20151202Transcript Volume I.pdf

BEFORE THE IDAHO PUBL]C UTILITIES COMMISSION
IN THE MATTER OF THE APPLICATION
OE AVISTA CORPORATION DBA AV]STA
UT]LITIES FOR AUTHORITY TO
INCREASE ]TS RATES AND CHARGES FOR
ELECTRIC AND NATURAL GAS SERVICE
IN IDAHO
CASE NO. AW_E_15_05
CASE NO. AW-G-15-01
BEEORE
COMMISSIONER KRISTINE RAPER (Presiding)
COMMISSIONER MARSHA SMITH
COMMISSIONER PAUL KJELLANDER
PLACE:Commisslon Hearing Room
412 WesL Washington StreetBoise, Idaho
November 23, 2OL5
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VOLUME I-Pagesl-777
CSBREPORTING
Constance S. Bucy, CSRNo. 187
23876 Applewood Way * I[ildeL Idatro 83676
(208) 890-s198
Ernail csb@heritagewifi . com
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CSB REPORTING
(208 ) 890-s198
APPEARANCES
Eor the Staff:KarJ. KJ.ein, Esq.
and Brandon Karpen, Esq.
Deputy Attorneys General-
412 West WashingtonBoise, Idaho 83120-0074
David J. Meyer, Esq.
Vice President e Chief Counsel-Avista Corporation
Post Office Box 3121
Spokane, Washington 99220
RICHARDSON ADAMS PLLC
by Peter iI. Richardson, Esq.
515 North 27Lh Street
Boise, Idaho 83702
McDEVITT & M]LLER
by Dean ,f. MiJ.Ier, Esq.
420 West Bannock StreetBoise, Idaho 83102
Brady M. Purdy, Esq.
Attorney at Law
2Ol9 North 17th StreetBoise, Idaho 83102
For Avista Corporation:
Eor Cl-earwater Paper:
For Idaho Forest Group:
For CAPAI:
APPEARANCES
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CSB REPORTINGWilder, Idaho
INDEX
9{ITNESS EXAM]NATION BY PAGE
ELizabeth Andrews(Avista)
Patrlck Ehrbar
(Avlsta)
Randy Lobb
(Staf f )
Christina Zamora
(CAPAI )
Mr. Meyer (Direct)
Prefiled Direct Testimony
Mr . Meyer (Direct )Prefiled Direct Testlmony
Commissioner Raper
Mr. Karpen (Direct)
Prefiled Direct Testimony
Commissioner Kj ellander
Mr. Purdy (Direct)
Prefiled Direct Testimony
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95
EXHIBITS
NUMBER DESCRIPTION PAGE
FOR AVISTA CORPORATION:
L - Stipulation in Case Nos.
AW-E-15-05 and AVU-G-15-01
Premarked
Admitted 5
8367 6
INDEX/EXHIBITS
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BOISE IDAHO MONDAY NOVEMBER 23 201,5 9:30 A. M
COMMISSIONER RAPER: A1l- rightr we wil-I go on
the record, then. This is the time and place set for a
technical hearlng in Case Nos. AW-E-15-05 and
AW-G-15-01, further identified as 1n the matter of the
application of Avista Corporation dba Avista Utilities
for authorlty to increase its rates and charges for
electric and natural gas service in Idaho. This hearing
is taking place to consider a settlement and stipul-ation
that was filed with the Commission on October 19th, 2075,
that attempts to fully resolve the issues presented in
the electric and gas cases before us.
My name j-s Kristine Raper and I am the Chair of
the proceeding. I have Commissioner Marsha Smith and
President Paul Kjellander and we comprise the Commission
and wiII render a final decision when the record closes,
so we can begin by taking appearances, if the Applicant
would Iike to begin.
MR. MEYER:
David Meyer.
Thank you. Appearing for Avista,
COMMISS]ONER
MR. KARPEN:
Brandon Karpen.
RAPER: Thank
Appearing for
you. For the Staff?
Commission Staff,
CSB REPORTING
(208 ) 890-sl-eB
COLLOQUY
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CSB REPORTING
(208 ) 890-s1eB
COMMISSIONER RAPER: Thank you. Mr. Purdy.
MR. PURDY: Yes, Brad Purdy on behal-f of
Community Action Partnership Association of Idaho, and as
we just mentioned, hopefully, my client will be here
momentarily.
COMMISSIONER RAPER: Mr. MiIler.
MR. MILLER: Thank you, Madam Chairman. Dean
J. MlIIer of the firm McDevitt & Miller on behalf of
Idaho Eorest Group.
COMMISSIONER RAPER: Thank you, and
Mr. Richardson.
MR. RICHARDSON: Thank you, Madam Chair. Peter
Richardson of the fi-rm Richardson Adams here with
Dr. Reading on behalf of the Clearwater Paper
Corporation.
COMMISSIONER RAPER: Thank you. Are there any
preliminary matters that need to come before us? Hearing
none, then, if Avista would like to caII its first
witness.
MR. MEYER: Yesr we call to the stand
Ms. Elizabeth Andrews. Whil-e she's getting situated, I
noticed that we have two Exhibit No. 1's. The new
Exhibit No. 1 is the stipulation. I propose to keep that
as it is. Now, Scott Morris in his direct testimony also
filed an Exhibit No. 1. It might be easier just to
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CSB REPORTING
(208 ) 890-s1eB
ANDREWS (Di)
Avista Corporation
renumber that as Exhiblt 1-a and we'11 keep the
references to Exhibit 1 for the stipulation today clean
1n that regard and not have to go through all this
testimony again.
COMMISSIONER RAPER: Okay, that woul-d be fine.
Thank you.
ELIZABETH M. ANDREWS,
produced as a witness at the instance of the Avista
Corporation, having been first duly sworn to tell the
truth, the whole truth, and nothing but the truth, was
examined and testif ied as fol-l-ows:
DIRECT EXAMINATION
BY MR. MEYER:
O. Eor the record, would you please state your
name and your employer?
A. Yes, my name is Elizabeth Andrews and I work
for Avista Corporation.
O. And have you prepared direct testimony in
support of the stipulation?
A. Yes, I have.
O. Do you have any chanqes or corrections to make
to that?
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CSB REPORT]NG
(2oB ) B9o-s198
ANDREWS (Di)
Avista Corporation
A. No, I do not.
O. Are you also sponsoring what has been marked as
Exhibit No. 1-, which is a copy of the stipulation?
A. Yes, I am.
O. And any changes to that?
A. No.
O. So if I were to ask you the questions that
appear in your prefiled direct testimony, would your
answers be the same?
A. Yes, they woul-d.
MR. MEYER: Wlth that, I would ask that the
prefiled testimony be spread as if read and move the
admission of Exhibit No. 1.
COMMISSIONER RAPER: Okay, without objection,
we will spread Ms. Andrews' testimony on the record as if
read, and we will admit Exhibit No. L, and with regard to
the 7-a, as Commissioner Smith sidebarred with me, Scott
Morris' testimony wiII not be spread on the record today
because it's not in support of the stlpulation and
settlement, so there I s no issue.
MR. MEYER: Okay.
COMMISSIONER RAPER: Exhibit l- will be the
settl-ement and stipulation.
MR. MEYER: Very qood, thank you.
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(Avista Corporation Exhibit No. 1 was admitted
into evidence. )
(The fol-lowing prefiled direct testimony
of Ms. Elizabeth Andrews is spread upon the record,)
CSB REPORTING
(208 ) 890-s198
ANDREWS (Di)
Avista Corporatlon
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I. INTRODUCTION
O. Please state your name, employer and business
address.
A. My name is Elizabeth M. Andrews and I am
employed by Avista Corporation ("Company" or "Avista") as
Manaqer of Revenue Requirements in the State and Eederal
Regulation Department, dt 1,41.1, East Mission Avenue,
Spokane, Washington.
O. Have you previously provided direct testimony
in this Case?
A. Yes. My previous direct testimony in this
proceeding covered accounting and financial data in
support of the Company's need for the proposed increase
in rates. f explained pro formed operating resul-ts
including expense and rate base adjustments made to
actual operating results and rate base.
O. What is the scope of this pre-filed testimony?
A. The purpose of my testimony is to explaln why
the Stipulation is in the public interest, ds well- as
describe and support the electric and natural- gas revenue
requirement el-ements of the Stipulation and Settl-ement
("Stipulation"), filed on October 16, 2015 between the
Staff of the Idaho Public Utilities Commission ("Staff'),
Clearwater Paper Corporation ( "Clearwater" ) , Idaho Forest
Andrews, Di 1Avista Corporation
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Group, LLC ("Idaho Eorest"), the Community Action
Partnershlp Association of Idaho ("CAPAI"), the Idaho
Conservation League ("Conservation Leaque"), the Snake
River Al1iance ("Snake River") and the Company, which, if
approved by the Commission, would resol-ve al-l- of the
issues in the Companyrs filing. These entities are
col-l-ectively referred to as the "Parti-esr" and represent
al-l- parties in the above-referenced cases.
Company witness Mr. Ehrbar discusses the non-revenue
related elements of the Stipulation aqreed to by the
Partles, such as Rate Spread and Rate Design, the Fixed
Cost Adjustment (FCA) Mechanism, as well as other
Stipulation components related to the Power Cost
Adjustment (PCA) authorized level- of expenses and
customer service-related initiatives and programs.
0. Are you sponsoring any exhibits?
A. Yes. I am sponsoring Exhibit No. 1, which is a
copy of the Stipulation and Settl-ement filed on October
16, 2075, with the Commission.
O. Pl-ease explain how the Parties arrived at the
Stipulation in this proceeding.
A. The Stipulation is the product of settl-ement
discussions held in the Commission offices on September
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18, 2015.1 It represents a compromise among differing
points of view, with concessions made by aII Parties, to
reach a bal-ancing of interests. As wil-I be explained in
the Companyr s testimony, the Stipulation represents a
fa:-r, just and reasonable compromise of the issues and is
1n the public interest.In additlon, the Stipulation is
the end result of extensive audit work conducted through
the dj-scovery process2, lncluding various on-site audit
visits by Commissj-on Staff, and hard bargaining by all
Parties in this proceeding.
As discussed in my testimony, the Stipulation
between the Parties resolved all issues associated with
the cal-cul-ation of the Company's requested cost of
capital, including capital structure and cost components,
and resolved al-1 revenue requirement issues. As
discussed by Mr. Ehrbar, the Stipulation also addresses
agrreement regarding rate spread and rate design and the
proposed ECA Mechanism.
1 tCl was unable to attend the Settlement Conferencei however, they
did provide a "Position Statement" on September l-7, 2015 providi-ng
their views on issues related to the proposed Fixed Cost Adjustment
mechanlsms and rate design.2 Eor its part, Avista responded to over 1?6 production requests
(incfuding sub-parts) from IPUC Staff and other intervening
parties.
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0. Why is the Stipulation in the public interest?
A. The Stipulation is in the "public interest" for
several reasons. The Stipulation was the product of the
give-and-take of negotiation that produced an "end
result" that is just and reasonabl-e. In addition, it is
supported by the evj-dence, demonstrating the need for
rate adjustments to provide recovery of necessary
expendltures and investment, the costs of which are not
offset by a growth in sales margins. The Settlement
enjoys broad-based support from a variety of
constituencies, including CAPAI, Clearwater, Idaho
Forest, the Conservation League, and the Snake River
Alliance, serving to address their specifj-c needs, and
the Staff of the Commission, representing aII customers.
O. Would you brlefly summartze the Stipulation?
A. Yes. Under the terms of the Stipulation, as
discussed further by Mr. Ehrbar, Avista woul-d implement
revj-sed tariff schedul-es designed to recover additional
annual- electric and natural gas revenue effective January
t | 2016. These rate changes are designed to provide
retail revenues necessary to al-l-ow the Company the
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opportunity to earn the return agreed to in the
Stipulation for the 201,6 rate period.3
Eor electric operations, the Parties agree to an
overall base rate lncrease of 0.12 (0.12 on a billed
basis) or $1.7 million in electric annual base tariff
revenues. In addition, the Parties have agreed to the
proposed extensj-on of Schedule 91 extending the electric
rebate extension in fu]I ($2.8 million annual-1y) for two
years through December 201,1. Therefore, a residential
customer using an average of 929 kil-owatt hours per month
woul-d see a $0.75, or 0.92, increase per month for a
revised monthly bilf of $85.74. (See Exhibit No. 1-,
Paragraph lB, for the January L, 2016 percentaqe change
in rates by rate schedule. )
For natural gas, Avista woul-d implement revised
tariff schedules designed to recover $2.5 mi111on in
additional annual natural gas revenue, representing an
overall 3.5? (4.82 on a billed basis) increase. In
addltion, the Partles have agreed Lo the proposed
extension of Schedule l9'7, extending the natural gas
rebate extensi-on in part ($0.2 mll-l-ion of the current
3 There was no agreement by the Parties regarding the 2017 rate
rel-ief originally requested by the Company, nor is Avista precluded
from filing for general rate relief for 2077 after the concl-usion of
this proceeding.
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$I.2 million) through December 201,6. Therefore, a
residential customer using an average of 61, therms per
month would see a $3.19, or 5.4e", increase per month for
a revised monthly bill of $62.4L. (See Exhlblt No. L,
Paragraph 19, for the January L, 20L6 percentage change
1n rates by rate schedul-e. )
In determining these revenue increases, the Parties
have agreed to various adjustments to the Companyrs
original filing, which are summarized in the Stipulation,
and described further in my testimony be1ow.
The Stlpulation calls for an overal-l- rate of return
of '7.422t determined using a capital structure consisting
of 508 common stock equlty and 508 debt, dD authorized
reLurn on equity of 9.52 and cost of debt of 5.34U.
LastJ-y, the Parties agree that Avista will- implement
el-ectric and natural gas Fixed Cost Adjustment mechanisms
("ECA"), which wil-l cofttmence concurrently wlth the
natura1 gas and electric rate changes January L, 2016.
