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HomeMy WebLinkAbout20230518AVU to Staff 4 Attachment 3.pdfStaff_PR_004 Attachment 3 Page 1 of 6 Avista Corporation Depreciation Study Data Questions GENERAL QUESTIONS • Why was there no gross salvage or cost of removal (COR) recorded for the 392 and 396 accounts across any of the functions? Do you have a new practice in place? We did notice that there was a large outstanding balance sitting in 108000 for Vehicle Removal projects in 2021. We unitized that project in 2021 and that moved the dollars from 108000 to 108001. At that point this is when cost of removal and salvage would have been recognized. That amount was about $4.5 million. • Cost of removal amounts increased in 2020 in several hydro production accounts compared to other years. What is the reason for this? Most of this is related to unitizing a very large Hydro project for our Nine Mile Dam in 2020(approximately $68 million). We had charges to 108000 from 2013-2017, but those don’t become cost of removal until the project was unitized., in Some examples are: o Account 331 Structures and Improvements – COR of $1,411,572.75 o Account 332 Reservoirs, Dams and Waterways – COR of $646,301.18 o Account 333 Water Wheels, Turbines and Generators – COR of $2,958,167.57 o Account 334 Field Measuring and Regulating Station Equipment – COR of $1,785,832.86 o Account 335 Miscellaneous Power Plant Equipment – COR of $212,088.99 • There has been little investment in solar generation since the last depreciation study. Does the company have plans to increase solar generation in the coming years? From what I’ve been able to gather, sounds like we will have more solar generation, but at this time we don’t know what that will look like. Also was told that if we do have more solar generation it won’t be from Avista owned assets. • In the data file “Item 1 – Depreciation Study Plant 2020” there are entries that include AFC in their title. What does the acronym AFC stand for? AFC is actually supposed to be AFUDC. This is to account for the difference in our AFUDC rates with the commissions versus the FERC rates. We have higher AFUDC rates approved by the commissions versus what is allowed by FERC. So we are booking the difference to a regulatory asset. You will see AFC accounts for each depreciation group we have except for land and vehicle accounts . Are these amounts depreciable? Yes they are depreciable and the rates are the same as the main depreciation group it is aligned with. • There are a number of new plant subaccounts included in the data (see list with proposed names below). Will you need separate depreciation rates for these accounts, or can they be included with previously existing accounts? o 331150 – Structures and Improvements – Conservation – Fisheries – Can be included with previously existing accounts o 353100 – Station Equipment – Step Up Transformers – Can be included with previously existing accounts. o 370121 – Meters – Washington AMI. I believe we had a depreciation rate set up for the meters in the last depreciation study. It is currently 7.03% Staff_PR_004 Attachment 3 Page 2 of 6 o 371003 – Electric Vehicle Charging Stations. This account was set up to specifically track assets installed in a building that will be self sustaining. Here is an explanation of the project: Leverage Avista's participation in the Eco-District by utilizing the net-zero, carbon free Catalyst building to evaluate how types of net-zero, carbon free developments impact the energy production and delivery system. This isn’t relating to electric vehicles, it’s more like equipment in our distribution system.  Follow up question: What assets are included in this particular subaccount? Are the assets similar to one of the other subaccounts for 371? o 371030 – Electric Vehicle Charging Stations – Public Can be included with previously existing accounts. o 371040 – Electric Vehicle Charging Stations – Fast Chargers Can be included with previously existing accounts. ELECTRIC PLANT Account 315 Accessory Electric Equipment • What was the reason for the cost of removal amount in 2019 for $133,714.05? We unitized a large project for Kettle Falls related to Rewinding the Steam Turbine Generator. We unitized the project in 2019 so the 108000 became cost of removal in 2019. Were these related to the retirements in 2016 or 2017? The 108000 was charged in 2017. Account 331 Structures and Improvements • What caused the high cost of removal amount recorded in 2020 for $1,411,572.75? See the response on page 1 for this account. • What was the reason for the increased investment in this account from the years 2014-2019? Most years in that range had well over $5 million of additions. I’m not sure I understand this question. I’m seeing in that range about $48 million of additions in this account. Is this supposed to mean we didn’t have over $5 million of additions in that range? I looked at the additions and $17 million of this is made up of the Nine Mile Unit 1 and Unit 2 upgrade($10 million) and a new gantry crane at Cabinet Gorge($7 million) because it had multiple failures to lift specific equipment/material at the plant. There were also 8 different projects over $1 million relating to our dams at Noxon, Nine Mile, Cabinet Gorge