20230804AVU to Staff 1-8.pdf

AVISTA CORPORATION RESPONSE TO REQUEST FOR INFORMATION

JURISDICTION: IDAHO DATE PREPARED: 08/04/2023 CASE NO: AVU-E-23-06 WITNESS: N/A REQUESTER: IPUC RESPONDER: John Wilcox TYPE: Production Request DEPARTMENT: Accounting
REQUEST NO.: Staff-001 TELEPHONE: [phone] REQUEST: Please provide the documents, statements and other workpapers, with all formulas intact and
enabled, including source documents, used to calculate the total due of $28,288,773.72 stated on page two of Attachment A of the Application.
RESPONSE:
Please see Staff_PR_001 Attachment A for the letter from the State of Montana Department of Natural Resources. Please note we are working with the State of Montana on the “rate of return” used. See Staff_PR_001 Attachment B for the calculations of the total due of $28,288,773.72. We have noted differences between the “rate of return” in the letter and what was used in the
calculation. See Staff_PR_001 Attachment C for the schedule from the State of Montana on the
annual rates of return.
RECEIVED
Friday, August 4, 2023 2:15:42 PM
IDAHO PUBLIC
UTILITIES COMMISSION
AVISTA CORPORATION RESPONSE TO REQUEST FOR INFORMATION

JURISDICTION: IDAHO DATE PREPARED: 08/04/2023 CASE NO: AVU-E-23-06 WITNESS: N/A REQUESTER: IPUC RESPONDER: John Wilcox TYPE: Production Request DEPARTMENT: Accounting
REQUEST NO.: Staff-002 TELEPHONE: [phone] REQUEST: Please provide the documents, statements and other workpapers,
with all formulas intact and enabled, including source documents, that support the escrow account ending balance of $24,522,420.49 as stated on page one of Attachment A of the Application.
RESPONSE:
Please see Staff_PR_002 Attachment A for the escrow statement from US Bank.
AVISTA CORPORATION RESPONSE TO REQUEST FOR INFORMATION

JURISDICTION: IDAHO DATE PREPARED: 08/04/2023 CASE NO: AVU-E-23-06 WITNESS: N/A REQUESTER: IPUC RESPONDER: John Wilcox TYPE: Production Request DEPARTMENT: Accounting
REQUEST NO.: Staff-003 TELEPHONE: [phone] REQUEST: Please provide the interest rates required under the escrow agreement as described on page six of
the Application (i.e., the "rate of return of the united investment program"). RESPONSE: Please see Staff_PR_001Attachment A for the letter from the State of Montana Department of
Natural Resources. Please note we are working with the State of Montana on the “rate of return”
used. See also Staff_PR_001 Attachment C for the schedule from the State of Montana on the rates of return.
AVISTA CORPORATION RESPONSE TO REQUEST FOR INFORMATION

JURISDICTION: IDAHO DATE PREPARED: 08/04/2023 CASE NO: AVU-E-23-06 WITNESS: N/A REQUESTER: IPUC RESPONDER: John Wilcox TYPE: Production Request DEPARTMENT: Accounting
REQUEST NO.: Staff-004 TELEPHONE: [phone] REQUEST: Please provide the interest rate on the escrow account by year for each year of its existence.
RESPONSE: Please see Staff_PR_004 Attachment A for a schedule of interest by period.
AVISTA CORPORATION RESPONSE TO REQUEST FOR INFORMATION

JURISDICTION: IDAHO DATE PREPARED: 08/04/2023 CASE NO: AVU-E-23-06 WITNESS: N/A REQUESTER: IPUC RESPONDER: Liz Andrews TYPE: Production Request DEPARTMENT: Regulatory Affairs Dept.
REQUEST NO.: Staff-005 TELEPHONE: [phone] REQUEST: Please provide the Company's rationale for the carrying charge mentioned on page 2 of the
Application. RESPONSE: The Company has proposed that this regulatory asset would accrue a carrying charge equal to the
Company’s authorized cost of debt set in Case No. AVU-E-23-01 (pending Commission approval
at 4.97%) and would continue until fully amortized. The Company believes it would be appropriate to accrue a full rate of return, as the Company is required to finance these costs with debt and equity, and therefore the use of the debt return alone is conservative to the actual cost to the Company. The use of the actual cost of debt would also be conservative to that ordered in
Washington in recent deferrals as well, allowing consistent accounting treatment related to a
Washington/Idaho allocated expense.
AVISTA CORPORATION RESPONSE TO REQUEST FOR INFORMATION