The key components of the electric and natura1 gas ECA
Mechanisms are described by Mr. Ehrbar in more detail,
and are illustrated in Appendices B and C of the
Stipulation attached as Exhiblt No. 1.
II. HISTORY OF FILING
O. Please describe the Companyrs general rate case
requestr ds filed.
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A. On June L, 2015, Avista filed an Application
wj-th the Commission for authority to increase revenue
effective January L, 2016 for el-ectric and natural gas
service in Idaho by 5.22 and 4.5?, respectively. If
approved, the Companyr s 2016 revenues for electric base
retail- rates would have increased by $13.2 million
annualIy, and Company revenues for natural- gas service
would have increased by $3.2 mil-lion annually. The
Company also requested an increase to electric base
retail revenue of $13.7 million (5.12), and an increase
in natural gas base retail- revenue of $1.7 (2.22),
effective January 7, 2077. By Order No. 33324, dated
June 15, 201,5, the Commisslon suspended the proposed
schedules of rates and charges for el-ectric and natural
gas service.
The Company proposed util-izing the results of its
electric and natural gas service studies, sponsored by
Company witnesses Ms. Knox and Mr. M1l-ler, respectively,
as a guide to spread the overal-l- requested el-ectric and
natural gas revenue increases by rate schedul-e on a basis
which: 1) moved the rates for nearly all the schedules
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Andrews, Di BAvista Corporation
cl-oser to the cost of providing service, and 2) resu.Ited
in a reasonable range in the (net) proposed percentaqe
increase across the schedul-es. The spread of the
proposed electric and natural gas increases generally
resufted in the rates of return for the various servi-ce
schedules moving approximately 25% closer to the overall
rate of return (unity) for electric, and approximately
332 closer to the overall rate of return for natural gas.
The Company also requested el-ectric or natural gas
residential basic charge increases from $5.25 to $8.50
for electric, and from $4.25 to $8.00 for natural gas.
0. What are the primary factors driving the
Company's need for electric and natural gas increases?
A. The primary factor driving the Companyrs
proposed electric and naturaf gas revenue increases in
201,6 and 2017, as discussed in the Company's direct
filing, is an increase in net plant investment. Specific
capital investments over the period 2015-2071 discussed
by other Company witnesses include, among other things,
replacement of the Companyr s Customer Information System
(Project Compass) described by Mr. Kensok, and upgrades
to certain major generating facilities, such as the Nine
Mile Rehabilitation project discussed by Mr. Kinney. In
2076, these increased costs for electric operations are
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Andrews, Di 9Avista Corporation
offset, in part, by a reduction in net power supply and
transmission expenditures .
However, for 20L1 net power supply expenses
contribute significantly to the proposed incremental
revenue increase requested for 20L7. Approximately 408
of the 20L1 proposed revenue increase is related to the
expiration of a capacity sal-es agreement with Portland
General- El-ectrlc on December 31, 201,6, increasing overall
net power supply costs.
III. REVENUE REQUIREMENT ELEMENTS OF THE STIPUI.ATION
O. Please explain the derivation of the Electric
and Natural- Gas Revenue Requirements outlined in the
Stipulati-on.
A. The Parties agreed that Avista would implement
revised tariff schedules designed to recover additional
annual efectric and natural gas revenue, effective
January L, 2076. These j-ncreases are deslgned to provide
sufficient retail revenues for the 2076 rate period,
which would provide the Company with the opportunity to
earn the return agreed to in the Stipulation.
Whil-e Avista's fiting requested 201,6 and 2017
electric revenue requirement increases of $13.2 million
and $1,3.7 m11l-ion, respectively, effective January l- of
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each year, the Parties only agreed to a 201,6 increase
effective January L, 201,6. Aqreed-upon adjustments,
incl-uding the agreed-upon rate of reLurn, resul-t in a
recornmended el-ectric revenue requirement increase of $1.7
million effective January 1, 2016.
Similarly, while the Company requested 2016 and 2017
natural gas revenue requirement increases of $3.2 million
and $1.7 mi11ion, respectively, effective January 1 of
each year, the Parties only agreed to a 2076 increase
effective January L, 20L6. Agreed-upon adjustments,
incl-uding the agreed-upon rate of return, result in a
recoflrmended natural gas revenue requirement increase of
$2.5 mlIlion effective January 7, 2016.
No agreement was made by the Parties regarding the
2077 el-ectrlc and natural- gas proposed increases by
Avista, and Avista is not precluded from filing for 207'7
general rate relief after the conclusion of this
proceeding.
O. Pl-ease explain the Parties' agreement with
regard to an Authorized Rate of Return, incl-uding the
Return on Equity.
A. The Parties have agreed to an overall- rate of
return of 7.422, based on a return on equity of 9.52r drr
equity component at 502 and cost of debt of 5.348. By
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comparison, the Company's original filing requested an
overall rate of return of -1.622, a return on equity of
9.92, dfr equity component of 508 and cost of debt of
5.348.
0. Please provide an overview of the revenue
requirement adjustments agreed to by the Parties
resulting in the overall electric and natural gas revenue
requirements.
A. A number of the adjustments, agreed to by the
Parties, resulted in removing 2016 increased costs for
recovery to be determined in a future rate period, as
well- as reducing certain expenditures to the aqreed-upon
level-s by the Parties. The Parties agreed to revenue
requirements that refl-ect the adjustments shown below in
the excerpted tables from the Stipulation:
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fabf.e 1: E].ectric Reverrue Requiroent
Table 2: Natural Gas Revenu--!gg5!g!
SUMMARY TABLE OF ADJUSTMENTS TO ELECTRIC RE\IENUE REQUIREMENT
ETTECTIVE JANUARY 1, 2016
(000s ofDollan)
Revcnue
Requirrment Retc Base
Amount rs Filed:
Adjustmcna:
o) Cost of Capital
b.) Rcvisc 2015 Cap&alAddiims
) Rcmorc20l6Expcnses
L Insuraocc E:rpcnse
ii Iafcmatin Scnbcs & Tccboobgr
iii. NeExccrtircl,abor
iv. O&MOfteE
$ 13,230 $ %9425
(2,43E)
(33s) $ (16,
Rcmw 2016 CapihlAd&ins
Rcvisc Dcftrrcd Debils ad Credis to Reflect 2015 Balanccs
$
$
$
$
Udare 2015 E@yee Beneft Ccs
A{frst Iqlurics and Damages Experse
Remrrc Ofter Incemiws and Rcstatc Noo.offcer locentiles
lncirde Four-Year A.octizatim of 2O15 Pro!:ct Cryss Deftrral
Inchrdc Forr-Yea Amqtizatirn of l^ake Spdrae Deferral
lnctde Palcuse Wihd in PCA
Misccllancous A&G A{irstuetrts: Drrector & Offccr Insurance, Bord of
Dirccttr E4cnscs, Realocatirn of Legal Expe6cs, Rmval of Euvimental
Cbanp Ccts, andRcmvalof Micellancos Agec&To E:pcnscs
Adjruted Amounts Eftctfue January l,2016
s
$
$
$
$
$
$
$
$
s
(548) $ lJ89
9$l3l
(62)
(521)
(38'
212
,t8l
(8)
(100)
(66e)
(l19)
(3J00)
$ (580)
s 1,700 $
SUMMARY TABLE OF ADJUSTMENTS TO NATI'RAL GAS REVENUE REQUIREMENT
ETTECTTI'E JANUARY 1, 2016
(000s ofDollers)
Revenuc
Requirement Rate Base
Amount u Filed:
Adi[ltDCnE:
Cost of Capitrl
Rcvbc 2015 Capital A&tbos
$ 3,205 $ 127,49t
) Remove 2016 CapialAdditbrs
Revbe Defened Debib and Credis to Rcflcct 2015 Bahnces
Remorc 20l6Eqemes
I Insurancc E:eeue
ii. Idamatin Services & Techmbgr
iii. NorBrccuivc Labor
Updae 2015 Bryhycc Bcrcft Coss
Adist lqiuri:s and Darnagos E:pemc
) Rerrorrc Ofter Irrcertircs and RcstaE Norrofter Irrcedives
Inchr& Fon-Ycar Arnrtizatbn of 2015 Proict Corqass Dcfcrral
Mbcclancou A&GAdistrenb: Director & Offcer Insurance, Board of
Director F,rycnses, Reatbcatbn of kgal Bpenses, and Reroval of
Mbcelhreos Agrced-To Epcnses
A(f,uted Amousts E&ctivc Jrnuery l, 2016
$
$
$
s
(415)
N $ 3,758
0q $ 66e
(3)
s (lo$ (132)s (185)$ 129$ (126)
$ (2'
$ (168)
$ (128)s 2s00 s
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Avista Corporation17
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As can be seen by a review of the individual line
descriptions provided within the summary tabl-es excerpted
from the Stipulation, the adjustments accepted for
settlement purposes cover a broad ranqe of revenue and
cost cateqorj-es, including the authorized rate of return.
The individual adjustments should not be viewed in
isolation; rather, they shoul-d be viewed in total as part
of the entire Stipulation, and are the resul-t of hard
bargaining and compromj-se.
O. Woul-d you please elaborate on the individual
line items contained within the excerpted tables?
A. Yes. A description of these adjustments for
electric and natural gdsr resulting in the revenue
requirements ef f ective ,Ianuary L, 2016 follows.
Cost of Capital - (Table 1 and Table 2, l-1ne a.)
The overall- revenue requirement reduction of the changie
in cost of capital, reduces the overal-l- revenue
requirement for electric by $2.438 million and for
natural gas by $415,000.
Revise 2015 Capital Additions - (Table 1 and Table
2, line b.) The 201,5 electric and natural gas capital
additions were updated by Avista to refl-ect adjustments
for updated information, includlng, for example, the
delay in completion of the Nlne MiIe Hydroelectric
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Andrews, Di 14Avista Corporation
Capital Project from 2015 to 2016 and the impact on
depreciation expenser ds wel-I as accumufated depreciation
(A/D) and accumul-ated deferred federal income taxes
(ADE]r) .
For electric, this adjustment to update capital
investment reduces the overall revenue requirement by
$3.345 million and reduces rate base by $16.125 million.
For natural gds, this adjustment increases the overafl
revenue requirement by $440r 000 and increases rate base
by $3.758 mil-Iion.
Remove 2016 Capital- additions - (Table 1 and Table
2, line c. ) The 2016 electric and natural gas capital
additions adjustmentsr ds proposed by the Company in its
orlginal filings, were removed, delaying recovery by
Avista of the associ-ated revenue requirement until- future
rate case proceedings. Total- depreciation expenses and
rate base, net of accumulated depreciation and
accumulated deferred income tax, reflect balances as of
year-end December 31, 2015. Eor electric, this
adjustment reduces the overal-l- revenue requirement by
$548,000 and increases rate base by $1.789 million. For
natural- gdsr this adjustment decreases the overall
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revenue requirement by $76,000 and increases rate base by
$669,000.4
Revise Deferred Debits and Credits to reflect 2075
Bal-ances - (Table 1 and Tabl-e 2, line d.) Deferred
deblts and credits regulatory balances and amortizations
were adjusted to reflect 2015 amortization expense and
regulatory balances as of December 37, 2015, rather than
the 2076 expense and regulatory balances as proposed by
the Company. For electric, this adjustment increases the
overall- revenue requirement by $52r 000 and increases rate
base by $131,000. For natural gds, this adjustment
decreases the overaff revenue requirement by $3,000
IneRemove 2016 Expenses - (Table 1 and Table 2, 1
e.) The followinq adjustments remove 2016 expenses pro
formed in the Companyrs original filing, delaying
recovery of those expendltures until future rate case
proceedlngs:
Insurance Expense - (Table 1 and Table 2, l-ine
e. , i. ) 20L6 incremental insurance expenses related
to qeneral IiablIity, directors and officers
( "D&o" )Iiabillty, and property insurance were
4 Removing the impact of 2016 capi-ta] additions, as well as removing
the impact on accumulated depreciatj-on and accumulated deferred
federal- income taxes on totaf net plant during 201-6, has the result
of increasing overalf net rate base, but reducing overal-f revenue
requirement, due primarily tc reduced depreci-ation expense.
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removed. This adjustment reduced the electric
revenue requirement by $62,000 and reduced the
natural gas revenue requirement by $16r000.
Information Services a Technology - (Table 1
and Table 2, line e., ii.) 2016 incremental
information service and technology expenses, related
to the Company's replacement of the Company's
Customer Service Information System, and increased
costs to support various business processes,
application support, additional securlty
requirements, annual contractual agreements and
maintenance and license fees were removed. This
adjustment reduced the electric revenue requirement
by $521,000 and reduced the natural gas revenue
requJ-rement by $132, 000.
Non-Executive Labor (Tabl-e l- and Table 2,
line e. , iii. ) 2016 incremental- non-executive l-abor
increases related to increases approved by the Board
of Directors for 2016 for its non-union,
non-executive employees, as wel-I as the 201,6 union
contract increases for union employees was removed.
This adjustment reduced the el-ectric revenue
requirement by $385,000 and reduced the natural gas
revenue requirement by $185r000.
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OeM Of f sets (Table L, Iine e. , iv. )In the
Companyrs direct filing, 20t6 capital additions were
reviewed for any net O&M offsets, both increases in
expenses and savings that are expected in the 2016
rate period. Specific expenses and savings for 2016
identified and included in the Company's direct
filing were removed, consistent with the removal of
2016 capital additions noted above. This adjustment
j-ncreased the electric revenue requirement by
$212,000.