and Long Lake. If you need specifics on those projects I can send that to you. Account 332 Reservoirs, Dams and Waterways • What caused the $1,613,209.86 retirement from vintage 1994 and the $1,758,387.00 retirement from vintage 1991 at Nine Mile Falls in 2018? There were two projects related to one another called Nine Mile Redevelopment. One project was to improve the sediment bypass system and the other was to replace the intake deck at Nine Mile. We had someone devoted to working on the projects at Nine Mile and they worked through retiring the assets related to these projects. • Why were there no retirements in 2020? Don’t know Staff_PR_004 Attachment 3 Page 3 of 6 • Does the $646,301 of cost of removal in 2020 relate to retirements in prior years? See the response on page 1 for this account, but yes the retirements happened in previous years. Account 333 Water Wheels, Turbines and Generators • What was the reason for the cost of removal amount in 2019 for $508,119.08? This was related to a project to modernize our Unit 2 at Little Falls. We installed a new generator, turbine and shaft. Were these related to the retirements in prior years such as 2016, 2017 or 2018? Yes the retirements happened in 2017 and 2018. Account 353 Station Equipment • Investment in this account has increased in 2019 and 2020 as compared to other years. What is the reason for the recent increased investment? In 2019 there were really three projects that resulted in the increase. We had to install a new 250 MVA auto transformer at our new Saddle Mountain Substation for $3 million and we had excessive voltages in our southern region or more specifically at our N. Lewiston substation and installed two 50 MVAR air core reactors for $7.7 million and we were rebuilding our Westside substation for $3.1 million. In 2020 work continued to build our new Saddle Mountain substation for about $18 million. • What was the reason for the relatively young retirements in 2020 from vintage 2005 of $2,572,925.49 and $1,430,513.29 from the Coyote Springs 2 substation? We had one single phase step up transformer that failed at Coyote Springs. We decided to install 3 single phase transformers to replace the one single phase transformer. We have put a claim with our insurance company to get insurance proceeds for the failed transformer but looks like we have been denied. Account 355 Poles and Fixtures • What caused the retirements in 2017 for $1,489,941.28 and in 2018 for $1,955,103.96 to be so much higher than other years? Was there a cause for these higher retirement levels? We were rebuilding many transmission lines which also resulted in us putting in many new poles. Looks like we received many property removal notices to remove the old poles. Account 356 Overhead Conductors and Devices • What caused the high cost of removal amount recorded in 2020 for $651,729.90? Does some of the cost of removal relate to prior year retirements? This was from us rebuilding transmission lines as mentioned directly above. Some of the retirements did happen in 2019, but also in 2020. Account 361 Structures and Improvements • What was the reason for the $6,839,151.94 addition to the Downtown Network Operations? We put in a new operations office and warehouse building for the Downtown Network Crew who were working at Post St. and several other sites around downtown. This consolidated everyone to one building. Account 365 Overhead Conductors and Devices Staff_PR_004 Attachment 3 Page 4 of 6 • What was the reason for close to $30 million of additions in 2017 when most years additions are in the $10-$15 million range? I think this was more of a timing of when work was done since I don’t see anything specific that really increased the spend in 2017. Account 366 Underground Conduit and Account 367 Underground Conductor+ • Why was there no gross salvage recorded in years 2016-2020 when there was gross salvage recorded every year prior? I think this may be due to us changing how we unitize. We used to unitize based on actuals, but now unitize based on estimates. Unitizing based on actuals used the charges to allocate the charges to retirement units where now we get as builts from our work management system to populate the estimates and the charges get allocated across those as builts in the estimates. I’m not positive as I took over the fixed asset role in 2017. Account 368 Line Transformers • Retirements for this account are at much lower levels post-2013 than they were during 2013 and prior. What is the reason for this change in retirement amounts? Are line transformer retirements being made to the incorrect plant account? Has there been less of a focus on replacing line transformers in recent years? I don’t know the answer to this. Unfortunately everyone who worked in our department at that time has left. There were some large retirements to this account during that time and ever since it looks like we are getting retirements from our work management system and its calculating the value on the Handy Whitman index and then retiring those across numerous vintages. Looks like the large retirements were done specifically and retired from one vintage. Account 370 Meters • Is it correct that new plant account 370121 contains AMI meters installed in Washington? Yes we