20150812AVU to Staff 64 Attachment A.pdf

Exhibit No. ___(DFK-1T)

BEFORE THE WASHINGTON UTILITIES AND TRANSPORTATION COMMISSION

DOCKET NO. UE-15______
DOCKET NO. UG-15______

DIRECT TESTIMONY OF
DON F. KOPCZYNSKI
REPRESENTING AVISTA CORPORATION

Staff_PR_064 Attachment A Page 1 of 17
Exhibit No. ___(DFK-1T)
1
III. ADVANCED METER INFRASTRUCTURE (AMI) PLAN 2
Q. Please describe the Company’s plans for the implementation of advanced 3
metering infrastructure (AMI) in its Washington service territory? 4
A. The Company has entered the initial planning phase of a program to deploy 5
advanced meters for its electric and natural gas customers in its Washington service area. 6
The Washington advanced metering project will build on the Company’s experience with 7
automatic meter reading (AMR) in Idaho and Oregon, and advanced metering infrastructure 8
(AMI) in Pullman, Washington, to provide direct customer and operational benefits to all of 9
Avista’s Washington operations. The project, which will encompass approximately six years 10
beginning in 2015, will deploy advanced meters to approximately 253,000 electric 11
customers, and 155,000 natural gas customers. 1 12
Q. What is advanced metering infrastructure? 13
A. Advanced metering infrastructure includes advanced meters that are digital 14
meters capable of two-way communication and which are equipped with the ability to 15
measure the incoming and outgoing flow of electricity from a customer’s premises in 16
configurable intervals that range from 5 minutes to an hour. This communication capability 17
means the meter can remotely transmit energy-use information to the utility and the 18
customer, and can also receive and respond to signals sent from the utility to the meter. 19
Advanced meters themselves are only part of an integrated metering system. That is, they 20
must be connected with specialized communication networks and information management 21
systems in order to deliver value to the consumer. This entire system of meters, 22
1 These numbers reflect the estimated number of customers who will receive meters through the course of the six-year deployment period.
Direct Testimony of Don F. Kopczynski
Avista Corporation Docket Nos. UE-15___ & UG-15___ Page 1

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Exhibit No. ___(DFK-1T)
communications, and digital hardware and software systems is referred to as advanced 1
metering infrastructure. 2
Q. Please explain the difference between meters used for automatic meter 3
reading and advanced metering? 4
A. Automatic meter reading technology, as deployed in the Company’s Idaho 5
and Oregon service territories, records energy consumption and transfers that data, usually 6
monthly, from the meter to the utility (one-way communication). Data transmittal occurs via 7
specialized communication networks, or by mobile collection using a data receiver mounted 8
in a vehicle or a walk-by handheld system. 9
Advanced meters, also known as Smart Meters, are capable of two-way 10
communication and transmit the incoming and outgoing flow of energy from a customer’s 11
premises in configurable intervals that range from five minutes to an hour. This 12
communication capability means the meter can remotely transmit energy use information to 13
the utility and the customer, and can also receive and respond to signals sent from the utility 14
to the meter. Advanced meters can support the implementation of a variety of load reduction 15
and energy saving programs that are beyond the capability of automatic meter reading 16
systems. 17
Q. Will the Company replace all of its electric and natural gas meters as 18
part of this plan? 19
A. All of the existing electric meters, the majority of which are conventional 20
electro-mechanical meters, will be replaced under the project with a new advanced meter, as 21
shown in Illustration No. 1, below. 22
23
Direct Testimony of Don F. Kopczynski
Avista Corporation Docket Nos. UE-15___ & UG-15___ Page 2
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Exhibit No. ___(DFK-1T)
Illustration No. 1 1
Electro-Mechanical Meter Advanced Digital Meter 2
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Existing natural gas meters will be upgraded with a new digital communicating 10
module referred to as an “Encoder Receiver Transmitter” or “ERT”, as shown in Illustration 11
No. 2. The natural gas meter itself, will not replaced. 12
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Illustration No. 2 14
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Retrofitting Natural Gas Meter Index with ERT 20
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Direct Testimony of Don F. Kopczynski
Avista Corporation Docket Nos. UE-15___ & UG-15___ Page 3