Update 2015 Employee Benefit Costs - (Table l- and
Tabl-e 2, Iine f .) Employee benefit costs include costs
associated with pension and medical insurance and
post-retirement expenses lncl-uded in the Company's direct
filing. Penslon expense was determined in accordance
with Accounting Standard Codification 715 (ASC-715) by an
independent actuari-aI firm, Towers Watson, which is
reviewed by the Companyrs outside accounting firm
annually for reasonableness and comparability to other
companies.s Medical insurance and post-retirement
expense includes costs associated with the employee and
5 fn october 2013, the Company revi-sed its defined benefit pension
plan such that, as of January 1, 2014, the pJ-an is no longer offered
to its non-union employees hired or rehired by Avista on or after
January 1, 2074. A defined contrj-bution 401(k) plan replaced the
defined benefit pension plan for alf non-union employees hired or
rehired on or after January 1, 2014.
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retiree medical plans and the FAS 106 expense, which
records the costs associated with post retirement
medical.5 This adjustment reflects updated information,
and reflects employee benefits at a 20L5 expense levef.
This adjustment increased the electric revenue
requirement by $481r 000 and increased the natural gas
revenue requirement by $729, 000.
Adjust Injuries and Damages Expense - (Table 1 and
Table 2, Iine q. ) Injuries and damages expense is a
restatinq adjustment that repJ-aces the accrual recorded
in the test period with the six-year rolling average of
actuaf injuries and damages payments not covered by
insurance. This adjustment revises
average as proposed by Staff. This
electric revenue requirement by $8,
natura.l- gas revenue requirement by
Remove Officer Incentives and
the six-year rolling
adjustment reduced the
000 and reduced the
$126, o0o.
Restate Non-Officer
Incentives (Table 1 and Table 2, l-ine h. ) This
adjustment removes the officer portion of the employee
6 In october 2013 the Company revised its heal-th care benefit plan
for non-uni-on employees hired or rehired on or after January 1, 2074.
Upon retirement the Company will no longer provide a contri-bution
towards his or her medical premiums. The Company will provide access
Lo the retiree medical- pIan, but the non-unj-on employees hired or
rehired on or after January 1, 20L4, wi-1J- pay the fuII cost of
premiums upon retirement. In addition, beginning January 1, 2020,
the method for cal-cul-ating health insurance premiums for non-union
retirees under age 65 and active Company employees wi-l-l be revised.
The revision wil-f resul-t in separate health insurance premiums for
each group.
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incentive expense incl-uded in the Company's original
filing. This adjustment also adjusts the Company's
proposed non-officer six-year average incentive payout
percentage of l02Z to 100U r ds proposed by Staff. This
adjustment reduced the electric revenue requirement by
$100r 000 and reduced the natural- gas revenue requirement
by $25, 000.
Include Eour-Year Amortization of 201-5 Project
Compass Deferral - (Table 1 and Table 2, l-ine i.) In
Case Nos. AW-E-14-05 and AVU-G-14-01, the Commission
approved an aIl-party settlement, in which the Parties
agreed that eighty-percent (808) of the revenue
requirement associated with Project Compass during 2015,
begi-nning the month the Project goes into service, would
be deferred, without a carrying charge, for recovery in a
future proceeding. The B0? figure was arrived at through
negotiation for cal-endar year 2015 only. The deferral
was due, in part, to the uncertainty of the timing of the
in-service date for the project. This project was moved
into service on February 2, 20L5.
In the Company's direct filed case the Company
proposed a two-year amortj-zation of the deferred electric
and natural- gas revenue requirement amounts associated
with Project Compass for calendar year 2015. This
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adjustment revises the amortization of the Project
Compass Deferra1 over a four-year period. This
adjustment reduced the electric revenue requirement by
$669r 000 and reduced the natural- gas revenue requirement
by $168,000.
Inc]ude Four-Year Amortization of Lake Spokane
Deferral- (Table lt line j. ) In Case No. AW-E-13-05
(see Order No. 329L1), the Company sought, and received
approval of an Accounting Order to defer the costs
related to the improvement of dissol-ved oxygen levels in
Lake Spokane. Order No. 329L7 authorized the Company to
defer and transfer Idaho's share of these costs
(approxlmately $473,000) to FERC account 182.3 (Other
Regulatory Assets) for Iater recovery, with no carrying
charge.
In the Companyrs direct fifed case the Company
proposed a two-year amortization of the Lake Spokane
Deferral. This adjustment revises the amortization of
the Lake Spokane Deferral over a four-year period. This
adjustment reduced the el-ectric revenue requirement by
$119, 000.
Incl-ude Palouse Wind in Power Cost Adjustment
("PCA") Mechanism - (Table L, Iine k.) The Parties agree
that, for purposes of this case, the recovery of costs
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rel-ated to the Palouse Wind Power Purchase Agreement
("PPA") w111 continue to be included in the PCA, subject
to the current sharing (908 customer, LjZ Company). This
adjustment removes the Palouse Wind PPA expenses from the
pro forma power supply adjustment included in the
Company's original filing. This adjustment reduced the
el-ectric revenue requirement by $3.5 million.
Miscellaneous Adjustments - (Tabl-e t, line I and
Table 2, Iine j . ) The Company adopted, for settlement
purposes, Staff's proposal to adjust or remove various
administrative and general (A&G) expenses including: 1)
removing an addltional 402 of Tdaho electric Director and
Officer insurance expense ($114,000 electric / $29,000
natural- gas); 2) removing 1egaI expenses allocated to
Idaho in error ($5,000 electric / $1,,000 natural gas) ; 3)
removing two-thirds of environmental cleanup expenses
incurred in 2074 ($322,000 electric) ; 4) removing
miscellaneous expenses as agreed to ($65r 000 electric /
$79,000 natural- gas) ; and removing additional Board of
Director expenses incl-uded in 20L4 ($74,000 el-ectric /
$19,000) . This adjustment reduced the electric revenue
requirement by $580,000 and reduced the natural- gas
revenue requirement by $128,000.
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O. Please summarlze the impact of these
adjustments on the electric and natural- gas revenue
requirements agreed to by the Parties.
A. The adjustments discussed above, and agreed to
by the Parties, reduce Avista's electrj-c revenue
requirement request of $13.23 mll]ion to $1.7 mi11ion,
and its natura1 gas revenue requirement request of $3.205
million to $2.5 million, resulting in a 0.12 el-ectric and
3.52 natura1 gas base rate increase. Net rate base for
electric and natural gas is $735.02 million and $131.925
miIIion, respectively, effective January 1-, 201,6.
IV. CONCLUSION
O. In conclusion, why is this Stipulation in the
public interest?
A. This Stipulation strikes a reasonable bal-ance
between the lnterests of the Company and its customers,
including its low-income customers. As such, it
represents a reasonable compromise among differlng
interests and points of view.
The terms of the Stipulation represent base rate
j-ncreases designed to provide necessary retail revenues.
The Parties have agreed that the Company has demonstrated
the need for revenue requirement increases
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Andrews, Di 23Avista Corporation
for both its electric and natural gas operations, thus
providing recovery of its costs over the 201,6 rate
period.
In the final- analysis, however, any settl-ement
reflects a compromj-se in the glve-and-take of
negotiations. The Commission has before it a Stipulation
that is supported by sound analysis and supporting
evidence, the approval of which is in the public
interest.
O. Does this conclude your pre-filed direct
testimony?
A. Yes, it does.
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CSB REPORTING
(208 ) 890-s198
ANDREWS
Avista Corporation
(The following proceedings were had in
open hearing. )
MR. MEYER: With that, she's availabl-e for
CTOSS.
COMMISSIONER RAPER: Okay. Does Staff have any
cros s ?
MR. KARPEN: No cross.
COMMISSIONER RAPER: Mr. Purdy?
MR. PURDY: I have none. Thank you.
COMMISSIONER RAPER: Mr. Mil-l-er?
MR. MILLER: Nor I.
COMMISSIONER RAPER: Mr. Richardson?
MR. RICIIARDSON: No questions, Madam Chair.
COMMISSIONER KJELLANDER: None.
COMMISSIONER RAPER: Any questions from the
Commission?
COMMISSIONER SMITH: No.
COMMISSIONER RAPER: It looks like you're done,
Ms. Andrews. Thank you for coming.
THE WITNESS: Thank you.
(The witness left the stand. )
MR. MEYER: Next Mr. Ehrbar.
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CSB REPORT]NG
(208 ) 890-s198
EHRBAR (DT )Avista Corporation
PATRICK D. EHRBAR
produced as a witness at the j-nstance of the Avista
Corporation, having been first duly sworn to tell the
truth, the whole truth, and nothing but the truth, was
examined and testified as follows:
D]RECT EXAMINATION
BY MR. MEYER:
0. Mr. Ehrbar, for the record, please state your
name and your employer.
A. Patrick Ehrbar, and my employer is Avista
Corporation.
O. And have you prepared direct testimony in
support of the stipulation?
A. Yes, I have.
0. Do you have any changes to that?
A. I have just one change and it's on page 11 of
my testimony. Table No. 1 --
COMMISSIONER KJELLANDER: What paqe was that
again?
THE WITNESS: Irm sorry, page 11.
COMMISSIONER KJELLANDER: Thank you.
THE WITNESS: So Tabl-e No. 1 as shown therer ds
was poj-nted out to me yesterday, that the source
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CSB REPORT]NG(208) 890-s198
EHRBAR (Di )Avista Corporation
documents in the second column, some of the il-l-ustrative
sourcing where the numbers came from don't tie to the
numbers. While the numbers in the right-hand column are
correct, the sourcing is a little bit off. Say, for
instancer orr line 11 where you see "H Actual January # of
Existing Customersr " it says, ": d - e, " those are
slightly off, so what f propose to do is to refil-e this
table later today or tomorrow morning to correct for
those source errors.
MR. MEYER: So essentially, we will swap out
this page.
COMMISSIONER RAPER: Replacement. page?
MR. MEYER: Correct.
COI4\,IISSIONER RAPER: Thank you.
O. BY MR. MEYER: Any other changes?
A. No, sir.
O. So if I were to ask you the questlons that
appear in this prefiled testimony, would your answers be
the same with that exception noted?
A. They would.
MR. MEYER: Thank you. With that, I ask that
hls testimony be spread as if read.
COMMISSTONER RAPER: Without objection, we wil-I
spread Mr. Ehrbar's testimony on the record as if read.
MR. MEYER: Thank you.
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(The fol1owing prefiled direct testimony
of Mr. Patrick Ehrbar is spread upon the record. )
CSB REPORT]NG
(208 ) 890-s198
EHRBAR (Di)
Avista Corporation
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I. INTRODUCTION
O. Please state your name, employer and business
address.
A. My name is Patrick D. Ehrbar and I am employed
as the Manager of Rates and Tariffs for Avista Utilities
("Company" or "Avista"), at 141,1, East Mission Avenue,
Spokane, Washington.
O. Have you previously filed dlrect testimony in
this proceeding?
A. Yes. My testimony in this proceeding covered
the spread of the proposed electric and natural gas
revenue j-ncreases among the Company's electric and
natural gas general- service schedul-es. My testimony also
described the changes to the rates within the Company's
el-ectric and natural gas service schedules, as well as
the Company's proposed electric and natural gas Fixed
Cost Adjustment Mechanisms.
0. What is the scope of this pre-filed testimony?
A. The purpose of my testimony is to describe and
support the non-revenue requJ-rement portions of the
Stipulation and Settl-ement ("Stipulation"), fil-ed on
October 16, 2015 between the Staff of the Idaho Public
Utili-ties Commissi-on ("Staff '), Cl-earwater Paper
Corporation ( "Clearwater" ) , Idaho Eorest Group, LLC
Ehrbar, Dl 1Avista Corporation
33
("Idaho Forest"), the Community Action Partnershlp
Association of Idaho ("CAPAf'r), the Idaho Conservation
League ("Conservation League"), the Snake River Al-liance
("Snake River") and the Company. These entities are
collectively referred to as the "Partiesr " and represent
several parties in the above-referenced cases.
In my testimony I wil-l- explain the following
Settlment components:
1. Rate Spread and Rate Design
2. Fixed Cost Ad;ustment Mechanisms
3. Other Settl-ement Items
I will also provide an overview of the Company's customer
service programs.
0. Are you sponsoring any exhibits?
A. No, I am not. Company witness Ms. Andrews is
sponsoring Exhibit No. 1, which is a copy of the
Stipulation and Settlement filed on October L6, 201-5,
with the Commission.
II. RATE SPREAD & RATE DESIGN
O. Please explain the settl-ement terms relating to
cost of service.
A. Eor electric operations, the Company prepared a
cost of service analysis using a system load factor
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Ehrbar, Di 3Avista Corporation
method of classifying production costs, allocating 1008
of transmission costs to demand, and al-l-ocating
transmission costs on a twefve-month basis. For
settl-ement purposes, the Parties agreed to use a pro-rata
allocation based on the Company's proposed 258 move
towards unity for purposes of spreading the revised
electric revenue requi-rement, while not agreeing on any
particular cost of service methodology.
For natural gas operations, the Company proposed
that all rate schedules be moved approximately 332
towards unity. Eor settl-ement purposes, the Parties
agreed to use a pro-rata al-l-ocation of the Company's
natural- gas rate spread percentages from its original
filing for purposes of spreadlng the revised revenue
requirement.
O. How did the Stipulation address rate design?
A. Eor settl-ement purposes, the Parties have
agreed that the revenue requirement for each electric and
natura1 gas service schedul-e woul-d be applied as a
unj-form percentaqe j-ncrease to each volumetric energy
rater ds shown in Appendix D of the Stlpulation provlded
as Ms. Andrew's Exhibit No. 1. While there woul-d be no
change to the residential electric Schedule 1 monthly
basic charge, the Parties agreed that the natural gas
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Schedule 101 monthly basic charge would increase by $1.00
per month, from $4.25 to $5.25.
Appendix D of the Stipulation (Andrews Exhibit No.
1) provides a summary of the current and proposed rates
and charges for electric and natural gas service.
O. Would you please explain how the Stipulation
addresses the present electric rebate customers are
receiving in 20L5.
