20150728AVU to Staff 20.docx

AVISTA CORPORATION
RESPONSE TO REQUEST FOR INFORMATIONJURISDICTION:IDAHODATE PREPARED:07/21/2015CASE NO.:AVU-E-15-05/AVU-G-15-01WITNESS:Karen SchuhREQUESTER:IPUCRESPONDER:David MachadoTYPE:Production RequestDEPARTMENT:State & Federal RegulationREQUEST NO.:Staff-020TELEPHONE:[phone]REQUEST:
Please provide a copy of the cost/benefit analysis or similar analysis for each capital project costing more than $3 million that the Company has included in its rate base since the last general rate case.RESPONSE:
Please see Avista's response 020C, which contains TRADE SECRET, PROPRIETARY or CONFIDENTIAL information and exempt from public view and is separately filed under IDAPA 31.01.01, Rule 067 and 233, and Section 9-340D, Idaho Code, and pursuant to the Protective Agreement between Avista and IPUC Staff dated June 4, 2015.As shown in Staff_PR_023, Avista has identified 24 ERs for which the transfers to plant (additions to rate base) allocated to Idaho exceeded $3 million in total from January 2012 through June 2015. These 24 ER names and numbers are listed below:Please note that each of Avista’s business cases includes a calculated customer internal rate of return (CIRR). We have included copies of Avista’s active business cases with Avista’s initial filing at Schuh, Exhibit No. 11, Schedule 3. Please see therein for the calculated CIRR for each business case under which an aforementioned ER is included. The CIRR is the most consistent and comparable form of economic analysis over all of the Company’s business cases. In addition to the previously provided CIRRs, we have included additional cost/benefit or similar analysis for each capital project (business case), where available. Where a capital project does not have a cost/benefit or similar analysis beyond the aforementioned CIRR, we explain why such analysis was not considered. See below for discussion of the capital projects and any related attachments.ER 1000 – Electric Revenue Blanket: This ER falls under the New Revenue – Growth business case, which addresses the costs to serve new loads for electric service. This specific ER relates to new electric service connections. This activity relates to Avista’s obligation to serve customers.ER 1001 – Gas Revenue Blanket: This ER falls under the New Revenue – Growth business case, which addresses the costs to serve new loads for gas service. This specific ER relates to new gas service connections. This activity relates to Avista’s obligation to serve customers.ER 1003 – Distribution Line Transformers: This ER falls under the New Revenue – Growth business case, which addresses the costs to serve new loads for electric service.This specific ER relates to new transformers required to provide new service to customers. This activity relates to Avista’s obligation to serve customers.ER 2055 – Electric Distribution Minor Blanket: This ER addresses minor rebuilds of distribution equipment (e.g., replacing meters, services, transformers, primary lines, etc.) as well as replacing damaged equipment. Work performed under this ER represents required capital maintenance to provide safe and reliable service to customers.ER 2059 – Failed Electric Distribution Plant – Storms: This ER addresses the replacement of crossarms, poles, and structures, as necessary, due to storms or fires on distribution and transmission lines. Work performed under this ER represents required capital maintenance to provide safe and reliable service to customers.ER 2060 – Wood Pole Management: This ER entails inspecting all Electric distribution feeders on a 20 year cycle and repairing or replacing poles or pole elements identified as requiring such work. Please see Staff_PR_020 Attachment A for a system analysis report regarding the wood pole management program, which indicates that a 10 year inspection cycle would be most advantageous to the customer from an CIRR perspective, but only slightly more so than Avista’s current 20 year cycle.ER 2484 – Moscow 230kV Sub-Rebuild 230 kV Yard: This ER addresses the need to rebuild the Moscow 230 kV Substation. This project addresses a system reliability issue. Staff_PR_020 Attachment B is a planning memorandum outlining the risks associated with not undertaking this project.ER 2535 – TCOP Related Distribution Rebuilds: This ER addresses the replacement of adding transformers. Please see Staff_PR_020C Confidential Attachment A for a TCOP report detailing the basis for the program.ER 2549 – Moscow City