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Exhibit No. ___(DFK-1T)
Q. Has the Company tracked national trends in the deployment of smart 1
metering systems? 2
A. Yes, the effort of utilities to improve customer satisfaction and deliver 3
operational benefits, coupled with advances in metering technology, have helped propel a 4
trend toward digital metering across the United States. The Energy Information 5
Administration2 reported that in 2012, 533 U.S. utilities had installed over 43,000,000 6
advanced meters. According to the September 2014 report by the Edison Foundation 7
Institute for Electric Innovation, on “Utility-Scale Smart Meter Deployments:” 8
Smart meters are playing a critical role in shaping the electric grid of 9
tomorrow and enabling the integration of new technologies and innovations 10
across the grid. As the power grid evolves into a broad platform for 11 integrating new energy services and technologies, the ability to connect 12 legacy assets and systems and integrate new ones is critical; smart meters are 13
supporting this evolution. In addition, the data collected by smart meters (or 14
automated metering infrastructure (AMI)) opens the door for greater 15
integration of new resources and new energy services for customers. 16 17 The report documents the levels of deployment of advanced electric meters in the 18
United States over the past several years, shown below in Illustration No. 3. The Illustration 19
shows deployment levels increasing markedly from only seven million in 2007, to a level of 20
50 million by July 2014. 21
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2 Energy Information Administration. Frequently Asked Questions: How many smart meters are installed in the U.S. and who has them? http://www.eia.gov/tools/faqs/faq.cfm?id=108&t=3
Direct Testimony of Don F. Kopczynski
Avista Corporation Docket Nos. UE-15___ & UG-15___ Page 4

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Exhibit No. ___(DFK-1T)
Illustration No. 3 1
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The report also notes the rate of penetration of advanced electric meters at 43 percent 10
for residential applications, and depicts the degree of penetration state by state by 2015, as 11
shown in Illustration No. 4 below. A copy of this report is attached as Exhibit No.___(DFK-12
3). 13
Illustration No. 4 14
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Direct Testimony of Don F. Kopczynski
Avista Corporation Docket Nos. UE-15___ & UG-15___ Page 5
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Exhibit No. ___(DFK-1T)
In the United States, the number of deployment projects for advanced meters is 1
expected to reach 260 in 2016, double the number of deployment projects in 20093. The 2
penetration of advanced meters in the United States is forecast to range from 50% to 70%4 3
by year 2020. 4
Closer to home, our largest neighboring cooperative utilities with adjacent service 5
territories – Inland Power and Light and Kootenai Electric Cooperative – either have 6
installed advanced metering or are in the process of doing so. Elsewhere in Washington 7
State, Tacoma Public Utilities has deployed advanced metering and Seattle City Light is in 8
the process of selecting the advanced metering systems they will be placing into service. 9
Q. Have the policies of state and federal government and regulatory 10
organizations contributed to this trend in the deployment of advanced meters? 11
A. Yes. The federal Energy Policy Act of 20055 required states to evaluate new 12
electricity standards, which included “smart metering,” and to evaluate whether these new 13
standards should be adopted as requirements for state regulated electric utilities. In addition 14
to federal policies, several states (e.g. California) have required utilities to implement 15
advanced metering programs. Policies supporting the deployment of advanced metering 16
have also been developed by organizations such as the National Association of Regulatory 17
Utility Commissioners (NARUC). In 2007, NARUC passed a resolution to eliminate 18
regulatory barriers to the broad implementation of advanced metering infrastructure.6 The 19
resolution identified the value of advanced metering in achieving significant utility 20
3 Leveraging Business Intelligence and Analytics to Improve Performance. Presentation by Gartner Research made to Avista, September 2014. 4 From Pike Research in 2012, as cited from Elster presentation made to Avista in 2015. 5 Energy Policy Act §§ 125(a); 1252(a); and 1254(a) all codified at 16 U.S.C 2621(d)(11-15). 6 Resolution sponsored by the Committee on Energy Resources and Environment and Adopted by NARUC Board of Directors on February 21, 2007.