A. Yes. Through rate Schedule 97, customers are
receiving a rebate of $0.00091 per kllflh for 2075
(approximately $2.8 mil-l-ion) . This rebate rate was first
approved in the Company's 201,2 general rate case, Case
No. AW-E-12-08.
As a part of the settlement stipulation approved by
the Commission in Case No. AW-E-14-05, the rebate was
extended through December 31, 2075 using the 2013
electric earnings sharing deferral.
For 20L4, Avista deferred approximately $5.6 million
under the electric earnings sharing. The Parties have
agreed to use the $5.0 mll}ion deferral balance from 2014
and extend the Schedul-e 97 rebate rate for 20L6 and 2017.
This informatj-on is shown on Appendix E to the Settl-ement
Stipulation (Andrews Exhibit No. 1).
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Ehrbar, Di 5Avista Corporation
O. Please explain how the Stipulation addresses
the present natural qas rebate customers are recei-ving in
20L5.
A. Throuqh rate Schedule t9'7 , customers are
receiving a rebate of $0.01489 per therm through December
31, 2015 (approximately $1.2 million). This rebaLe rate
was first approved 1n the Companyr s 20L2 qeneral rate
case, Case No. AW-G-L2-01 .
As a part of the settl-ement stipuJ-ation approved by
the Commission in Case No. AW-G-14-01,, the rebate rate
was extended for 2015 using the 2013 natural gas earnings
sharing deferral, ds wel-I as the Schedule 191 Natural Gas
Energy Ef f iciency funding balance.
For 2014, Avista deferred approximately $0.2 milflon
under the natural gas earnj-ngs sharing. The Parties have
agreed to use the $0.2 million natural gas deferral
balance from 20L4 to partially offset the expiration of
the $7.2 million rebate that wil-l occur on January I,
201,6. This information is shown on Appendlx E to the
Settlement Stipulatlon (Andrews Exhibit No. 1) .
O. What is the effect on retail- rates, by rate
schedule, of the proposed settlement?
A. The following table reflects the aqreed-upon
percentage increase by schedule for electric service:
31
1
2
3
4
5
6
7
I
9
10
11
L2
13
L4
l_5
16
1,'l
18
19
20
2t
22
23
24
25
Rate Schedule
Resllerfhl Schedub I
Gerpral Servbe Schedules I l/12
Large General Servbe Scheduhs 2lDz
Frdra Iffge Gerpral Servbe Schedub 25
Cbarwafer Paper Schedub 25P
Pureing Servbe Schedubs 3 I Rz
Steet & Area Liglts Sche&rles 4l-48
Overall
Increase in Base Increase in
Rates Bilins Rates
0.9%
0.5%
0.6%
0.6%
0.4%
0.7%
0.8%
g'ZY!
0.9o/o
0.5%
0.6%
0.6%
0.4%
0.7%
0.8o/o
9'7!e
The following table
increase by schedule
Rate Schedule
General Servbe Schedub 101
Iarge Gerpral Servirc Scheduhs llllll2
Lrtempt Sabs Servbe Schedubs l3lll32
reflects the agreed-upon percentage
for natural gas service:
Increase in
Base Rates
7.7%
3.7%
7.5%
Increase in
Biling Increr
Netof New
Expiring Ret
5.30/o
3.1%
4.8%
3.1%
4.8o/"G
ing Rates
4.1%
1.5%
2.7%
5.2%
WA
Tiamportatbn Servbe Schedub 146* 5.2%Overall E 2%,* exchtdes commodity and interstate pipeline transportation costs
O. What are the residential bill impacts if the
Commission approves the Settlement Stipulation?
A. An electric residential customer using an
averagie of 929 kilowatt hours per month would see a
$0.75, or 0.98, increase per month for a revised monthly
bill of $8s.74.
A natural- gas residential customer usj-ng an average
of 6l therms per month woul-d see a $3.19, or 5.42,
j-ncrease per month for a revised monthly bill of $62.41.
Increase
Expirins hte
Ehrbar, Di 6Avista Corporation
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III. FIXED COST ADJIJST}{ENT MECHANISMS
O. Please explain the settlement terms relating to
the Flxed Cost Adjustment ("FCA") Mechanisms.
A. The Stipulation includes electric and natural
gas FCA mechanisms. The ECA is a mechanism designed to
break the link between a utility's revenues and a
consumerts energy usaqe. The Company's actual revenue,
based on kilowatt-hour and therm sales, will vary, up or
down, from the level set by the IPUC. This coul-d be due
to changes in conservation, weather or the economy.
The Parties have agreed upon a Revenue-Per-Customer FCA
for electric and natural gas operations. The FCA wil-I
compare actual- FCA revenues to allowed FCA revenues
determined on a per-customer basis, with any differences
deferred for later rebate or surcharge. Customers in the
FCA will be segmented into Rate Groups (Resldential- and
Non-Resldential-), and further categorized as eit.her
"Existing Customers" or "New Customers."
0. What is the term of the ECA Mechanj-sms?
A. The Parties agreed to an initial ECA term of
three years, with a review of how the mechanisms have
functloned conducted by Avista, Staff, and other
interested parties following the end of the second ful1-
Ehrbar, Di 1Avista Corporation
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Ehrbar, Di 8Avista Corporation
year. Avista may seek to extend the term of the
mechanism prior to its expiration.
O. You mentioned that customers will be comblned
into Rate Groups. Please explain.
A. The Parties have agreed to combine customers
into Rate Groups. For the Electric FCA, customers would
be included in one of two Rate Groups:
1. Residential- - Schedule 12. Commercial Schedules 11, !2, 27, 22, 31, and
32
For the Natural Gas FCA, customers would be included
in one of two Rate Groups:
1. Residential - Schedul-e 1012. Commercial Schedul-es 1l-1 and 712
O. Why were certain customers excluded from the
agreed-upon mechanisms?
A. For the el-ectric FCA, Street and Area Lighting
customers served on Schedules 41,-49 were excluded because
the fixed costs to serve them are recovered in their flat
monthly rates, and therefore fixed cost recovery is not
dependent upon customer usage. Extra Large General
Service Schedule 25 and Extra Large General- Service to
Cl-earwater Paper Schedule 25P were excluded from the
mechanism primarily because these customers tend to be
higher load factor customers. With a higher load factor,
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the Company believes that the recovery of fixed costs
from these customers is less volatile versus the other
schedules, and as such incLusion 1n the FCA at this time
is not necessary.
In addition, for these large-use customers, Avista
has more direct contact with these customers regarding
future plans that may increase or decrease their l-oads.
These changes in retail load, whether they be related to
energy efflciency measures or for other reasons, are
easier to identify and reflect in a general rate case,
than for other rate schedules that have a large number of
lower-usaqe customers.
Eor the natural gas FCA, the Parties have agreed to
remove Schedul-es 131 and 132 from the mechanism because
only one customer was served on these schedules in the
test year.1 FinaIIy, Schedul-e 1,46 transportation
customers were not included in the design of the ECA
because, like Schedul-e 25 customers, they tend to have
less volatile usage (higher load factor), and future
changes 1n their usage are more easily identifled and
reflected in general rate filings.
1 The one Schedul-e 132
service to firm service
cusLomer recently moved
under Schedule 112.
from interruptible
41 Ehrbar, Di 9Avista Corporation
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O. Have you prepared a simplified ca1culation
showing how the FCA mechani-sm works?
A. Yes. While the components of the electric and
natural gas FCA mechanisms are il-lustrated in Appendices
B and C of the Settl-ement Stipulation (Andrews Exhlbit
No. 1) , Table No. 1 below is an illustrative example of
how the electric mechanism works. The example is for
only January 2076, and provides the base authorlzed
values as well as the calcul-ation of the monthly deferral
using an illustrative number of customers, energy usage,
and actual monthly revenue.
4Z
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3
4
5
6
7
8
9
10
11
1,2
13
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18
79
20
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25
Revised November 23, 201 5
fab].e No. 1:
Actual # of Customers
I
oD
h Actual
i
t rc.-,.-.**:g--.^..".^-;.-.-$g1s"1-^""-"-""-
i :h*i . , $gr4,3gr7!9---i--
Actual kwh
($E,955)
j* New cusonrrs will be fracked rsing a diftrerr FCA Revern:e Per Custonpr as agreed to in t}e Stipuhtbn
i
The illustratj-ve example provided above would be
similar for natural gas customers. The components for
the natural gas FCA are provided in Appendix C to the
Stipulation (Andrews Exhibit No. 1).
Ehrbar, Di 11
Avista Corporation
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Avista Corporation
O. Woul-d you please describe how Existing
Customers and New Customers would be treated in the FCA
mechanisms?
A. Yes. The Parties have agreed that revenue
related to certai-n items discussed below would not be
included in the FCA for new customers. The resul-t is
that the Fixed Cost Adjustment Revenue-Per-Customer for
new customers will be l-ess than the Fixed Cost Adjustment
Revenue-Per-Customer for existing customers. For new
electric customers added after the test period, recovery
of incremental revenue re1ated to fixed productlon and
transmission costs woul-d be excl-uded from the electric
FCA. Eor new natural gas customers added after the test
period, recovery of incremental revenue rel-ated to fixed
production and underground storaqe facility costs would
be excluded. These modifications are included in
Appendices B and C to the Stipulation (Andrews Exhibit
No. 1) .
0. Please describe how Avista will report on the
mechanisms.
A. Avista will file, within 45 days of the end of
each quarter, a report detail-ing the FCA activity by
month. The reporting wiIl al-so include information
related to the deferrals by rate group, what the
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deferral-s would have been 1f tracked by rate schedule,
use and revenue-per-customer for existing and new
customers, and other summary financial information.
Avista will provide such other information as may be
reasonably requested, from time to time, in the future
quarterly reports.
O. Pl-ease provide
Company would fil-e for a
proposed FCA.
information related to when the
rate adjustment under the
A. On or before July L, the Company wil-l- file a
proposed rate adjustment surcharge or rebate based on the
amount of deferred revenue recorded for the prior January
through December time period. The rate adjustment woul-d
be cal-culated separately for each Rate Group, with the
applicable surcharge or rebate recovered from each group
on a uniform cents per kWh or per therm basis. The
proposed tariff (Schedule '75 for electric and Schedule
1,15 for natural gas) included with that filing would
include a rate adjustment that recovers/rebates the
appropriate deferred revenue amount over a twelve-month
period effective on October 1 for electric (to match with
Power Cost Adjustment and Residentlal Exchange annual-
rate adjustments time period), and November 1st for
45 Ehrbar, Di 13Avista Corporation
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natural gas (to match with the annual Purchased Gas Cost
Adjustment rate adjustment time period).
The deferred revenue amount approved for recovery or
rebate would be transferred to a bal-ancing account and
the revenue surcharged or rebated during the period would
reduce the deferred revenue in the balanclng account.
After determining the amount of deferred revenue that can
be recovered through a surcharge (or refunded through a
rebate) by Rate Group, the proposed rates under Schedules
15 and i-75 would be determined by dividing the deferred
revenue to be recovered by Rate Group by the estimated
kwh safes (Electric FCA) or therm sal-es (Natural Gas FCA)
for each Rate Group durlng the twelve-month recovery
period.
Any deferred revenue remaj-ning in the balancing
account at the end of the amortization period would be
added to the new revenue deferral-s to determine the
amount of the proposed surcharge/rebate for the following
year.
O. Would you describe the accounting for the
proposed electric and natural gas ECA?
A. Yes. Avista will record the deferra] in
account 186 - Mlscellaneous Deferred Debits. The amount
approved for recovery or rebate would then be transferred
into a
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Regulatory Asset or Regulatory Liability account for
amortization. On the income statement, the Company woul-d
record both the deferred revenue and the amortization of
the deferred revenue through Account 456 (Other Electric
Revenue), or Account 495 (Other Gas Revenue), in separate
sub-accounts. The Company would file quarterly reports
with the Commission showing pertinent information
regarding the status of the current deferra1. This
report would include a spreadsheet showing the monthly
revenue deferral- cal-cul-ation for each month of the
deferral peri-od (January - December) , as well- as the
current and historical- monthly balance 1n the deferral
account.
o.
balance?
Will lnterest accrue on the unamortized
A. Yes, interest will be accrued on the
the FCA balanclng accounts at theunamortized balance in
Customer Deposit Rate.2
O. Is there an agreed-upon l-imitation as to the
amount of an FCA surcharge?
A. Yes. An ECA surcharge, by rate group, cannot
exceed a 3Z annual rate adjustment, and any unrecovered
2 Based on order
for 2015 is 1.0t.
No. 33187 in Case No. GNR-U-14-12, the deposit rate
The rate is updated annua11y.
Ehrbar, Di 15Avista Corporation
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balances will be carried forward to future years for
recovery. There is no limit to the Ievel of the FCA
rebate.
IV. OTHER ELEMENTS OF THE STIPUI,ATION
O. Please explain the settlement terms relating to
the PCA authorized level- of expenses.
A. The new level of power supply revenues,
expenses, retail load and Load Change Adjustment Rate
resulting f rom the ,January L, 20L6 settlement revenue
requirement for purposes of monthly PCA mechanism
ca1culations are detailed in Appendix A of the
Stipulation (Andrews Exhibit No. l-) .
O. Please explain the customer service-rel-ated
issues agreed upon in the Settlement Stipulation.
A. The Parties have agreed upon two customer
service-rel-ated issues. Fj-rst, the Company and interested
parties will meet and confer prior to the Companyr s next
general rate case in an effort to identlfy low income
customers served by the Company, quantify the number of
customers so identified, and determine those customers'
usage patterns. An initial meeting shall occur no later
than June 30, 201,6, with follow-up meetings to occur as
the attendees may deem appropriate.
4B Ehrbar, Di 1,6Avista Corporation
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Second, the Company and interested parties will meet
and confer prior to the Companyls next qeneral rate
filing in order to assess the Low Income Weatherization
and Low Income Energy Conservation Educatlon Programs and
discuss appropriate level-s of cost-effective, 1ow*income
weatherlzation funding in the future. An initial meeting
shal-l occur no l-ater than June 30, 2016, with fo1low-up
meetings to occur as the attendees may deem appropriate.