to North Lewiston 115kV Rebuild: This ER falls under the Transmission – Reconductors and Rebuilds business case, which reconductors or rebuilds existing transmission lines as they reach the end of their useful lives, require increased capacity, or present a risk management issue. Previous wood pole inspection had identified a number of structures along this transmission line that required reinforcement or replacement. This factor, coupled with the age of the line, indicated that a full line replacement was necessary. ER 3005 – Gas Distribution Non-Revenue Blanket: This ER addresses the replacement of sections of existing gas piping that require replacement to improve the operation of the gas system, but which are not directly linked to new revenue. Replacement of pipe occurs at the end of useful lives or upon failure of a section of the system. This capital expenditure is required to maintain system reliability and safety.ER 3008 – Aldyl-A Pipe Replacement: This ER addresses the replacement of 730 miles of pre-1987 Aldyl-A pipe in Avista’s system. Due to the tendency of Aldyl-A piping to suffer brillet-like cracking leak failures, there is potential harm to the public. As a result, Avista determined the replacement of this pipe to be necessary. The capital expenditure is driven by safety considerations. Staff_PR_020 Attachment K is a document detailing the justifications for the project scope and timeline.ER 3246 – Construct Chase Rd Gate Stn Post Falls ID: This ER addresses the construction of a gate station in Post Falls, ID, which is necessary because the system demand in the Couer d’Alene area exceeds the capacity of the existing Rathdrum gate station on a design day. The capital expenditure addresses a system reliability concern.ER 4116 – Colstrip Capital Additions: This ER represents programmatic ongoing capital expenditures associated with Units 3 and 4 at Colstrip.Talen Energy operates and maintains Colstrip on behalf of all the owners.  Each year they provide Avistawith capital project summaries. Each project has a NPV and IRR calculated where appropriate, while projects identified as a reliability or environmental compliance driven project will be identified as such and an NPV/IRR is not calculated.Avista’s share of the costs for these units is 15%, which represents Avista’s fractional ownership of Units 3 and 4. Additionally, certain common expenditures are incurred for the benefit of all four units, generally, our share of the costs for these common expenditures is approximately 10%.Please see Staff_PR_020C ConfidentialAttachments B through I for annual documentation of the capital project summaries provided by Talen Energy. A description of what each attachment includes is as follows:Attachment B – 2012 Units 3 & 4 ProjectsAttachment C – 2012 Units 1-4 Common ProjectsAttachment D – 2013 Units 3 & 4 ProjectsAttachment E – 2013 Units 1-4 Common ProjectsAttachment F – 2014 Units 3 & 4 ProjectsAttachment G – 2014 Units 1-4 Common ProjectsAttachment H – 2015 Units 3 & 4 ProjectsAttachment I – 2015 Units 1-4 Common ProjectsER 4140 – Nine Mile Redevelopment: This ER addresses the redevelopment of Avista’s Nine Mile hydro generation facility, which was based on the regulatory requirement under Avista’s FERC license to the Spokane River to restore Units 1 and 2, which had been out of service since 2005 and 2012, respectively. Please see Staff_PR_020 Attachment C and Staff_PR_020 Attachment D for the Spokane River System Hydro Assessment Project Team Recommendation and the Spokane River System Hydro Assessment Summary Report, respectively, which document the economic considerations related to the redevelopment project.ER 4149 – Base Load Thermal:The Base Load Thermal business case was established to sustain or improve the existing operating costs of the major base load generating stations at Coyote Springs 2 (other than that covered in Avista’s Long Term Service Agreement Coyote Springs 2 business case) and Kettle Falls. Staff_PR_020 Attachment M details the 53 projects mentioned above.ER 4152 – Little Falls Powerhouse Redevelopment: This ER falls under the Little Falls Plant Upgrade business case, which addresses the modernization of the Little Falls facility. The existing equipment prior to undertaking this project ranged from 60 to over 100 years old. As a result, Avista began to experience increases in forced outages at the Little Falls facility. Please see Staff_PR_020 Attachment E, which is a presentation