Direct Testimony of Don F. Kopczynski
Avista Corporation Docket Nos. UE-15___ & UG-15___ Page 6

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Exhibit No. ___(DFK-1T)
operational cost savings in the areas of outage management, revenue protection and asset 1
management. The resolution also called for advanced metering business case analyses to 2
identify cost-effective deployment strategies, endorsed timely cost recovery for prudently 3
incurred expenditures, and made additional recommendations on rate making and tax 4
treatment of such investments. A copy of the resolution is attached as Exhibit No.___(DFK-5
4). 6
Q. What are Avista’s objectives for its Washington advanced metering 7
project? 8
A. Avista is committed to achieving a greater degree of customer satisfaction, 9
and offering information and choices that help customers better understand and manage their 10
energy costs. Advanced metering supports these goals by enabling a range of benefits that 11
will improve the quality and cost-effectiveness of services they receive from Avista. These 12
benefits include near real-time energy use information, energy alerts, more accurate billing, 13
improved energy efficiency, theft-loss prevention and outage management, and remote rapid 14
reconnect of service. And, as the industry moves toward new programs such as time-of-use 15
and demand-based pricing, and with the greater prevalence of customer-owned distributed 16
generation, Avista will have the technology to effectively evaluate and implement such 17
programs. 18
Q. In developing this program, has the Company addressed the range of 19
factors to be considered by the Commission in evaluating advanced metering projects, 20
Direct Testimony of Don F. Kopczynski
Avista Corporation Docket Nos. UE-15___ & UG-15___ Page 7
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Exhibit No. ___(DFK-1T)
as listed in the Commission’s “Interpretive and Policy Statement” in Docket No. UE-1
060649?7 2
A. Yes, it has. For factors such as meter and installation costs, and 3
administrative savings, Avista has prepared preliminary estimates of the costs and expected 4
benefits associated with the advanced metering program. Avista has also specifically 5
addressed among other issues, customer protection and privacy policies. 6
Q. Has the Company evaluated the benefits and the costs of this project? 7
A. Yes. The Company has prepared a report summarizing the Washington 8
advanced metering project, which provides an overview of advanced metering 9
infrastructure, describes the expected benefits associated with the project, and provides an 10
initial estimate of the project capital investment and maintenance costs. A copy of this report 11
is provided as Exhibit No.___(DFK-5). 12
Q. Can you please briefly summarize the benefits of advanced metering, as 13
detailed in the Company’s report. 14
A. Yes. Customers will experience benefits from the deployment of advanced 15
metering in a variety of ways. These include improvements in service quality and customer 16
experience that are generally more apparent to the customer, as well as those which may not 17
be so apparent to the customer, but otherwise serve to reduce operating costs associated with 18
providing service. A brief description of these customer benefits is provided below: 19
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7 In the Matter of the Commission’s Investigation of Public Utility Regulatory Policies Act Standards Pertaining to Smart Metering and Time of Use Rates dated August 23, 2007.
Direct Testimony of Don F. Kopczynski
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Exhibit No. ___(DFK-1T)
Improved Customer Service 1
 Privacy – reduces the frequency of the need for utility personnel to 2
physically visit the customer’s property. 3
 Improved Customer Experience – provides improved service levels 4 in several areas as well as information that allows customers to better 5
understand and manage their energy use. 6
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Customer savings 8
 Energy efficiency – when coupled with energy conservation tips, 9 enables the customer to implement cost effective efficiency 10
measures. 11
 Reduced outage times – informs the Company of a power outage at 12
the premises, helping us to restore service more quickly. 13
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Platform for Future Rate Options 15
 Rates, smart grid, distributed resources – provides the platform 16
needed to implement grid upgrades, integrate increasing amounts of 17
customer-owned generation, and to offer additional service and 18
billing options in the future. 19
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Improved Operational Performance 21
 Eliminating manual meter reading – allows savings by implementing 22
automated meter reading. 23
 Remote Rapid reconnection of service – significantly shortens the 24 time required to reconnect electric service. 25
 Improved outage management – integrates with the outage 26
management system to help allocate crews more efficiently, and 27
provides a verification of service restoration without having to call 28
the customer. 29
 Increased electrical system efficiency – allows the utility to reduce 30
the amount of electricity required to maintain the required line 31
voltage along each feeder. 32
 Reduced energy theft and unbilled usage – helps quickly identify 33
meter tampering and energy theft, and reduce unbilled usage. 34
 Greater billing accuracy – reduces the potential for human error in 35