V. CUSTOMER SERVICE PROGRAMS
O. Does the Company have programs in place to
mitigate the impacts on customers of the proposed rate
i-ncreases ?
A. Yes. We have a history of making it a priority
within our Company to maintain meaningful programs to
assist our customers that are least able to pay their
enerqy bills. We also have programs to assist our entire
customer basel )-.e.1 not just our low-income customers.
Some of the key programs that we offer or support are as
follows:
* DSM Energy Efficiency Programs and Funding. The
Company offers a broad array of energy efficiency
program measures that provide customers with
increased opportunity to manage their energy bi11s.In 2015, Avlsta has hosted two Energy Fairs, one in
Lewiston, and the other in Post Falls. Over 500
customers were in attendance and received energy
Ehrbar, Di L'7Avlsta Corporation
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Ehrbar, Di- 1BAvista Corporation
efficiency tips and klts that included l-ow cost/no
cost ways to reduce enerqy consumption.
* Project Share. Project Share is a vofuntary program
allowing customers to donate funds that aredistributed through community action agencies to
customers in need. In the 2014/2015 heating season,Avista Utilities' customers, employees and Avista
Corp donated $123,528 which was directed to Idaho
Community Action Agencies .
* ComforL Level Bi11ing. The Company offers theoption for all- customers to pay the same bill amount
each month of the year by averaging thelr annualusaqe. Under this program, customers can avoid
unpredictabl-e winter heating bj-1Is.
* Pa]rynent Amangements. The Company's Contact CenterRepresentatives work with customers to set up
payment arrangements to pay enerqy bills.
* CARES Program. Customer Assistance Referral- andEvaluation Services provide assisLance to
special-needs customers through access to speclallytrained (CARES) representatives who provldereferrals to area agencies and churches for helpwith housing, util-i-ties, medical assistance, etc.
* Senior Energlg Outreach: Avlsta has developedspecific outreach efforts to reach our morevulnerable customers (seniors and disabled
customers) with bill paying assistance and energyefficiency information that emphasizes comfort andsafety. Some examples of this effort are as follows:
* Senior Publications: Avista has created a
one-page advertisement that has been placed in
senj-or resource directories and targeted seniorpublications to reach seniors with informationabout energy efficiency, Comfort Level- BiIIing,Avista CARES and energy assistance. A brochurewith the same information has also been createdfor distribution through senior meal dellveryprograms and other senior home-care programs.
50
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Ehrbar, Di 19Avista Corporation
* Senior Energy Workshops: With the help of theAvista Conservation Energy Education Team, 5
Energy Workshops have been facilitated in 2015,wlth more to come later this year.
Approximately, 150 seniors and low-incomeindividuals were reached and given Home Energy
Saving klts along with learnlng about
l-ow-cost/no-cost ways to reduce energy use.
O. Does thls conclude your pre-filed direct
testimony?
A. Yes, it does.
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CSB REPORTING
(208 ) 890*s198
EHRBAR (Com)
Avista Corporation
(The fol-l-owing proceedings were had in
open hearing. )
MR. MEYER: He is available for cross.
COMMISSIONER RAPER: Commission Staff?
MR. KARPEN: No questions.
COMMISSIONER RAPER: Mr. Purdy?
MR. PURDY: No questions.
MR. MILLER: No questions.
COI4\,IISSIONER RAPER: Mr. Richardson?
MR. RICHARDSON: No questions, Madam Chair.
COMMISSIONER RAPER: Any questions from the
Commission?
COMMISSIONER KJELLANDER: No questions.
EXAMINATION
BY CO}O{ISSIONER RAPER:
O. I have one question for your Mr. Ehrbar. With
regard to the fixed cost adjustment and the appllcation
of the FCA being applied to existing and new customers
differently, I just want. to clarify in my own head and
for purposes of the record that when a general rate case
is fil-ed, those new customers then move into the existing
customer category?
A. Yes.
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CSB REPORTING
(208 ) 890-5198
EHRBAR (Com)
Avista Corporation
O. And are bil-led as existing customers with
regard to the FCA?
A. That is correctr so until we have a new general
rate case, those new customers wil-l- always be treated as
new. Once we have a new base l-ine, then those new
customers will be existing and we'll- track them from
there.
COI,fl{ISSIONER RAPER: Thank you. Any redirect?
MR. MEYER: No redirect.
COMMISSIONER RAPER: You are excused. ThaNK
you.
THE WITNESS: Thank you.
(The witness }eft the stand. )
COMMISSIONER RAPER: Does that concl-ude
Avista's witnesses?
MR. MEYER: It does. Thank you.
COMMISSIONER RAPER: Mr. Karpen.
MR. KARPEN: Madam Chair, we woul-d call Randy
Lobb.
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CSB REPORTING
(208 ) 890-5198
LOBB (Di )Staff
RANDY LOBB,
produced as a witness at the instance of the Staff,
having been first duly sworn to teII the truth, the whole
truth, and nothing but the truth, was examined and
testified as follows:
D]RECT EXAMINAT]ON
BY MR. KARPEN:
O. Good morning, Mr. Lobb. Can you please state
your fu1l name and speII your last name for the record?
A. My name is Randy Lobb, L-o-b-b.
O. Can you teIl the Commission with whom you are
employed and in what capacity?
A. I'm employed by the Idaho Public Utilities
Commi-ssion. I am the Utilities Division Administrator.
O. Are you the same Randy Lobb that filed
testimony in this matter?
A. Yes, I am.
O. Do you have or does Staff have any changes or
wish to clarify any positions that have already been
stated in the comments?
A. No.
O. So if I were to ask you today those same
questions set forth in your direct and rebuttal
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CSB REPORT]NG(208) 890-s198
LOBB (Di )Staff
testimony, would your answers be the same?
A. Yes, they woul-d.
O. Are they true and correct to the best of your
knowledge?
A. Yes.
MR. KARPEN: Madam Chair, f move to spread Mr.
Lobbrs testimony upon the record as if read.
COMMISSIONER RAPER: Without objection, Mr.
Lobb's testimony wlth regard to the stipulation and
settlement will be spread across the record as if read.
(The following prefiled direct testimony of
Mr. Randy Lobb is spread upon the record. )
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AW-E- 1 5- 0 5 /AW-G- 1 5- 0 1
1.7/73/1.5
(Di) 1
STAEF
O. Please state your name and business address for
the record.
A. My name is Randy Lobb and my business address
1s 472 West Washington Street, Boise, Idaho.
O. By whom are you employed?
A. I am employed by the Idaho Public Utilities
Commission as Utilities Division Administrator.
O. What is your educational and professional
background?
A. I received a Bachelor of Science Degree in
Agricultural Engineering from the University of Idaho in
1980 and worked for the Idaho Department of Water
Resources from June of 1980 to November of 1987. I
received my Idaho l-icense as a registered professional
Civil- Engineer in l-985 and began work at the Idaho Public
Utilities Commission in December of 1987. I have
analyzed utility rate applications, rate design, tariff
filings and customer petitions. I have testlfied in
numerous proceedings before the Commission including
cases dealing with rate structure, cost of service, power
supply, line extensions, regulatory policy and facility
acquisitions. My duties at the Commisslon include case
managemenL and oversight of al-I technlcal Staff assigned
to Commission filings.
O. What is the purpose of your testimony in this
56 LOBB, R
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CASC?
A. The purpose of my testimony is to describe the
AW-E- 1 5- 05/AW-G- 1 5- 0 1
1.L/1.3/L5
(Di) 1a
STAFF
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AW-E- 1 5- 0 5/AW-G- 1 5- 0 1
tL/L3/7s
(Di) 2
STAFF
proposed comprehensive settlement in this case and
explain Staff's support.
O. Pl-ease summarize your testimony.
A. The proposed Stipulation and Settlement (the
"Settlement") provides an electric rate increase on
January l, 201,6 of $1.7 mill-ion (0.692) and a natural gas
rate increase of $2.5 mil-Iion (3.49U ) . It al-so provides
for a Eixed Cost Adjustment (FCA) mechanism for both
electric and gas service to track recovery of Commission
authorized fixed costs and either surcharge for
shortfall-s or credit for over collection on an annual
basis.
After comprehensive revj-ew of the Company's
Application, thorough audlt of Company books and records
and extensive negotiation with parties to the case, Staff
supports the proposed Settl-ement. Staff believes that
the Settlement, supported by aI1 parties to the case is
in the public interest and should be approved by the
Commission.
Background
0. Please describe Avistafs original filing.
A. Avista made its original filing on May 13, 2015
requesting authority to increase its rates by $13.2
million (5.22) and $3.2 million (4.5e") for el-ectric and
gas service, respectlvely, effective January !, 2016.
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AW-E- 15- 0 5/AW-c- 15- 01
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STAFF
The Company also
additional $13.7
for electric and
requested to increase its rates
million (5.18) and $1.7 million
gas
by an
(2.22)
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AW-E- 1 5- 0 5/AW-c- 1 5- 0 1
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(Di) 3
STAFF
service, respectively, effective January 1, 2017. The
Company proposed a capltal structure of 50/50 and a
return on common equity of 9.92.
The Company proposed to spread the revenue
increase in both years to electric and gas customer
classes using a 25? move and a 338 move toward cost of
service, respectively. Residential customer charges would
increase from $5.25 to $8.50 and from $4.25 to $8.00 per
month for el-ectric and natural- gas service, respectively.
Fina11y, the Company proposed an FCA for both
gas and electric service to track monthly recovery of
fixed costs on an annual basis in between rate cases. If
cost recovery was below that authorized by the
Commission, then customers would receive a surcharge. If
cost recovery exceeded that authorized by the Commission,
customers would receive a credit.
Settlement Overview
O. Pl-ease summarize the proposed Settlement.
A. The proposed Settlement specifies a rate
increase of $1.7 mj-l]-ion (0.692) and $2.5 m111ion (3.49U )
for electrlc and natural gas service, respectively,
effective January L, 20\6. It al-so specifies a 50/50
debt to equity capital structure, a 5.348 cost of debt
and a 9.5? return on common equity.
Besides specifying capital structure, equity
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STAEF
return and the debt cost for both electric and gas
service, the Settlement al-so specifies a variety of
expense and j-nvestment adjustments. The electric and gas
revenue adjustments fall primarily into three cateqories:
1) eliminate test year proforma expense and investment
beyond December 3L, 2075; 2) modify miscel-Ianeous test
year expenses; and 3) Iengthen amortization periods for
deferred accounts. Electric revenue requirement is
further adjusted by continuing Palouse Wind expense
recovery through the Power Cost Adjustment (PCA)
mechanism rather than through base rates.
The revenue increase wiII be spread to each
electric and gas customer class based on a 252 and 332
move toward class cost of servi-ce, respectively, as
originally proposed by the Company. Electric residential
energy rates wiII increase by a unlform percentage to
generate the additional revenue. The basic charge for
residentiaf electric customers wiIl remain at i5.25 per
month while the basic charge for residential gas service
will- increase from $4.25 to $5.25 per month. The
remaining increase will be spread uni-formly to commodity
rates.
The Settl-ement also establishes an FCA for 3
years for both electric and natural gas service to track
and defer over or under col-l-ection of Commission
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authorized fixed costs on an annual basis. The
Settlement describes a variety of ECA requj-rements
incl-uding treatment of new and existing
AW-E- 1 5- 0 5/AW-G- 1 5- 0 1
1.L/1.311.s
(Di ) 4a
STAFF
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customers and annua] reporting.
O. Are there any other provisions included in the
proposed Settl-ement?
A. Yes. The Settl-ement also specif ies base power
supply expenses for use in the PCA mechanism, extension
of electric and natural- gas rebates and an agreement for
the parties to meet and confer on low income
weatherization programs and l-ow income consumption data.
Settlement Process
O. What was the process that l-ead to the all-party
Settl-ement?
A. After the Companyrs initial filing on May 73,
201,5, the Commission issued a Notice of Application and
set an intervention deadline of June 29, 2075. Eive
parties intervened in the case: 1) Clearwater Paper, 2)
Consumer Action Partnership of Idaho (CAPAI), 3) Idaho
Conservation League, 4) Idaho Eorest Group and 5) Snake
River Al-Iiance.
Avista, Staff and the intervening parties then
conferred and set a schedule that incl-uded settl-ement
workshops, filing dates for dlrect and rebuttal testimony
and a date of November 23, 201,5 for a technical hearing.
Parties convened a workshop on September 18, 20L5 to
discuss case settlement.
Through extensive discussj-ons and give and take
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AVU-E- 15-05/AW-G- 15- 01
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(Di) s
STAFF
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on a variety of issues that included over 23 revenue
requirement
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STAFF
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AW-E- 1 5- 0 5/AW-G- 1 5- 0 1
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STAFF
ad;ustments, class cost of service, revenue spread, rate
design, multi-year rate plans and fixed cost adjustment
mechanisms, the parties came to tentative agireement.
Over the next month, the parties agreed to language
culminating in the proposed Settlement and Stipulation
filed on October 19, 2015.
Staff Investigation
O. What type of lnvestigation did Staff conduct to
evaluate the Company's rate increase request?
A. There were fifteen Utilities Division Staff
assigned to extensively review the Companyr s applicatron
and identify issues in preparation for litigation at
hearing. Staff conducted two weeks of onsite audits,
submitted 1-56 production requests, and reviewed rate
increase requests filed by the Company in other state
j urisdictions .
Staff identified twenty three adjustments to
the Company's requested revenue requirement, evaluated
and developed annual power supply expense for the PCA,
compared and contrasted past and present class cost of
service models and assessed the need for an FCA
mechanism. Staff prepared a revenue requirement and
establlshed positions on al-l- of the major issues in
preparation to fil-e direct testimony on October 21, 20L5.
