not aware at
4 this point.It's reasonable to assume that as the FCA
5 goes by annually,those numbers would change in response
6 that.
7 Q Do you have any --I don't see it in the
8 testimony,but since I asked question to the Company,I
9 think it's fair to ask you,too,so we have this
10 break-even line of 927 kilowatt-hours for the average
11 residential customer,do you have any knowledge of what
12 falls above the line,what falls below the line?Is
13 there a greater proportion of folks that fall below the
14 line,the 927,or above the line?
15 A As far as the distribution of the
16 customers,I would have to look through.I do not have
17 it off the top of my head.I presume there's some parody
18 between those numbers,but I can't say certainly.
19 COMMISSIONER HAMMOND:Thank you.That's
20 all the questions I have.
21 COMMISSIONER ANDERSON:Thank you,
22 Commissioner Hammond.
23 Any redirect?
24 MR.RIVAS:Yes,Mr.Chair,just one
25 question.
CSB REPORTING 283 HEUSINKVELD (Com)208.890.5198 NWEC &ICL
1 COMMISSIONER ANDERSON:Yes.
2
3 REDIRECT EXAMINATION
4
5 BY MR.RIVAS:
6 Q Mr.Heusinkveld,you recall a back and
7 forth between you and Commissioner Hammond regarding
8 offsets from the FCA or PCA?
9 A I do.
10 Q Is it possible for a customer to reduce
11 their volumetric usage and thus the charges included in
12 both the FCA and PCA?
13 A Yes,through behavior changes or
14 efficiency program engagement or on their own.
15 Q And is it possible for a customer to
16 reduce their monthly basic charge?
17 A No.
18 MR.RIVAS:Thank you.No further
19 questions.
20 COMMISSIONER ANDERSON:Thank you.Any
21 other questions from the other intervenors?Seeing none,
22 without objection,you may be excused.
23 THE WITNESS:Thank you Chair,
24 Commissioners.
25 (The witness left the stand.)
CSB REPORTING 284 HEUSINKVELD (ReDi)208.890.5198 NWEC &ICL
1 COMMISSIONER ANDERSON:Do we have any
2 other witnesses to call today?
3 MR.MEYER:The Company does not.
4 MR.BURDIN:No one from Staff.Thank
5 you.
6 COMMISSIONER ANDERSON:Northwest?No
7 other intervenors?
8 Thank you,and for future reference,
9 opening statements are always allowed and we will at this
10 moment also give an opportunity for any posthearing
11 comments or briefs and we can also allow for closing
12 statements.
13 We'll start with Avista,if you have a
14 closing statement.
15 MR.MEYER:Well I do,and I would like to
16 touch briefly on the opening statement,which sounded in
17 part like a closing statement,and I'll take it either
18 way.I'll comment on it.
19 First of all,the process concerns raised
20 by counsel in his opening comments,he appeared to be
21 instructing the Commission on its responsibilities to
22 entertain evidence and make sure there's a full record.
23 This Commission is fully aware of what its
24 responsibilities are under the law.
25 Secondly,on process,counsel paints a
CSB REPORTING 285 COLLOQUY208.890.5198
1 picture suggesting that it really didn't have a chance to
2 present its case.It didn't have a chance to file its
3 direct testimony before settlement discussions were had.
4 Well,that's not the way most --that's not the way
5 settlements often work.
6 What does happen in a settlement
7 discussion is that all parties,including his client,
8 have had a full and complete opportunity to participate
9 in the settlement process itself,bring forward all
10 arguments they had with reference to the basic charge and
11 they had that opportunity.
12 Not only that,they have an opportunity
13 now that a settlement has been reached and even though
14 they didn't achieve their objective to,again,challenge
15 certain elements,which they've done,the basic charge.
16 They have presented their own expert testimony.They
17 built their record.They haven't been deprived of any
18 due process.We've responded and now it's up for the
19 Commission to balance those interests.
20 In terms of the --that's process.In
21 terms of the substance,I think what you've seen here is
22 an attempt by the Company and the parties,the settling
23 parties,to reach an accommodation that would allow an
24 increase in the basic charge that nowhere exhausts that
25 bucket "of fixed charges"under any reasonable definition
CSB REPORTING 286 COLLOQUY208.890.5198
1 of fixed costs.We are well below the tipping point of
2 that bucket,if you will.
3 You've heard the percentages.This is
4 just a step and percentage-wise a relatively small step
5 in that direction and is consistent with what other
6 utilities in this jurisdiction and elsewhere are doing,
7 so this is not a wholesale adoption of straight fixed
8 variable.It is a step in that direction and for good
9 reason.I won't go into the cost justifications,but
10 it's about time is the short answer.It's about time
11 that we made some headway there.
