20230330AVU to Staff 1-7.pdf

AVISTA CORPORATION
RESPONSE TO REQUEST FOR INFORMATION

JURISDICTION: IDAHO DATE PREPARED: 03/24/2023
CASE NO: AVU-E-23-03 WITNESS:
REQUESTER: IPUC RESPONDER: Tia Benjamin
TYPE: Production Request DEPARTMENT: Regulatory Affairs
REQUEST NO.: Staff-001 TELEPHONE: [phone]

REQUEST:

Please provide workpapers in electronic format with links intact and formulae enabled that support
the table of values shown on pages 4 and 5 of the Application. Please explain how the Company
applied the principle of average costing for these calculations.

RESPONSE:

The values provided in the table on page 4 of the Application, come directly from the cost work
papers derived from the Company’s Maximo work management system. The proposed costs were
provided with this filing. The present costs are from last year’s filing and are being provided in
Staff_PR_001 Attachment A. Avista has provided an example of the calculations that make up the
costs in the work orders in Staff_PR_002 Attachment A as well as a description of how the costs
are derived by expense category.

The table on page 5 presents actual costs of materials as an example of the increase in costs Avista
is experiencing. Avista has provided actual invoices in Staff_PR_003 through Staff_PR_005 as
examples of these actual costs which go into the Maximo work management system.

RECEIVED
2023 March, 30 4:28PM
IDAHO PUBLIC
UTILITIES COMMISSION
AVISTA CORPORATION
RESPONSE TO REQUEST FOR INFORMATION

JURISDICTION: IDAHO DATE PREPARED: 03/28/2023
CASE NO: AVU-E-23-03 WITNESS:
REQUESTER: IPUC RESPONDER: Tia Benjamin
TYPE: Production Request DEPARTMENT: Regulatory Affairs
REQUEST NO.: Staff-002 TELEPHONE: [phone]

REQUEST:

Please explain the following aspects of the Work Order Cost Estimates provided as pages 35 to 50
of the Application:

a. Please confirm whether these are actual work order costs, or hypothetical estimates;

b. Please explain how the adjusted total for the first table matches the overall total of the second
table for each work order, given that the first table shows labor, material, and overhead costs,
while the second table lists only material costs;

c. Many of the individual Work Order Cost Estimates include additional worksheet calculations
that divide the total cost by seemingly arbitrary number of units to calculate a unit cost. Please
explain and show how the number of units is properly associated with the cost of each work
order;

d. The Work Order Cost Estimates on pages 40 and 47 include the calculation of a weighted
average for transformer costs. Please explain how the weighting was determined and provide
supporting worksheets; and

e. The unit costs for "OH" transformers are markedly different than the unit costs for "pad"
transformers of the same rating. Please explain why there is a difference.

RESPONSE:

a. The costs presented in the work orders of this Application use actual costs for a standard
designed job. Avista has built a standard designed job to represent a typical scenario in our
Maximo work management system for each cost component. This standard job is run to
capture current actual labor and materials costs at our current overhead rates for a typical
scenario of each type of work. When a workorder is created, factors such as the location, drive
time, vehicle miles will vary. Avista’s work management system is constantly being updated
to keep costs as current as possible based on recent costs the Company has experienced.

b. The first table in the work order cost estimates presents the total labor, materials, tools, and
overhead costs for each standard designed job. The second table is a list of compatible units.
Each compatible unit is allocated a portion of the costs from each category in the table above.
Please see Staff_PR_002 Attachment A for an example with the detailed components and a
summary table using the Secondary Pole Fixed Cost work order as an example.

The following table demonstrates how these components are applied to each compatible unit.

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The material cost of a compatible unit is typically a unit and the minor required assembly
items. In this case, the 35PCL4 E \ OH \ PL is a 35 foot pole and the bolts and washers. The
1RH E \ OH \ SR is a heavy neutral rack with the bolts, washers and insulator spool.

The labor cost is based on the labor hours per compatible unit and the current labor rate in the
work order system.