O. How did Staff prepare for the settlement
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workshop?
A. Staff prepared for the settlement workshop by
AW-E- 15- 0s/AVU-G- 15- 01
LL/ L3/ ts
(Di ) 6a
STAFF
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(Di) 7
STAFE
preparing for testimony 1n the litigated case. Staff
developed its revenue requirement adjustments and
positlons on various issues for presentation at the
workshop in conjunction with preparing testimony for
hearing.
O. What 1s Staf f rs settl-ement objective?
A. The objectlve of settl-ement is to achieve an
outcome that is better for customers than what otherwise
could be achieved through a litigated case. Successful
settlement from Staff's perspective is to convince the
Company and other parties to accept the majority of Staff
revenue adjustments and positions as part of the proposed
Settl-ement rather than risk losing those issues at
hearing.
0. Does the Settlement achieve those objectives?
A. Yes, I be1ieve that it does. Of the 23
electrlc revenue requirement adjustments that Staff
identified, roughly 71 were encorporated either totally
or partially in the Settlement. Rather than an increase
of $13.2 mi111on as proposed by the Company, the
Settlement specified an electric increase of only $1.7
million. On the gas side, 74 of 1,6 adjustments were
fu11y or partially included in the Settl-ement reducing
the increase from $3.2 mil]ion to $2.5 million.
O. What type of revenue requirement adjustments
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AW-E- l- 5- 0 s/AW-G- 1 5- 0 1
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(Di) 7a
STAFF
were proposed by
A. Besides
the
Staff and included in the
a reduction in return on
Settlement?
common equity,
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STAFF
adjustments generally fal1 into three categories: 1)
el-iminate test year proforma expense and investment
beyond December 31, 201-5; 2) modify miscellaneous test
year expense; and 3) lengthen amortization periods for
deferred accounts.
O. What effect did equity return have on revenue
requirement?
A. The Company had originally proposed a return on
common equity of 9.92 while the Settl-ement specifies a
return of 9.5U. Staff notes that the fower return is
consistent wlth return on equity established in Avistars
Washington jurisdiction and Staff believes it is within a
reasonable range for Avista's financial situation and
represents a reasonable compromise in this case.
The return on equity adjustment reduced
electric revenue requirement by $2.44 mil-l-ion and natural
gas revenue requirement by $415r000. Capital structure
and cost of debt remain as originally proposed by the
Company.
O. What effect dld limiting the test year proforma
period have on revenue requirement?
The Companyrs original proposal incl-uded a
multi-year rate increase with budgeted expense and
capital additions iricluded through December 3l-, 201,1 .
The Settlement speclfles a single year raLe j-ncrease on
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January 1-, 2016 with expense and investment incl-uded
through December 31, 2015. The Settlement speciflcally
reduces electric test year
AW-E- 1 5- 0 5/AVU-G- 1 5- 0 1
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(Di) Ba
STAFF
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AW-E- 15- 0 s/AVU-G- 15- 01
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(Di) e
STAFF
revenue requirement by $3.9 mil-l-ion to ref l-ect reduced
levels of actual 20L5 capital investment and removes
planned capital additions in 201,6.
The Settl-ement further removes nearly $1
mil-l-ion in el-ectric revenue requirement for insurance,
lnformation services and technology and non-executive
labor expense increases planned for 201,6. Adjustment for
these items on the gas side reduced revenue requirement
by $333,000. Staff maintains that limiting test year
proforma expense and investment to December 31, 2075
better reflects known and measurable costs actually
incurred by the Company and is consistent with past
Commission Order (No. 30112).
0. What test year expenses were actually reduced
from the Company's proposal?
A. The second category of adjustments reflects a
$688r 000 reduction in electric revenue requirement and a
$2791 000 reduction in gas revenue requirement to reduce
proposed expense recovery in rates. The parties agreed
to a variety of adjustments that Staff believes reflected
more appropriate levels of expense.
Injuries and damage expenses were reduced for
both electric and gas operati-ons to reflect average
expenses incurred over the l-ast 6 years. Officer
incentives were removed and non-officer incentives were
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reduced to reflect 1008 rather than a 702e" payout. Other
miscellaneous
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(Di) 9a
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administration and qeneral expenses were reduced for such
items as insurance expense for directors and officers, a
legaI expense error, abnormally hiqh cleanup expenses
incurred in 2074, Board of Director expense al-Iocated to
shareholders and miscellaneous account 930 expenses.
O. What impact did extended amortization of
deferral bal-ances have on stipulated revenue requirement?
A. The third category of adjustments extended
deferral balance amortization periods to reduce test year
revenue requirement by $788,000 and $168,000 for electric
and gas servj-ce, respectlvely. Staff maintained that
amortization periods for project Compass and Lake Spokane
project deferrals shoul-d be set at 4 years rather than 2
years as proposed by the Company. The parties agreed to
4 years for the purpose of settlement.
O. Were there other revenue requirement
adjustments included in the Settlement that did not fit
into the three categories?
A. Yes. The Settl-ement included an electric
expense adjustment of $3.5 million for the Palouse Wind
project. Expenses and benefits assocj-ated with this
project are currently include for recovery in the
Companyr s PCA mechanism. The Settlement specifies that
Pal-ouse Wlnd expenses will continue to be recovered in
the PCA rather than included in base rates as originally
proposed by the Company.
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(Di) 11
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O. Why does Staff bel-ieve it is approprlate to
continue PCA treatment of Palouse Wind expense?
A. Staff maintains that the Palouse Wind project
was never acquired to meet loads in Idaho. It was
acquired to comply with Resource Portfol-io Standards in
Washington State. While the project does generate enerqy
and provide some va1ue to Idaho customers, the cost for
Avj-sta to purchase the project output exceeds the value
of the energy generated. Consequently, Staff bel-ieves
that Company shareholders should share in the annual
economic loss created by the project. Avista disagrees
with Staff's position but accepts the stipulated
treatment for purposes of this case. The net customer
benefit of continued PCA treatment of Palouse Wind
expense is approximately $350,000 or the Company's 102
share of $3.5 million that would be eliminated with base
rate treatment.
Revenue Spread and Rate Design
O. Please explaln the Settl-ement with respect to
cl-ass cost of service and revenue spread.
A. The Companyr s original appllcation in this case
i-ncluded cl-ass cost of service studies for both electrlc
and natural- gas service. Those studi-es both showed that
residential and smaff commercial customers were paying
l-ess than their appropriate cost of service and large
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high l-oad factor customers were paying more than their
appropriate cost
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STAEE
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STAFF
of service. The Company consequently proposed moving
electric customers 252 toward cost of service and gas
customers 33? toward cost of service.
While no party specifically agreed with the
methodology used in the Companyrs cost of service study,
al-1 partles agreed that the study results generally
indicated whether customer classes were above or below
cost of service. Therefore, aII parties accepted the
Company's proposed incremental move toward cost of
service.
Staff fu11y reviewed the Company's cl-ass cost
of service studies submitted in this case and those
submitted by the Company in prior cases. Staff agrees
for the purposes of this case that cost of service trends
support the incrementa.l- move as proposed in the
Settl-ement. The resultinq percentage increase by
customer class is shown on page 15 of the Settl-ement.
O. How does the Settlement specify that rates will
change?
A. The Settl-ement specifies that the volumetric
enerqy rate will increase by a uniform percentage for al-1
customer classes and residential basic charges wilI
remain at $5.25 per month. The basic charge for natural
gas residential customers will- increase from $4.25 per
month to $5.25 per month with a uniform percentaqe
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increase in the volumetric enerqy rate for the remaining
revenue requirement balance.
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STAFF
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The revenue requirement for all other gas service
schedules wil-l- be applied as a uniform percentage
increase 1n the volumetric energy rate.
Staff supports the increase in the natural gas
basic charqe for residential- customers that equals the
current electric basic charge for residential customers.
Staff also bel-ieves the uniform percentage increase in
volumetric energy charges is appropriate in thls case
given the smalI overa1f increase in revenue requirement.
O. Could you please describe the electric and
natura1 gas rebate extension?
A. Yes, electric customers are currently receiving
an annual rebate through December 3L, 20L5 of
approximately $2. B mil-l-ion for 20i-3 earninqs sharing
approved by the Commission in Case No. AW-E-14-05. The
Settl-ement specifies that the $2. A million annual rebate
will continue through December 3L, 2011 using $5.0
mil-l-ion in 2014 revenue sharing.
The natural gas rebate of approximately $1.2
million annually for 201,3 revenue sharing and unused
energy efficiency balance is al-so set to expire on
December 3!, 201,5. The Settlement specifies that $0.2
mil-l-1on in 2074 revenue sharing wil-I be used to partially
offset the $1.2 million rebate that will expire on
January 1-, 20L6.
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Staff believes that use of revenue sharing
funds to prolong rebates that would otherwise expire or
to mltigate a
AW-E- 1 5- 0 5/AW-c- 1 5- 0 1
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(Di) 13a
STAFF
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(Di ) L4
STAFE
portion of an expiring rebate is appropriate. Customers
are entitled to these funds and Staff supports the rate
stabilizing effect that occurs from including them in the
Settfement.
Fixed Cost Adjustment
O. What is an ECA mechanism?
A. An FCA mechanism is designed to track fixed
cost (Company costs that do not change with energy
consumption) recovery and either surcharqe for under
recovery or rebate for over recovery on an annual basis.
The mechanj-sm decouples fixed cost recovery from energy
consumption to assure that fixed costs are recovered no
matter how much energy is consumed.
O. Please explain the Company's proposed FCA
mechanism.
A. The Company proposed a permanent electric and
natural- gas ECA based on a Commission approved level of
fixed cost recovery per customer, known as the Fixed Cost
Adjustment Revenue-Per-Customer. The proposal included
two Rate Groups, Residentlal and Non-Residential. The
Residential Rate Group included Schedule 1 for the
electric FCA and Schedule 101 for the natural gas FCA.
The Commercial Rate Group for the electric ECA included
Schedul-es 11, \2, 21, 22, 31, 32. The Commercial Rate
Group for the gas FCA
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(Dr ) 1s
STAFF
included Schedules 111 and 1,1,2. Each Rate Group had a
distinct Eixed Cost Adjustment Revenue-Per-Customer.
The Company proposed an annual filing for each
rate group to recover or rebate the appropriate deferred
revenue amount over a l-2-month period (January-December).
The surcharge/rebate reconciles monthly differences
between fixed costs allowed to be coll-ected on a
per-customer basis, and the non-weather normal-ized actual
fixed costs coll-ected. The deferred revenue under/over
collectlon would then be separately surcharqed or rebated
to each customer group through the Companyt s proposed
electric tariff Schedul-e 15 or the natural gas tariff
Schedule 175.
0. Is the stipulated FCA mechanism identical to
the Company's origlnal proposal?
A. No. The parties have only agreed to a 3-year
pilot, with a review following the end of the second full-
year. This w1l-I allow Staff and other parties an
opportunity to evaluate the mechanism and determine
whether it is functioning as intended. The mechanism can
be modified or discontinued if it is found to be
operating lmproperly. In order to facilitate on-going
review, the Company agreed to provide quarterly reports
showing the monthly deferrals by rate group, what the
deferrals woul-d have been if tracked by rate schedule,
use and revenue-per-
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AW-E- 1 5- 0 5/AW-G- 1 5- 0 1
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(Dr ) 76
STAE'F
customer for existing and new customers, and other
summary financial information.
The Company had proposed to use the FERC
interest rate on the unamortized FCA bal-anclng accounts.
Instead, the Parties have agreed to calcufate the accrued
interest based on the Customer Deposit Rate, which is
consistent with prior Commission Orders. l
Whil-e the Company's original proposal did not
inc1ude a cap on annual- surcharges, the Parties have
agreed that I'CA surcharges in any given year cannot
exceed 38. The cap will be applied by rate group with
any unrecovered balances carried forward to future years
for recovery. Staff believes the cap is necessary to
prevent larqe annual surcharges if weather or economic
conditions vary significantly in a particular year.
The FCA mechanics proposed in the Settlement
are nearly identical to the Company's proposal-. The only
difference is that Fixed Cost Adjustment
Revenue-Per-Customer for new customers added after the
test period wil-l- be l-ess than that for exlsting
customers.
O. Why should Revenue-Per-Customer differ for new
and existing customers in the FCA?
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1 Based on Order No. 33187 in Case No. GNR-U-L4-1,2, thedeposit rate for 201-5 is 1.08. The rate is updated
annua11y.
AW-E- 15- 0 5/AW-G- 15- 01Lt/ t3/ 1,5
(Df) 16a
STAEF
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AVU-E- 1 5- 0 5/AW-G- 1 5- 0 1
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(Di) 11
STAFF
A. The Parties agreed that the Fixed Cost
Adjustment-Revenue-per-customer for new electric
customers wiII exclude fixed production and transmission
costs. For new natural gas customers, recovery of costs
related to fixed production and underground storaqe woufd
also be excluded. This disparate treatment wiII limit
fixed cost recovery for new customers in between rate
cases to fixed costs that are more certain to occur.
Staff maintains that certain types of
investments are "Iumpy" and may not actually be required
to serve new customers in between general rate cases.
Rather than assume these costs are incurred for automatic
recovery in the FCA, they are removed from new customer
revenue and only those incremental costs directly related
to servinq new customers are included.
The new customer investment issue is further
hiqhlighted when the FCA reconciles the monthly
difference between fixed costs alfowed to be coll-ected on
a per-customer basis and fixed costs actually collected.
As the number of customers increase between rate cases,
the total fixed costs allowed to be collected increases
beyond the amount reviewed and authorized by the
Commission. An FCA should not become a substitute for
qeneral rate case filings, whereby the Company requests
rate treatment for investments actual-1y incurred. Staffbelieves Iimltlng FCA
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AW-E- 1 5- 0 5/AW-c- 1 5- 0 1
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(Di ) 18
STAFF
recovery to specific types of fixed costs better assures
that costs recovered through the FCA are actually
incurred to serve a new customer.
a. When will the Company fil-e a proposed surcharge
or rebate?