reading, recording and entering meter data into the billing system, 36
and eliminates the need to estimate bills for account transactions and 37
when the meter may be inaccessible for manual reads. 38
 More cost-effective utility system studies – provides better data and 39 lowers the cost of performing various system studies. 40
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Direct Testimony of Don F. Kopczynski
Avista Corporation Docket Nos. UE-15___ & UG-15___ Page 9
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Exhibit No. ___(DFK-1T)
Q. What is the estimate of the overall project cost? 1
A. The capital cost of implementation is currently estimated at $142.1 million, 2
and the estimated annual maintenance cost is $5.2 million. The Company’s estimates are 3
considered preliminary since the technical specifications for the project and vendor pricing 4
have not been finalized through a request for proposals process. 5
Q. Has the Company forecasted the expected capital investment over the 6
deployment period of the project? 7
A. Yes, it has. Illustration No. 5 below shows the Company’s preliminary estimates 8
of capital spending over the course of implementation of the advanced metering system. 9
Illustration No. 5 10
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Q. Has the Company prepared a preliminary estimate of the lifetime net 19
benefits of the Washington advanced metering project? 20
A. Yes, it has. Illustration No. 6 below provides a comparison of the preliminary 21
estimates of the costs and benefits over the life of the project. This chart shows the “cost” of 22
the project as $223 million, composed of the net present value of the revenue requirement 23
Direct Testimony of Don F. Kopczynski
Avista Corporation Docket Nos. UE-15___ & UG-15___ Page 10
$-
$5,000,000
$10,000,000
$15,000,000
$20,000,000
$25,000,000
$30,000,000
$35,000,000
$40,000,000
2015 2016 2017 2018 2019 2020
Preliminary Estimate of Forecast Capital Expenditures
through 2020
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Exhibit No. ___(DFK-1T)
associated with the capital investment of $145.3 million, plus the net present value of the 1
revenue requirement of the annual operating expense of $77.6 million over the 21-year life 2
of the project. The preliminary estimates of the project benefits are shown as the net present 3
value of the “operational savings” of $170.4 million, and the net present value of the 4
“customer direct savings” of $60.1 million (although in reality, all of these savings benefit 5
customers either directly or indirectly through lowering the Company’s costs below what 6
they otherwise would have been). 7
Therefore, current estimates show a net benefit over the life of the AMI project of 8
$7.5 million. The costs and savings are described in detail in Exhibit No.___(DFK-5). 9
Workpapers including the details of these calculations have been provided with this filing. 10
Illustration No. 6 11
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Q. Has NARUC recognized that deployment of advanced metering 21
technology may require the removal and disposition of existing meters that are not 22
fully depreciated? 23
Direct Testimony of Don F. Kopczynski
Avista Corporation Docket Nos. UE-15___ & UG-15___ Page 11
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Exhibit No. ___(DFK-1T)
A. Yes, it has. In the NARUC resolution of February 21, 2007, noted above, it 1
was resolved that Commissions seeking to facilitate deployment of cost-effective advanced 2
metering technologies should consider the regulatory option to, inter alia: 3
. . . provide for timely cost recovery of prudently incurred AMI expenditures, 4
including accelerated recovery of investment in existing metering 5
infrastructure, in order to provide cash flow to help finance new AMI 6 deployments; 7
8
Q. Does the $145.3 million present value of costs, shown above in 9
Illustration No. 6, include the cost associated with retiring the Company’s existing 10
undepreciated electric meters? 11
A. Yes, it does. 12
Q. In the event that the actual lifetime project costs were to exceed the value 13
of the quantifiable lifetime benefits, does the Company believe the project is still in the 14
best interest of its customers? 15
A. Yes. 16
Q. Please explain? 17
A. The value of the benefits shown in the lifetime net benefits chart (Illustration 18
No. 6) reflect only those direct benefits which have been quantified, and not the value of the 19
unquantified or unquantifiable (intangible) benefits associated with the project. The NARUC 20
Resolution cited earlier, recognizes this point and urges commissions to consider regulatory 21
options for AMI “…that takes into account both tangible and intangible benefits.” (See 22
Exhibit No.___(DFK-4) 23
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Direct Testimony of Don F. Kopczynski
Avista Corporation Docket Nos. UE-15___ & UG-15___ Page 12
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Exhibit No. ___(DFK-1T)
Q. What are some of these intangible benefits? 1
A. Some of the intangible benefits are described at pages 9-11 of Exhibit 2
No.___(DFK-5). These include: 3
• Web Portal – Provides customers access to their (5-15 minute) interval 4
energy-use data via Avista’s customer website. 5
• Home Area Network – An interface to an in-home energy management 6
device provides customers direct access to their real-time energy use. 7
• Text Alerts – Allows the utility to send customers text alert messages when 8
some measure of energy use (e.g. total kWh used or demand), which has been 9