The tool cost field applies vehicle costs to the work order. A portion of the vehicle costs is
applied to each compatible unit.

Avista tracks and applies various overheads to all capital work. This column applies the
overheads to each compatible unit. Avista uses a six month averaging to smooth the changes
in the overhead rates and not overly burden any one customer due to a short term change in the
rate.

c. Each calculation is taking the work represented by the work order and determining a single
unit cost, such as per lot or per foot. The inputs are based on the informed judgement of
employees within the operations department based on recent construction experience. For
example, the Development work order represents a typical thirty lot development. To
determine the per lot cost, it must be divided by 30. An example by foot can be found on the
OH Primary Variable work order, this work order represents a typical job that would install a
350 foot overhead line, therefore, to develop a per foot cost, the total must be divided by 350.

d. The transformer cost calculations are applying a spread of the sizes of transformers that
generally exist in the field to best apply the costs. For example, there are fewer 100KVA
transformers installed then 15KVA so the Company applies a weighted allocation of the costs
in order to accurately represent the actual makeup of the transformers on the system.

e. There are a couple factors affecting the cost of pad mount (pad) transformers being more costly
than overhead (OH) transformers. First, pad mount transformers are larger than the overhead
due to trying to fit on a standard foundation. Also, because pad mount transformers are on the
ground and do not get as much cooling, they require more oil and added heat sink features. All
of these factors drive cost as it requires more material.

Another major factor is supply and demand. Most utilities are leading with underground for
new construction. This drives higher demand on the pad mount transformers which is
exceeding supply. This results in a higher cost.

Material Labor Labor Labor Tools
Cost Hours Rate Cost Cost OH Cost CU Total
IRHE \OH \SR $84.31 0.62 $49.47 $30.67 $13.02 $48.38 Sl 76.38
35PCL4 E \OH \ PL $600.12 10.01 $49.47 $495.19 $210.39 $493.46 Sl ,799.16
$684.43 10.63 $525.87 $223.41 $541.83 Sl ,975.54
AVISTA CORPORATION
RESPONSE TO REQUEST FOR INFORMATION

JURISDICTION: IDAHO DATE PREPARED: 03/28/2023
CASE NO: AVU-E-23-03 WITNESS:
REQUESTER: IPUC RESPONDER: Chad Markel
TYPE: Production Request DEPARTMENT: Supply Chain
REQUEST NO.: Staff-003 TELEPHONE: [phone]

REQUEST:

Please provide Company invoices showing the Company's purchases of 25 KVA transformers for
the past two years, whether "OH" or "pad" or some other type. For each invoice, please include the
vendor name, item description (including specified standard), size, quantity, and price or provide
separately if not indicated on the invoices.

RESPONSE:

Please see Staff_PR_003 Attachment A for a sampling of invoices for 25 KVA transformers from
2021 and 2022. Due to the voluminous nature of providing all invoices through the two year
period, the company has provided a sampling throughout the two years to demonstrate the increase
in cost over time.

Note that the vendor changed in mid-2022. The recent nation wide supply chain disruption has hit
transformers especially hard. There have been several factors that have affected the transformer
industry, please see Staff-PR-003 Attachment B for an infographic discussing the drivers of
transformer cost increases.

Prior to mid-2022, Avista sourced transformers from ERMCO. ERMCO was created by Electric
Co-ops in the late 1960s to manufacture transformers. It later expanded to offer transformers to
investor-owned utilities. Recently, due to the industry shortage of transformers, ERMCO made the
decision to go back to only supplying their co-ops, leaving many utilities to have to find a different
source for transformers. The low supply and high cost of transformers is affecting many Utilities,
not just Avista.