detailing the increases in forced outages since 2004.ER 5005 – Information Technology Refresh Program: This ER provides for the refresh of information technology assets to align Avista’s information technology tools with technology lifecycles to replace these assets before they become obsolete, at which point the safe and reliable operation of Avista’s electric and natural gas operations may be compromised. Capital expenditures under this ER address information technology lifecycle replacement.ER 5006 – Information Technology Expansion Program: This ER provides for the implementation of new information technology in Avista’s operations, including, but not limited to, business process automation and technology supporting business process efficiency improvements. Project steering committees do evaluate each project to determine whether or not to implement a technology expansion project based on the perceived business needs and associated benefits that the implementation would provide. Staff_PR_020 Attachment Jdetails the 158 projects mentioned above. Due to the voluminous number of projects (many of which are low in dollar value), steering committee evaluations can be made available on a sample basis.ER 5106 – Next Generation Radio System: This ER addresses the refresh of Avista’s 20 year old land mobile radio (LMR) system used for critical crew communications and daily operations. Avista maintains a private LMR system because public providers do not provide communication coverage throughout Avista’s rural service territory. Additionally, the Federal Communications Commission (FCC) mandated that all licensees using a particular spectrum (of which Avista is an affected licensee) must migrate to spectrum efficient narrowband technology. Please see Staff_DR_020 Attachment L for further detail regarding the Next Generation Radio System.ER 5138 – Customer Information System (CIS) Replacement: This ER addresses Avista’s project that replaced the legacy customer information system with a modern customer information system. Please see Staff_PR_020 Attachment I for an overview of Avista’s Project Compass (this overview was also presented in Avista’s initial filing, as Exhibit No. 10 / J. Kensok, Avista / Schedule 1 in Case Nos. AVU-E-15-05 and AVU-G-15-01).ER 6103 – Clark Fork Implement PME Agreement: This ER addresses the implementation of the settlement agreement associated with Avista’s FERC license for the Clark Fork River. This work is mandated by FERC order.ER 7000 – Transportation Equip: This ER falls under the Fleet Budget business case. Avista’s fleet management group utilizes a vehicle replacement model (VRM) analysis program to determine which vehicles should be replaced in a given year. This program utilizes internal data to identify the replacement criteria that will enable Avista to achieve the lowest total cost of ownership over the lives of its fleet assets. Please see Staff_PR_020 Attachment F for the most recent Vehicle Replacement Summary report, which discusses the methodology in detail for achieving the lowest total cost of ownership.ER 7101 – COF HVAC Improvmt: This ER falls under the HVAC Renovation Project business case. Avista’s central office facilities (COF) were originally constructed in 1956 and the original HVAC equipment has been operating nonstop since then. Parts are no longer available for portions of Avista’s HVAC system, requiring replacement parts to be manufactured in order to perform repairs. Staff_PR_020 Attachment G includes estimates of the cost savings associated with replacing Avista’s legacy HVAC system with a modern, energy efficient system. Staff_PR_020 Attachment H details the additional workspaces that Avista was able to incorporate into its COF in tandem with the HVAC renovation.ER 7126 – Long term Campus Re-Structuring Plan: This ER addresses updates to Avista’s central office facilities in order to more efficiently utilize Avista’s COF. This project also allowed the HVAC renovation to be accomplished continuously, rather than in a staged process, which contributed efficiencies to the HVAC renovation. Staff_PR_020 Attachment G includes estimates of the cost savings associated with the facilities updates included in the campus restructuring. Staff_PR_020 Attachment H details the additional workspaces that Avista was able to incorporate into its COF in tandem with the HVAC renovation.Due to the voluminous nature of the Attachments they are being provided in electronic format only.