12 The second thing I'd like to discuss and
13 that is it really wasn't touched on so much in the
14 testimony today,but in the prefiled testimony of
15 Ms.McCoy,she said this would somehow hurt low income
16 customers,and I believe the rebuttal testimony of
17 Mr.Ehrbar suggests actually quite the opposite,and
18 consistently so in prior studies,it would actually serve
19 to benefit based on our estimation based on,albeit,
20 limited data when it was last studied in '14 and '15,but
21 the analysis suggests that it does not harm,in fact may
22 benefit,low income customers to increase the basic
23 charge.
24 And lastly,given the very minuscule
25 impact that this increase in basic charge will have on
CSB REPORTING 287 COLLOQUY208.890.5198
1 the energy rate,the variable rate,a minuscule impact,
2 this will have no discernible effect on conservation
3 efforts.The Company has been very robust in its support
4 of conservation.We've made funding available to the
5 agencies and frankly,much of that funding remains
6 unspent by the CAP agencies.
7 That's of continuing concern of ours.The
8 money is there and we are --it's a part of conservation
9 that we're trying to get the money out there and get it
10 done and we hope it happens,so those are my comments.
11 Thank you.
12 COMMISSIONER ANDERSON:Thank you,Avista.
13 Staff?
14 MR.BURDIN:Nothing from Staff,
15 Commissioners.Thank you for your time and consideration
16 on this issue.
17 COMMISSIONER ANDERSON:Counsel?
18 MR.RIVAS:Nothing,Mr.Chair.We'll
19 reserve for posthearing brief.Thank you very much.
20 COMMISSIONER ANDERSON:Thank you,so last
21 asking for any posthearing briefs or any final comments
22 from anyone else here today?
23 Seeing none,if I've overlooked the
24 admission of any additional exhibits previously
25 identified in this matter,they are now hereby admitted
CSB REPORTING 288 COLLOQUY208.890.5198
1 pursuant to Rule 267.Any exhibits presented during the
2 hearing without objection are deemed admitted.No
3 objection.
4 (All exhibits previously marked for
5 identification were admitted into evidence.)
6 COMMISSIONER ANDERSON:Intervenor Funding
7 Request Rule 164,14 days to apply for intervenor
8 funding.Do you anticipate needing the full 14 days,any
9 intervenors?
10 MR.RIVAS:Mr.Chair,we could do it on a
11 more limited time frame than that if that's the pleasure
12 of the Commission.While I have my microphone on,I'm
13 not sure if I missed your call,if I was supposed to pipe
14 up for posthearing briefing,but that is our intent.
15 COMMISSIONER ANDERSON:I was under the
16 impression we had a pre-and posthearing briefing.I can
17 back up without objection and allow for that closing
18 briefing,closing statements.
19 MR.RIVAS:A posthearing written brief,
20 Mr.Chair,not statement.
21 COMMISSIONER ANDERSON:Okay,so clarify
22 that for me.What are you asking for?
23 MR.RIVAS:Just that we intend to file a
24 posthearing brief in this matter,a posthearing written
25 brief.
CSB REPORTING 289 COLLOQUY208.890.5198
1 COMMISSIONER ANDERSON:That's fine,
2 that's fine.Thank you.I'm sorry I wasn't clear on
3 that,so the 14 days,I think,is sufficient time.We
4 don't need to shorten that time up for intervenor
5 funding,without objection.Staff?
6 MR.BURDIN:No objection.
7 COMMISSIONER ANDERSON:Thank you.Yes?
8 COMMISSIONER HAMMOND:Question.
9 COMMISSIONER ANDERSON:Commission
10 Hammond.
11 COMMISSIONER HAMMONDD:Posthearing brief,
12 are we --and I put it out to the parties,what's the
13 deadline to file a posthearing brief and do everybody
14 file their posthearing briefs at the same time or is
15 there a brief and a reply?I'm just trying to set
16 procedure so everybody understands.
17 COMMISSIONER ANDERSON:When an attorney
18 is asking me the question,do you have any suggestions?
19 COMMISSIONER HAMMOND:Well,I put it to
20 the parties,but since the intervenor funding deadline is
21 14 days,I don't want to extend it too far out.I'm
22 trying to remember what the effective date request is.
23 Can you tell me,is it September 1st?
24 MR.BURDIN:It is September 1st.
25 COMMISSIONER HAMMOND:Okay,I don't want
CSB REPORTING 290 COLLOQUY208.890.5198
1 to push this too far out and get us to the last day when
2 we're having to make a decision,so I'd ask counsel,when
3 do you think you can submit a posthearing brief?