set up a new account to track AMI meters as we had to seek commission approval. We hadn’t gotten commission approval prior to installing the meters. Are you planning on installing AMI meters in any other jurisdictions? There has been talk about putting the meters in Idaho, but there is no definite timeline for doing so. • Retirements increased in 2019 and 2020. Is this due to the AMI replacements? Yes we were retiring the old legacy meters as we were installing AMI meters. Are there any other reasons why there might be significant retirements in these two years? No • Is the plan to continue to add the standard meters in the Washington district as well as the new AMI meters? We have a few locations that did not convert to AMI meters but it is not very much. Is there a plan to eventually shift to only adding AMI meters in Washington? I believe that is the plan • Why have there been so few retirements made recently to the Idaho standard meters? Does this type of meter not get replaced very frequently? It doesn’t get replaced as much as the AMI meters will. We also stopped the practice of retiring a whole family of meters when we see failures. We just now retire the failed meters. Account 373.4 Street Lighting and Signal Systems – High Pressure Sodium Vapor Staff_PR_004 Attachment 3 Page 5 of 6 • What caused the large amount of retirements for $3,078,734.98 in 2017 and for $1,405,647.70 in 2018 to be so much higher than other years? We had a program in place to replace the sodium vapor lights to LED lights in those years. GAS PLANT Account 376 Mains • What caused the retirements for $6,719,230.57 in 2019 to be so much higher than other years? We had a backlog of retirements we processed in 2019 that did not come through our work management system. Mostly these were Property Removal Notices from Contractors who were replacing gas mains. • Why are the cost of removal amounts for years 2017-2020 so low compared to years prior? We haven’t been unitizing a lot of gas projects so the Cost of Removal is most likely sitting in RWIP. It would become Cost of Removal once we unitize the project. That’s just how our system works. Account 379 Measuring and Regulating Station Equipment – City Gate • What caused the retirement for $92,769.31 in 2018 from vintage 1997 related to the Indian Trail City Gate (Kettle Falls Line)? Our Existing Indian Trail Gate Station Is Becoming land Locked By Development. It Has Been Determined the Best Course Of Action Is To Build A New Gate Station And Eventually Reroute The Kettle Falls Feeder Around The Indian Trail • What caused the retirement for $69,488.31 in 2018 from vintage 2005 related to the Moscow Town Border City Gate and Odorizer? Moscow City Gate Station-replace failing obsolete gas telemetry equipment and instrumentation (AUTosol RTU) with new devices to provide reliable measurement and telemetry Account 380 Services • Why are the cost of removal amounts for years 2017-2020 so low compared to years prior? Same reason as 376 above. Account 381 Meters • What caused the increase in retirements each year starting in 2009? I assume this is supposed to be 2019, but this is part of the AMI project but on the gas side. We were replacing the AMR devices with ERT’s (Encoder, Receiver, Transmitter device) in Washington so we can read the gas meters remotely. • What caused the higher cost of removal in 2019 and 2020? We unitized some larger meter projects that resulted in Cost of Removal being recognized at that time. Also due to us replacing the AMR devices. Account 385 Industrial Measuring and Regulating Station Equipment • Why were there no retirements, cost of removal, or gross salvage from years 2012-2017? I don’t think we were getting property removal notices to retire the assets during this time. I believe the thought was the meter set assemblies were coming through our regular meter retirements Staff_PR_004 Attachment 3 Page 6 of 6 which wasn’t the case. This has been communicated to gas distribution that they need to submit property removal notices. Doesn’t look like there is much in terms of cost of removal or salvage in those years we did have those costs, but we really haven’t been unitizing these projects so the costs could be sitting in a project and won’t become cost of removal or salvage until we unitize. COMMON PLANT Account 390.10 Structures and Improvements – Company • What caused the retirements in 2018 for $1,173,828.00 with vintage 2005, for $802,477.50 with vintage 2009, for $741,967.00 with vintage 2006 and for $729,590.00 with vintage 2008 related to the central operating facility? We replaced the HVAC and Air Conditioning system at our corporate office. This was done floor by floor and included multiple projects. Will need to find out why we retired HVAC from these vintages. I’m going into the office on Friday to see if I can find out why they weren’t retired from earlier vintages. Account 392.50 Transportation Equipment – Other • What caused the additions for $1,029,125.63 in 2018 when additions in other years were significantly lower? Over half of this related to an avionics upgrade for the airplane we were leasing but purchased. We created a separate account for the airplane and these charges should be moved to that new account once we unitize the project.