A. FCA implementation wil-I cornmence concurrently
with the natural- gas and el-ectric rate changes January 7,
2016. On or before July l, 201,1 the Company will fil-e
1ts first proposed rate adjustment surcharge or rebate
based on deferred revenue recorded from January 201,6
through December 2076. The proposed tariff (Schedul-e 75
for el-ectric, Schedule 175 for natural gas) incl-uded with
that filing will- show the adjustment as a rate per kwh
for el-ectric and a rate per therm for natural- gas. This
ECA rate will be determined using expected energy sal-es
to surcharge/rebate the appropriate deferred revenue
amount over a twelve-month period effective October 7,
201,1 for el-ectrlc (to coincide with the PCA period) and
November L, 20L1 for natural- gas (to coincide wlth the
Purchased Gas Cost Adjustment period). The annual FCA
wi]l be filed consistent with this schedule for the
remaining 2 years.
O. Please explain why an ECA is necessary and how
it benefits customers?
A. Historically, Staff has generally supported
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rate design proposals that keep fixed charges l-ow in
order to
AW-E- 15- 05/AW-G- 15- 01
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1Ba
STAEE
LOBB,(Di )86
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(Di) 1-9
STAFF
AW-E-15- 0s/AW-G- 15- 01
Lt/L3/Ls
encouragie conservation and allow customers to control
their bilIs. While the Company's fixed costs do not
necessarily change with the l-evel of energy consumptj-on,
recovery of those f ixed costs does. For exampI.e, when
weather or favorable economic conditions contri-bute to
higher than normal energy or natural gas sales, the
Company may over-recover its fixed costs. Conversely,
when Demand-Side Management ("DSM") or price signals from
certain rate designs cause customers to use less energy
or natural- gdsr the Company may under-recover its fixed
costs. Consequently, there's a financial disincentlve
for the Company to encouragie conservation. The table
below shows the Company's revenue from fixed charges as a
percent of j-ts total fixed costs for each schedule
included in the FCA.
Electric Schedule L A
tt/L2
As
2L/22
Schedule3t/32
Fixed Costs 79 ,7LO ,926 28 ,]-88 , L29 38,749,299 3 ,959, 533
Fixed Charge
Revenue 6 ,494 , L65 2 , 463 ,750 4, 835, 500 L33 ,575
Fixed Charge? of Fixed
Costs
8.10*8. 708 L2.50*3 .402
Natural Gas ScheduLe
101-
Schedule
LtL/ L].2
Fixed Costs 37 ,448,84L 9,374,373
Fj-xed Charge
Revenue 4,769,535 L , 677, 185
Fixed Charge? of Fixed
Costs
t2.74*17.89*
r Calculated using page 1 of Appendix B and C. For purposes of this table,Distribut,ion and Customer Related Costs, and Common Costs are assumed to befixed coste. NaEural Gas Fixed Costs also include Ehe demand related chargesSchedule 150.
1n
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(Di ) 20
STAFF
The FCA reduces the financial disincentive to
encourage conservation by decoupling a portion of revenue
from the Company's energy and gas sales. Consequently,
the Company wil-I be at less risk of not fully recovering
its fixed costs when it promotes cost-effective DSM
programs and/or rate designs that send a price signal to
conserve energy or natural gas. If the Company
successfully encouraqes l-ower energy and gas consumption,
Staff believes the ECA will undoubtedly save customers
money in the long-run by deferring or elimlnating capital
costs that might otherwise be required to serve growing
1oad.
O. What impact might the FCA mechanism have on
customers?
A. Staff looked at the last two years to see what
the impact woul-d have been had the proposed mechanj-sm
been in place. In 201,3, residential customers woul-d have
received a rebate of 0.19% for electric and 0.028 for
gas. For the same time period, commercial- customers
would have received a rebate of 2.01 I for electric and a
surcharge of 1.602 for gas. In 2074, residential
customers would have received a rebate of 0.05U for
electric and a surcharqe of 1,.1,7I for gas. For the same
time period, commercial customers would have recej-ved a
rebate of 2.242 for electric and a surcharqe of 1.97 I for
gas.
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AVU-E- 1 5- 0 5 /AW-c- l- 5- 0 1tt/1-3/ls
(Di ) 21,
STAEE
Staff belleves the mechanism will be largely
impacted by weather, economic conditlons,
DSM/conservatj-on, and rate design. For example, if
temperatures are relatively mild (warm winters and cool
summers), customers coul-d see FCA surcharges.
Conversely, if temperatures are extreme (col-d winters and
hot summers), customers could see FCA credits.
O. Are there any other provisions in the
Settlement?
A. Yes, the Settl-ement specifies that the parties
wilI collaborate on l-ow income weatherization and Iow
income energy efficiency education. The objective of the
coll-aboration is to identify energy and gas consumption
Ievels of Iow income customers and identify the proper
enerqy efficiency fundlng level-s in the future.
The Settlement also specifies that the parties
wil-1 initially meet no later than June 7, 2016 to discuss
these issues. Staff fuI1y supports collaboration on the
l-ow j-ncome energy efficiency issues and looks forward to
actively participating in al-l associated meetings.
O. Does this concl-ude your testimony in this case?
A. Yes, it does.
89 LOBB, R
(The foll-owing proceedings were had in
open hearing. )
MR. KARPEN: And Ird l-ike to make Mr. Lobb
avai-lable for cross-examination.
MR. MEYER: No cToSS.
COMMISSIONER RAPER: Mr. Purdy?
MR. PURDY: No questlons.
COMMISSIONER RAPER: Mr. Miller?
MR. MILLER: Nor I.
COMMISSIONER RAPER: Mr. Richardson?
MR. RICIIARDSON: No questions, Madam Chair.
COMMISSIONER RAPER: Commissioners?
COMMISSIONER SMITH: No questions.
COMMISSIONER KJELLANDER: Just one.
EXzu,{INATION
BY COMMISSIONER KJELLANDER:
O. Mr. Lobb, mostly just to give the remaining
witness an opportunity to walk through the door, I have a
question. On page 2 of your testlmony in support of the
settlement, around l-ines 76 and 7J, you begin to tafk a
Iittle bit about the settlement being in the public
interest. Werve seen a lot of settlements in cases over
the last few years. Just for the record in general, what
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CSB REPORTING
(208 ) 890-s1e8
LOBB (Com)
Staff90
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CSB REPORTING
(2oB ) B9o-s198
LOBB (Com)
Staff
realIy goes through the mind of Staff when they finally
come to the point of saying the settlement is the right
approach? What is it that you look at in terms of just
various qeneral factors?
A. I think the most important thing for Staff is,
is 1t the best deal for customers, and we look at our
review of the case and the adjustments that we would make
at a litigated hearing and compare that to the
settlement, the stipulation that we have and how closely
that comes to what we beLieve we could achieve at hearing
and we make that comparison, and in this caser we
concluded that this as good or better than what we could
possibty achieve at hearing in a litigated caser so in
that regard, we bel-ieve it's in the public interest and
the best deal- for customers.
COMMISSIONER KJELLANDER: Thank you.
COMMISSIONER RAPER: No redirect? Staff, Mr.
Karpen, any redirect?
MR. KARPEN: No, Madam Chair.
COMMISSIONER RAPER: You are excused.
THE WITNESS: Thank you.
(The witness l-eft the stand. )
COMMISSIONER RAPER: Seeing that CAPAITs
witness has not yet appeared, do you want to do a
five-minute recess to try and give her an opportunity
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CSB REPORTING
(208 ) B9o-s198
to
MR. PURDY: I just spoke with Ms. Zamora.
Apparently, she was caught up in one of these storms
we're having somewhere in the country. Her flight was
delayed. She expects that she's no more than 10 minutes
out from the PUC rlght now.
COMMISSIONER RAPER: Okay, we'II do a lS-minute
recess to give her an opportunity to get in the door.
MR. PURDY. Thank you.
(Recess. )
COMMISSIONER RAPER: We'l-1 go back on the
record.
MR. PURDY: Thank you, Madam Chair, and thank
you and everyone else for their indulgence. Community
Action cal-ls Christina Zamora.
92 COLLOQUY
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CSB REPORTING(208) 890-s198
ZAMORA (Di)
CAPAI.
CHRISTINA ZAMORA,
produced as a witness at the instance of the Community
Action Partnership Association of ldaho, having been
first duly sworn to tel-l- the truth, the whole truth, and
nothing but the truth, was examined and testified as
follows:
DIRECT EXAMINATION
BY MR. PURDY:
O. Woul-d you please state your name?
A. Christina Zamora.
O. And what is your position with Community
Action?
A. Irm the executive director.
O. And have you previously caused to be filed in
this matter direct testimony consj-sting of 1,4 pages?
A. Yes.
O. If I were to ask you the same questions as
contained in that testimony, would your answers be
substantially the same today?
A. Yes.
O. And there are no exhiblts to your testimony;
correct?
A. None.
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CSB REPORTING(208) 890-s198
ZAMORA (Di)
CAPAI.
MR. PURDY: All right, with that, I'd ask the
testimony of Christina Zamora be spread upon the record
as if read and tender her for cross.
COMMISSIONER RAPER: With no objection, we will
spread the test-imony of Ms. Zamora across the record as
if read.
(The following prefiled direct testimony of
Ms. Christina Zamora is spread upon the record.)
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c. zAMoRA, Di 2
CAPAI
I. INTRODUCTION
Q: Please state your name and business address.
A: My name is Christina Zamora. I am the
Executive Director of the Communj-ty Action Partnership
Association of Idaho at 3350 W. Americana Terrace, Suite
360, Bolse, ID 83706.
Q: On whose behalf are you testifying in this
proceeding?
A: The Community Action Partnership Associatlon of
Idaho ("CAPAI") Board of Directors asked me to present
the views of an expert oflr and advocate for, low income
customers of Avista.
Q:
II. BACKGROUND
Pl-ease describe CAPAI I s organizational
structure and the functions it performs, relevant to its
involvement in this case.
A: CAPAI 1s an associatlon of the following
private, nonprofit organizatj-ons that fight poverty in
Idaho: 1) The Community Action Partnership (CAP-N &
CAP-NC); 2) E1 Ada, Inc. (EI Ada); 3) The Western Idaho
Community Action Partnership (WICAP); 4) The South
Central Community Action Partnership (SCCAP); 5) The
Southeastern Idaho Community Action Agency, Inc. (SCCAP);
6 The Eastern Idaho Community Action Partnership, Inc.
(EICAP); 7) The Community Council of Idaho, fnc. (CCI),
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andi B) The Canyon County Organization on Aging,
Weatherization and Human Services, fnc. (CCOA). The last
two agencies, CCI and CCOA, are designated in CAPAI I s
Bylaws as "special purpose agencies." These aqencies are
focused on provi-ding services to migrant and senior
populations, respectively. CollectiveIy, the six CAPs
along wlth CCI and CCOA are referred to as "member
agencies. " For the purposes of the Stipulatlon at i-ssue
ZAMORA, Di 2a
CAPAI
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c. zAMoRA, Di 3
CAPAI
in this proceeding, there is no rel-evant distinctlon
between a CAP and special purpose agency.
Each member agency has a designated servj-ce
area. Comblning aII agencies, every county in Idaho is
served. The agencies design their various programs to
meet the unique needs of communities located within their
respective servj-ce areas. Not every aqency provides all
of the following services, but aII work with people to
promote and support i-ncreased self-sufficiency. Programs
provided by CAPS incl-ude: employment preparation and
retention, education assistance child care, emergency
food, senior independence and support, clothing, home
weatherizatton, enerqy assistance, affordable housinq,
health care access, Erld much more.
Q: What is the relationship between CAPAI and the
member agencies?
A: CAPAI 1s effectively the umbrella orqanization
that provides a myriad of services to the members to
assist them j-n carrying out their individual missj-ons
throughout Idaho. Such services include training and
technical assistance, coordinatlon of resources, proqram
planning and assistance with lmplementation, programmatic
administratj-ve oversight, and advocacy for the low-j-ncome
in Idaho, among other things.
Q: Are the individual- member agencies represented
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C. ZAMORA/ Di 3a
CAPAI
on CAPAI's Board of Directors and, if sor how?
A: Yes they are. Each agency has an Executive
Director and its own Board of Directors that establishes
policy for that agency. The Executive Director manages
the day to day functions of the agency. In addition,
each Executive Director of each member agency sits on the
CAPAI Board of Directors. Thus, there are currently B
CAPAI Board members.
Q: Which of the eight member aqencies provide
Iow-income assj-stance to Avista's service territory?
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A: The Community Action Partnership serves North
Idaho incl,uding a1l- of Avistaf s Idaho service territory.
Q: Have you testified before this Commission in
other proceedings?
A: Yes, I have testifled on behalf of CAPAI in
numerous cases involvlng United Water, Idaho Power,
AVISTA, and Rocky Mountain Power and in gieneric
proceedings
Q:
A:
III. SUM}'IARY
Please summarize your testimony in this case?
The purpose of my testimony is to support the
settlement stipulatj-on entered into between CAPAI,
Avista, Clearwater Paper Corporation, Idaho Eorest Group,
L.L.C., the Idaho Conservation League, and the Snake
River A1liance. The Settlement Stipulation was filed
with the Commisslon on October 19, 201,5, and accompanied
by a Motion for Approval of Stipulation and Settlement.
I also provide the rational-e for CAPAITS support of the
settlement. Finally, I wil-l- explain why I believe that
the settlement is in the general interests not only of
Avistars low-income customers, but the qeneral body of
ratepayers as wel-1.
Q: fs CAPAITs support for the Settlement
Stipulation unconditional?
A: Yes it is
C ZAMORA, Di 4
CAPAI
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Q: Are there any exhibits to your testimony?
A: No.
