20180126Avista to Staff ICNU_DR_063.DOCX

AVISTA CORP.
RESPONSE TO REQUEST FOR INFORMATIONJURISDICTION:WASHINGTONDATE PREPARED:11/01/2017CASE NO.:U-170970WITNESS:Patrick EhrbarREQUESTER:ICNURESPONDER:Pat EhrbarTYPE:Data RequestDEPT:State & Federal RegulationREQUEST NO.:ICNU – 063(AVA)TELEPHONE:[phone]EMAIL:[e-mail]:Refer to Ehrbar, Exh. PDE-1T at 4:14-21:
Please explain why each state’s rate credit is not established by each Commission, independently, based on what is required pursuant to that State’s statutes.
If the WUTC finds that it requires $50 million in rate credits, would Avista then ratio that value by Washington’s allocation factor, to determine other state’s credit levels?
Please explain why the credit Avista proposes is allocated based on a common cost allocator, rather than based on the level of risks a state perceives.
What studies or reasoning does Avista have to conclude that the level of risk or requirement of each state’s statutes is proportional to the allocation of common costs? Please provide any supporting documents.RESPONSE:
It was the responsibility of the Joint Applicants to develop a proposed structure for the Proposed Transaction, and not the role of the state commissions, in the original applications. The Joint Applicants developed the annual Rate Credit to provide a benefit to customers in the form of reduced rates based in part on the expected savings that will occur following the closing of the Proposed Transaction ($1.7 million annually for the first five year period, and $2.7 million for the second five year period). The remaining, non-offsetable, amount of the annual rate credit is additional benefit/consideration that would be passed through to customers if the merger is approved.
Avista has not evaluated the hypothetical scenario proposed by ICNU. The final size and form of rate credits in each state must ultimately be approved by the respective state commission and may or may not be affected by changes made by one commission.
The annual Rate Credit is designed to provide a benefit to customers based in part on expected cost savings following the close of the Proposed Transaction. The cost savings related to the transaction, described by Mr. Thies, generally fall into the category of costs referred to as “common costs.” For ratemaking purposes, these common costs are allocated between electric and natural gas customers, and by state jurisdiction (Washington, Idaho, and Oregon) using standard allocation factors that have been used for many years to allocate common costs, and have been reviewed periodically in general rate cases. For that reason the Joint Applicants are using the standard cost allocators to allocate the proposed Rate Credit.
Please see the Company’s response to “c” above.