4 MR.MEYER:May I be heard?
5 COMMISSIONER ANDERSON:Please.
6 MR.MEYER:Thank you.First of all,I'm
7 happy to submit a posthearing brief on any reasonable
8 time frame.I question whether we need a posthearing
9 brief.The issues here are so limited,so well defined
10 in targeted testimony that the testimony itself could be
11 viewed as a recitation of the evidence,the arguments,
12 the conclusions,and serve essentially as the posthearing
13 brief.
14 I don't know that there's much more that
15 needs to be said in a posthearing brief.Having said all
16 that,certainly one round and I would think that --we've
17 got a September 1st date that is upon us and that's why
18 it makes it cumbersome,I think,to do much,if any,
19 briefing in this,but it's the pleasure of the Chair.
20 I'm happy to submit a brief within,say,14 days.
21 COMMISSIONER HAMMOND:Mr.Rivas?
22 MR.RIVAS:We would certainly be amenable
23 to a brief in 14 days and one round is sufficient for
24 sure.
25 COMMISSIONER HAMMOND:Staff?
CSB REPORTING 291 COLLOQUY208.890.5198
1 MR.BURDIN:Staff has no objection.We
2 sort of mirror Avista's take on this.Looking at the
3 briefs,I don't know how much more would be added with
4 posthearing briefs,but certainly,we don't object to
5 them if the party wishes.
6 COMMISSIONER HAMMOND:Idaho Forest Group?
7 MR.MORATZKA:Mr.Chair,Commissioner
8 Hammond,no position on the brief.I don't really
9 believe one is necessary,but happy to participate.
10 COMMISSIONER HAMMOND:And Walmart I see
11 back there.
12 MS.CAVIGLIA:I would echo Idaho Forest
13 Group.We don't take a position and we will participate,
14 if necessary.
15 COMMISSIONER HAMMOND:Anybody else?So I
16 think you're --I think what I heard is correct and
17 you've focused on,Chair,the briefs should be limited to
18 the issues in the dispute,which I believe is the
19 customer charge.I don't want to go far afield of
20 reopening things that haven't been contested.The ones
21 that have been contested,fine.I would recommend 14
22 dates for everybody,no reply period for anybody,and
23 then run that intervenor funding deadline on the same
24 calendar so everything is done at once.
25 If you choose to file a brief,great.If
CSB REPORTING 292 COLLOQUY208.890.5198
1 you don't,great.Understand that the briefs,we do have
2 a record and don't really need to be repeating things,
3 but if there's some argument that you feel is helpful
4 outside of that,that argument will be considered.Of
5 course,it's not necessarily factual as evidence as would
6 be the testimony,but with those ground rules,that is
7 what I would ask for,Mr.Chair.
8 COMMISSIONER ANDERSON:Thank you,
9 Commissioner Hammond.I believe the 14 days was the
10 consensus that we could have all this wrapped up in that
11 period of time,and I think that the rules of briefs are
12 apparent,so if it's not subject matter or if it's new
13 information,we'll have to give it the measure that it's
14 worth on that.
15 So with that,I do appreciate everyone's
16 attendance today and your courteous conduct.Pursuant to
17 Rule 47,representatives of parties and parties appearing
18 in a proceeding must conduct themselves ethically and
19 courteous and you have done that today and I do
20 appreciate it.
21 Any other questions from the Commission
22 itself?None.The Commission will consider this record
23 to be fully developed and we will deliberate privately
24 and render a decision as expeditiously as possible,and
25 with that,we are adjourned.
CSB REPORTING 293 COLLOQUY208.890.5198
1 (The Hearing adjourned at 10:15 a.m.)
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CSB REPORTING 294 COLLOQUY208.890.5198
1 A UTHENT I C A T I ON
2
3
4 This is to certify that the foregoing
5 proceedings held in the matter of the application of
6 Avista Corporation for the authority to increase its
7 rates and charges for electric and natural gas service to
8 electric and natural gas customers in the State of Idaho,
9 commencing at 9:00 a.m.,on Wednesday,August 2,2023,at
10 the Commission Hearing Room,11331 West Chinden Blvd.,
11 Building 8,Suite 201-A,Boise,Idaho,is a true and
12 correct transcript of said proceedings and the original
13 thereof for the file of the Commission.
14 Accuracy of all prefiled testimony as
15 originally submitted to the Reporter and incorporated
16 herein at the direction of the Commission is the sole
17 responsibility of the submitting parties.
18
19
CONSTANCE S.BUCY22CertifiedShorthand Reporter #1 7
2 3
CONSTANCE S BUCYNOTARYPUBUC-STATE OF IDAHOCOMMISSIONNUMBER1299524MYCOMMISSIONEXPIRES9-5-202425
CSB REPORTING 295 AUTHENTICATION208.890.5198