pre-selected by the customer, has been reached. 10
• Remote Rapid Reconnect – The time required to reconnect a customer’s 11
service will be dramatically reduced since a field person will no longer have 12
to be dispatched to physically restore service. 13
• Service Outages – Customers will have earlier notification and better 14
information on the status of their outage. 15
• Billing Inquiry – Gives the utility customer service representative immediate 16
access to the customer’s detailed energy-use information to assist in resolving 17
billing inquiries. 18
• Service Changes – Since the customer service representative will not have to 19
estimate bills for customers opening, closing, or transferring accounts, the 20
service process is more streamlined, call times will be reduced, and the 21
resulting bills will be more accurate. 22
• Privacy – With the elimination of manual meter reading, there will be a 23
significant reduction in the number of visits that Company employees make 24
to a customer’s premises. 25
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Direct Testimony of Don F. Kopczynski
Avista Corporation Docket Nos. UE-15___ & UG-15___ Page 13
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Exhibit No. ___(DFK-1T)
These intangible benefits will enhance the customer experience both now and with 1
future applications that cannot be fully anticipated. In each case the customer directly 2
benefits from the service improvements. 3
Q. Would you please describe the customer outreach to explain advanced 4
metering and how it will impact customers? 5
A. Yes. Much as it did with Project Compass, and the Pullman Smart Grid 6
Project, the Company is developing an “outreach plan” to not only notify customers of the 7
pending deployment, but also to explain the benefits of advanced metering and how it will 8
affect them. This outreach will include mailers, website discussions, social media, emails, 9
one-on-one engagement, and where appropriate, discussions in larger public venues. In the 10
process, we expect to continually build on our knowledge base about customers’ concerns 11
and to develop improved methods to effectively address them. The Company will work with 12
the Commission’s consumer staff and others who have an interest the implementation of this 13
program. 14
Q. What safeguards will the Company put in place in related to cyber 15
security and the protection of customer information? 16
A. Page 8 of Exhibit No.___(DFK-5) provides an overview of Avista’s security 17
safeguards around advanced metering. It begins with Avista’s Customer Privacy Policy, 18
developed in accordance with Commission rules, that expressly forbids the release of 19
customer information to third parties. We take that responsibility very seriously. With regard 20
to advanced metering, data will be encrypted at the meter, will be transmitted over a secure 21
virtual private network and all access will be authorized and authenticated. An oversight 22
committee will govern the development of the advanced metering security plan to ensure the 23
Direct Testimony of Don F. Kopczynski
Avista Corporation Docket Nos. UE-15___ & UG-15___ Page 14
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Exhibit No. ___(DFK-1T)
secure implementation and operation of the system. Finally, an advanced meter security 1
working group will be charged with implementing the plan and addressing new and 2
emerging issues. 3
Q. Notwithstanding all of these efforts and precautions, do you expect that 4
some customers may still want to “opt out” of the program? 5
A. While we do not expect many to do so, some may. Before implementation, 6
we will file a separate tariff that will contain the conditions under which any customer can 7
“opt out” of the advanced metering program. That, of course, comes at a cost to the utility 8
and its other customers, as we separately dispatch trucks and service personnel to widely 9
dispersed parts of our service area to read meters and perform other activities as needed. 10
Details of the proposed tariff will be discussed with Commission Staff and other interested 11
parties before it is filed. 12
Q. What is the anticipated time frame for this project? 13
A. In 2015, the Company will develop the system requirements, prepare requests 14
for proposals for metering system vendors, and move forward with the evaluations and 15
selection of a system to be implemented. In addition to making the meter system selection, 16
Avista will begin the acquisition of supporting computer servers, software applications and 17
security systems. The installation of new digital meters is slated to begin in 2016. At the 18
same time, Avista will be installing the communications infrastructure and performing the 19
work of systems integration. Meter installation will continue in 2017, with plans to complete 20
residential meters in 2018. Final installation of communications infrastructure will also be 21
completed in 2018. The installation of commercial meters will continue into 2019, with 22
Direct Testimony of Don F. Kopczynski
Avista Corporation Docket Nos. UE-15___ & UG-15___ Page 15
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Exhibit No. ___(DFK-1T)
plans to complete the advanced metering project in 2020. The report provided in Exhibit 1
No.___(DFK-5) provides additional details related to Avista’s AMI plans. 2
Direct Testimony of Don F. Kopczynski
Avista Corporation Docket Nos. UE-15___ & UG-15___ Page 16
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