AVISTA CORPORATION RESPONSE TO REQUEST FOR INFORMATION

JURISDICTION: IDAHO DATE PREPARED: 03/24/2023 CASE NO: AVU-E-23-03 WITNESS: REQUESTER: IPUC RESPONDER: Chad Markel TYPE: Production Request DEPARTMENT: Supply Chain
REQUEST NO.: Staff-004 TELEPHONE: [phone] REQUEST:
Please provide Company invoices showing the Company's purchases of 50 KVA transformers for the past two years whether "OH" or "pad" or some other type. For each invoice, please include the vendor name, item description (including specified standard), size, quantity, and price or provide separately if not indicated on the invoices.
RESPONSE: Please see Staff_PR_004 Attachment A for a sampling of invoices for 50 KVA transformers through 2021 and 2022. Due to the voluminous nature of providing all invoices through the two
year period, the company has provided a sampling throughout the two years to demonstrate the
increase in cost over time.
AVISTA CORPORATION RESPONSE TO REQUEST FOR INFORMATION

JURISDICTION: IDAHO DATE PREPARED: 03/28/2023 CASE NO: AVU-E-23-03 WITNESS: REQUESTER: IPUC RESPONDER: Chad Markel TYPE: Production Request DEPARTMENT: Supply Chain
REQUEST NO.: Staff-005 TELEPHONE: [phone] REQUEST:
Please provide Company invoices showing the Company's purchases of 3-inch Sweep PVC products for the past two years. For each invoice, please include the vendor name, item description (including specified standard), size, quantity, and price or provide separately if not indicated on the invoices.
RESPONSE: Please see Staff_PR_005 Attachment A for a sampling of invoices for the 3-inch PVC sweep through 2021 and 2022. Due to the voluminous nature of providing all invoices through the two
year period, the company has provided a sampling throughout the two years to demonstrate the
increase in cost over time.
AVISTA CORPORATION RESPONSE TO REQUEST FOR INFORMATION

JURISDICTION: IDAHO DATE PREPARED: 03/30/2023 CASE NO: AVU-E-23-03 WITNESS: REQUESTER: IPUC RESPONDER: Tia Benjamin TYPE: Production Request DEPARTMENT: Regulatory Affairs
REQUEST NO.: Staff-006 TELEPHONE: [phone] REQUEST:
In its Application, the Company provides a summary of the cost changes for the primary, secondary, service, and transformer average costs. Application at 4. For each of the proposed charges in this table, please provide the following:
a. The basis and/or source of information used to determine the amounts;
b. A breakdown of each of the costs by cost category (i.e. direct labor, direct material, direct vehicle cost, indirect/overhead costs, etc.)
c. Evidence such as quotes, invoices, or other source documents used in determining the amounts;
d. Workpapers that show how the amounts were calculated with inputs identified by their source and with all formula enabled. RESPONSE: Please see Staff_PR_002. The Company has provided an example of the breakdown of cost components and calculations in a workorder. Due to the voluminous nature of providing this for
every workorder and every cost component, Avista has provided an example. Please also see
Staff_PR_003 through Staff_PR_005 for actual invoices over the past two years, for transformers and 3-inch PVC sweeps, as examples.
AVISTA CORPORATION RESPONSE TO REQUEST FOR INFORMATION

JURISDICTION: IDAHO DATE PREPARED: 03/30/2023 CASE NO: AVU-E-23-03 WITNESS: REQUESTER: IPUC RESPONDER: Tia Benjamin TYPE: Production Request DEPARTMENT: Regulatory Affairs
REQUEST NO.: Staff-007 TELEPHONE: [phone] REQUEST:
For any overhead rates used in the calculation of the cost amounts in the previous request, please provide the following: a. A description of how the overhead rates are calculated and why they are appropriate for applying to the direct cost amounts;
b. The inputs, the source of the inputs, and any evidence validating the inputs used to calculate the
overhead rates. c. Workpapers that show how the amounts were calculated with inputs identified by their source and with all formula enabled.
RESPONSE:
Please see Staff_PR_007 Attachment A for the calculation which averages the six months of overheads by category which are applied to the work orders.
Please see Staff_PR_007 Attachment B for the Overhead Policy which gives an overview of how the different categories are managed and applied.