IV. ESSENTIAI ELEMENTS OF SETTLEMENT
A. Revenue Requirement:
Q: Pl-ease identify the primary aspects or el-ements
of the settlement that CAPAI bel-ieves renders it farr,
just and reasonable and in the best interests of the
general body of ratepayers.
c. zAMoRA, Di 4a
CAPA]
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c. zAMoRA, Di 5
CAPAI
A: The Company's original application sought a
two-phase rate increase with the first increase to take
place on January !, 2016 and the second on January 1-,
2077. The first year revenue increase would have yielded
an additional 5.22 in revenues for Avista's efectric
customers and 4.52 effective for gas which woul-d have
resulted in additional revenues to the Company of $13.2
million for electric and $3.2 million for gas.
The second phase of the requested increase,
effective January 7, 2011, would have increased electric
revenues 5.1U for el-ectrlc ($13.7 mil-lion) and 2.2e" for
gas ($1.7 mil-lion) .
Q: Woul-d you please describe CAPAITs involvement
in this case?
A: CAPAI participated fu11y throughout the
entirety of this case and participated in alI settlement
negotiations.
Q: What is the rate increase ul-timately agreed to
by all parties and set forth in the Settfement
Stipulation?
A: Flrst, the parties agreed to a single year rate
increase as opposed to the two-year phase-in approach
originally requested. The amount of the increase,
effective January L, 201,6, is $2.1 mill-ion for el-ectric
customers and $1.5 mil-l-ion for gas (0.69U and 3.492,
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c. zAMoRA, Di 5a
CAPAI
respectively) . The parties further agreed to a rate of
return on equity for Avista of 9.5U and a 50% colnmon
equlty ratio.
Q: How did the parties calculate this reduced
revenue requirement i-ncrease?
A: There were numerous adjustments made to
Avista's expenses, rate base adjustments, and capital
structure/rate of return, the latter alone reducing
revenue requirement by $2.438 miIllon for electric
revenues and $4151000 for gas. The many adjustments to
the various components of Avista's operations and the
resul-ting reduced rate increase are too numerous to
mention here and explicitly spelJ-ed out in the Settlement
Stipulation.
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c. zAMoRA, Di 6
CAPA]
Q: In llqht of your testimony, do you believe the
proposed revenue requirement increase to be farr, just
and reasonable?
A: Yes. fn combination with other provisions set
forth 1n the proposed Settlement Stlpulation, I believe
the aqreed upon and significantly reduced revenue
requirement increase to be fair, just and reasonable.
B. Fixed Cost Adjustment Mechanism:
Q: Were there any changes to Avista's overall
method of rate recovery that are noteworthy?
A: Yes. The parties agreed to the implementation
of a Fixed Cost Adjustment ("FCA) mechanism for Avista to
go into place at the time of the rate increase, January
l, 2016. This mechanism is initially for a 3 year period
with a review after the second fulI year of operation.
Avista has the rlght to seek an extension of the FCA.
The FCA wiII be segregated between electric and gas
customers as well as the Residential Class (Schedule 1)
and the commercial- customer classes. There are numerous
other provisions contained in the Settlement Stipulati-on
pertaining to the implementation and structure of the ECA
including, among others, quarterly reporting by Avista
and the annual filings by the Company necessary to make
the adjustments to ref.l-ect variations in fixed costs.
FinaIIy, there is a provision in the Stipulation that an
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c. zAMoRA, Di 6a
CAPA]
FCA surcharge by rate group cannot exceed a 33 annual
rate adjustment. Any unrecovered bal-ances wil-I be
carrj-ed forward to future years for recovery which should
help to avoid "rate shock" 1n any given year. On the
other hand, the parties agreed that to the extent that
Avista's ECA results in reduced rates, there shall be no
limit on the amount of the ad;ustment.
C. Rate Spread:
Q: How does the Settl-ement Stipulation propose to
al-locate the increased revenue requirement among rate
schedules, or classes?
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A: For el-ectric customer classes, the al-l-ocation
is to be spread on a pro-rata basls based on the
Company's proposed 25? move toward unity without adopting
any particul-ar cost of service methodol-ogy. For gas
customers, there will al-so be a pro-rata increase but
with a 33? movement toward unity among classes.
Q: Do you believe that a disproportionate rate
increase for both residential electric and gas customer
cl-asses is fair?
A: Yes. Under the circumstances, including the
fact that Avistars cost of service studies provided over
this and recent other rate cases have all shown the
Residential- cl-ass to be paying less than its share of
overall revenue requirement, I believe that a 252 and 332
movement for electric and gas Residentiaf customers,
respectively, is a fair compromise.
D. Rate Design:
Q: Does the Settlement Stipulation change the
Companyl s existing monthly customer charge?
A: Eor efectric customers, the answer is no.
There will- be no change to the monthly customer charqe or
fixed and variable demand charges. The residential
customers' existing $5.25 per month wilI remain
unchanged. For gas customers, there will be a $1.00
increase from $4.25 to $5.25, bringing it to the same
ZAMORA, Di -I
CAPAI
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r ZAMORA, Di 'l a
CAPAI
l-evel- as electric customers. The remaininq revenue
requj-rement increase for gas customers wiIl be allocated
on a uniform percentage basis to the volumetric rates
currently in existence.
Q: What is CAPAI's positlon regarding the proposed
rate design for the Residential electric and gas classes?
A: I bel-leve that, for the time being and unless
and until there is data demonstrating the existing
el-ectric customer charge to not be fair, just and
reasonable, leaving it at its
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current Ievel is best. I also believe that a $1.00 per
month increase to the qas monthly customer charge to
align it with the electric monthly charge is fair, just
and reasonabl-e.
E. Customer Service-Related Issues:
1. Low Income Data:
Q: Does the Settlement Stipulation address any
issues of interest or concern specific to Avista's 1ow
income customers?
A: Yes. Paragraph 20 of the Stipulation addresses
two important l-ow income issues. Firstr ds the
Commission is most like1y aware/ CAPAI has been working
diligently to obtain a better understanding of l-ow income
customer consumption habits, especially for electric
customers. In that pursuit, CAPAI has encountered
numerous obstacles, among them, the fact that electric
utllities have not historically categorized their
customers between low income and non-l-ow income.
Programs requiring identification of low income
customers, such as LTHEAP, are a source of some low
income consumption data, but fal-Is far short of capturing
the true number and identities of the Company's actual
Iow income customer base that would qualify pursuant to
federal poverty guidelines.
Q: Why is the i-dentification of low income
c. zAMoRA, Di B
CAPAI
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customers and their consumptlon data of val-ue and
interest to CAPAI?
A: As I statedr rro person or entity truly knows
the exact number of Avj-stars customers who quali-fy as
low-income pursuant to federal- guidelines. Although some
l-ow j-ncome customers apply for assistance proqrams such
as LIWA or LIHEAP and their consumption data could be
anon\rmously collected by Avista, CAPAI has reason to
bel-ieve that there are a considerabl-e customers who
qualify as 1ow income, but either fail to apply for
assistance, for whom assistance is not avail-abl-e or
meaningful, or who somehow falI between the cracks.
is entirely possible that the true number of l-ow
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j-ncome customers is many times greater than the handful
of assistance recipients on record.
Q: Why is the consumption data of low income
customers of interest to CAPAI?
A: Since CAPAI began initiating its pursuit of Iow
income data, there have been several realizations that
historical assumptions are not always accurate. For
example, it was assumed for many years that }ow income
customers cannot afford to consume unnecessary
electricity, so they consume relatively lower l-evels than
non-Iow income. Because of information collected 1n
recent yearsr w€ now know that there possibly exists a
surprisingly greater number of low income customers who
consume relatlvely high levels of electricity. The
possible reasons for this are numerous and include the
fact that the poor often l-ive in rented housing, or own
homes, that rely on electric heat. Avista's far northern
service territory naturally brings with it }ong, cold
winters. We also know with certainty that low income
customers tlpicalJ-y cannot afford to switch to
alternative fuel sources such as natura.l- gas.
Eurthermore, l-ow income housing is typically very poorly
insulated resulting in considerable heat loss. This is
why Avista's Low Income Weatherization (LIWA) program is
of great importance to the poor. Thus, Iow income
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customers whose usage matches these profiles have much
less discretion in their electric consumption.
Q: Please explain how the acquisitlon of more
thorough low income data woul-d assist CAPAI?
A: Without having a better picture of l-ow j-ncome
consumption, it makes taking a position on rate design
for the residential- class very difficult.
Q: Why is this?
c. zAMoRA, Di 9a
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A: Because another hlstorical presumption was that
Iow, fixed monthly customer charges are preferabl-e to low
j-ncome customers. Thus, CAPAI has historically argued
for collecting revenue requirement increases primarily
through the consumpti-on rates. If a greater percentage
of l-ow income customers are in fact relatively hiqh
users, then a higher basic charge would be preferable.
There are always winners and losers when making rate
design decisions, but without better data, CAPAI 1s
shooting in the dark. Thus, additional- l-ow income data
is essential- to taking a more well--informed position.
Q: How does the Settlement Stipulation address
this need for more thorough l-ow income data?
A: In paragraph 20 (a) of the Stipulation it is
stated: "The Company and interested parties will meet and
confer prior to the Companyr s next general rate case in
an effort to identify low income customers served by the
Company, quantify the number of customers so identified,
and determine those customers' usage patterns. An
initial meeting shall occur no l-ater than June 30, 2016,
wlth follow-up meetings to occur as the attendees may
deem approprj-ate. "
Q: Does this provision satisfy CAPAI's desires for
more thorough data as you have identified?
A: Yes. CAPAI notes that Avista has been
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forthcoming i-n responding to past requests regarding this
topic. It is, however, an on-going learning process as
we attempt to forge better ways to identify low income
customers and then obtain their usage data. CAPAI is
satisfied that this provision will provide the forum to
acquirlng further knowledge of the data sought.
2. Low Income Vleatherization Assistance and
Conservation Education :
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c. zAMoRA, Di 11
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Q: What is the second low j-ncome issue you
referred to earl-i-er and that is addressed in the
Settlement Stipulation?
A: Paragraph 20 (b) states that: "The Company and
interested parties shall meet and confer prior to the
Companyr s next general rate filing in order to assess the
Companyr s Low Income Weatherization and Low Income
Conservation Education Programs and discuss appropriate
1eve.l-s of cost-effectlve, 1ow income weatherization in
the future. An initial meeting shal-l- occur no l-ater than
,June 30, 20L6, with fol-Iow-up meetlngs to occur as
attendees may deem appropriate.
Q: Would you please explain why this provision is
of value to CAPAI?
A: LIWA funding level-s for all three of Idaho's
electric IOUs have been frozen since roughly late-2011.
Given the amount of time that has transpired, and the
increasing backlog of otherwise eliglble 1ow j-ncome
customers who cannot receive LIWA assi-stance due to
insufficient funding, CAPAI believes that a discussion
with the Company, Staff, and other interested parties
would be of value. CAPAI al-so believes that there are
new methodologies for determining a LIWA programr s
cost-effectiveness that have been adopted in other
states. In additionr dnv given utllity's programs are
113
subject to their own idiosyncrasies, changes, and
opportunities for improvement. CAPAI would like to
discuss Avistars LIWA program on a hol-istic, broad
spectrum basis to determine possible means of achieving a
greater cost-effectiveness rating.
IV. CONCLUSION
Q: Wou1d you please summarize CAPAI's posi-tion
with respect to the Settl-ement Stipulation?
A: It is CAPAI t s position that the Settl-ement
Stipulation refl-ects a well-negotiated conclusion and one
that is in the best interests of the general body of
ratepayers. For the
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reasons outl-ined in my testimony, CAPAI recommends that
the Commission approve the proposed settlement agreed to
by all parties to this case.
Q: Does that conclude your testimony?
A: Yes, it does.
c. zAMoRA, Di 1,2
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CSB REPORTING(208) 890-s198
ZAMORA
CAPAI
(The fol-lowing proceedings were had in
open hearing. )
COMMISSIONER RAPER: And does Avista have any
que stions ?
MR. MEYER: No questions. Thank you.
MR. KARPEN: No questions.
COMM]SS]ONER RAPER: Mr. Miller?
MR. MILLER: Nor I.
MR. RICHARDSON: No questi-ons, Madam Chair
COMMISSIONER RAPER: Anything from the
Commissioners? Thank your Ms. Zamora, for appearing to
support the stlpulation.
(The witness l-eft the stand.)
COMMISSIONER RAPER: I believe that exhausts
our witness list. Is there anything el-ser dny other
matters or issues, to come before the Commj-ssion today?
MR. MEYER: Just to thank you for letting us
appear by telephone this evening for the conference and
that will allow us to make better use of our time
throughout the afternoon, so thank you.
COMMISSIONER RAPER: Absolutely, and if you
wiIl, Mr. Meyer, tf the Company doesn't intend to have
any questions of public witnesses this evening, if you
can state that on the record when you introduce yourself,
then we can save a lot of time and effort that way as
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CSB REPORTING(208) 890-s198
we1l.
MR. MEYER: I have somebody gave me this
note because I know Irm forqetful-r so I'Il- do my best.
COMMISSIONER RAPER: Perfect, so with thatr we
do have a public hearlng scheduled this evening at 7:00
p.m. We wil-l await what I antlcipate will be Mr. Purdy
and CAPAI I s request for intervenor fundlng,' is that
correct?
MR. PURDY: Yes. What date?
COMMISSIONER RAPER: You have 74 days pursuant
to Rule 1,64. If you can get it in sooner, we can close
the record, the Commissioners can deliberate, and
speedily issue a decision.
MR. PURDY: I'1I do that. Thank you.
COMMISSIONER RAPER: Happy Thanksgiving,
everyone. Thank you for your indulgence in my first
hearing as Chair and this meeting is adjourned.
(The Hearing adj ourned at l- 0 : 10 a . m. )
1,1,1 COLLOQUY