JURISDICTION: IDAHO DATE PREPARED: 08/04/2023 CASE NO: AVU-E-23-06 WITNESS: N/A REQUESTER: IPUC RESPONDER: Liz Andrews TYPE: Production Request DEPARTMENT: Regulatory Affairs Dept.
REQUEST NO.: Staff-006 TELEPHONE: [phone] REQUEST: Please provide the Company's cost-benefit analysis for placing the lease payments into escrow
when the escrow account was established. Please include workpapers, with all formulas intact and enabled. RESPONSE:
The Company did not prepare a cost-benefit analysis for placing the lease payments into escrow
when the escrow account was established. As discussed in the Company’s Application for deferral of costs associated with the Montana Riverbed lease agreement (“Application”), Avista has an obligation to pay the State of Montana rent under the Hydropower Site Lease for the Noxon Rapids Project, effective January 1, 2007, that continues for the forty-five (45) year term of the lease
ending February 28, 2046, or sooner if the FERC license terminates before its scheduled expiration
in 2046. Per the initial agreement, after the first ten years of the lease (2007 - 2016) the parties were to meet to attempt to renegotiate the level of payments. These renegotiations for the riverbed lease
payment levels beyond the first 10-years began in 2016. The obligation to pay the agreed-upon level of rent, however, did not terminate after the initial ten-year period of the Site Lease, and the Company was still required to make the scheduled rent payments to the State of Montana, unless and until the parties both agree to an adjusted amount. As noted in the application at page 5, lines
9-17:
While the case between PPL and the State proceeded through the courts, Avista began making annual rent payments to the State in accordance with the settlement agreement. However, following the United States Supreme Court decision in 2010,
it appeared likely that Avista’s rental obligations would need to be adjusted. Meanwhile, from Avista’s perspective, the size of the potential refund that it believed could be required by a “retroactive” adjustment was becoming significant. Accordingly, in 2017, Avista began making its rent payments into escrow rather than directly to the State. This decision was accompanied by an Escrow Agreement
that governed the handling of funds that were paid into escrow, which was signed by
Avista, the State and the Escrow Agent. (emphasis added) Due to the on-going Northwestern Energy (Northwestern) litigation in federal court as to the non-navigability of certain reaches, and since Avista was required to continue to make the lease
payments to Montana even though the parties did not agree to what an adjusted amount should be, Avista agreed to continue making the annual payments at the original amount under protest, but thereby protecting the funds for customers by establishing an escrow account beginning March 2017.

Furthermore, as described in the Application, the payments for rent years 2016 through 2020 were put into the escrow account. In May 2021, the Parties reached a settlement and as part of that
settlement Avista would no longer make the annual payments under protest. The payments
beginning with rent year 2021 was paid directly to the State of Montana. This was the result of secondary litigation in which a Montana trial court issued an Order in 2021 in which it concluded that the Most Favored Nations clause had not yet been triggered and did not, therefore, provide a basis for disputing or reducing Avista’s annual rental rate. In addition, the Court concluded that
Avista was not entitled to a credit or refund for rent paid in any previous year, and that it was required to pay the annual full market rental rate going forward. Avista appealed that ruling to the Montana Supreme Court. The Montana Supreme Court concluded that, because the Northwestern litigation was non concluded, the Most Favored Nations clause had not yet been triggered. Accordingly, the Court found that the trial court erred in reaching the merits of the retroactivity
issue, and that the Most Favored Nations clause did not provide basis for making payments to the State into escrow. The case was therefore remanded to the trial court, and an Amended Judgement was entered on February 28, 2023.
AVISTA CORPORATION RESPONSE TO REQUEST FOR INFORMATION

JURISDICTION: IDAHO DATE PREPARED: 08/04/2023 CASE NO: AVU-E-23-06 WITNESS: N/A REQUESTER: IPUC RESPONDER: John Wilcox TYPE: Production Request DEPARTMENT: Accounting
REQUEST NO.: Staff-007 TELEPHONE: [phone] REQUEST: Please provide and describe the calculations used to generate the CPI index appearing on page
seven of the Application for each year listed. Please include workpapers, with all formulas intact and enabled. RESPONSE:
Please see the attached spreadsheet. Data was obtained from the U.S. Bureau of Labor Statistics.

AVISTA CORPORATION RESPONSE TO REQUEST FOR INFORMATION

JURISDICTION: IDAHO DATE PREPARED: 08/04/2023 CASE NO: AVU-E-23-06 WITNESS: N/A REQUESTER: IPUC RESPONDER: John Wilcox TYPE: Production Request DEPARTMENT: Accounting
REQUEST NO.: Staff-008 TELEPHONE: [phone] REQUEST: Please provide supporting documentation for all the actual annual lease payments made to the state
of Montana. RESPONSE: Please see the attached Accounts Payable vouchers for each year.