20180719Avista to Staff 1-19.pdf

Avista Corp.
1411 East Mission P.O.Box3727
Spokane. Washington 99220-0500
Telephone 509-489-!500
TollFree 800-727-9170
Ahrrrtsrfr
RTCEIVED
?01& Jut l9 [H $r 05
July 19, 201 8 rriiiiij PUIILIC
r I r t i- r'r i r s-c0Mllls$loN
Idaho Public Utilities Commission
472W. Washington St.
Boise, ID 83720-0074
Attn: Brandon Karpen
Deputy Attorney General
Re: Production Request of Commission Staff in Case No. AVU-E-18-03/AVU-G-18-02
Dear Mr. Karpen,
Enclosed are Avista's responses to IPUC Staffs production requests in the above referenced
dockets. Included in this mailing are the original qnd two paper copies of Avista's responses to
production requests: Staff 1-19. Also enclosed on three separate CD's are copies of Avista's
responses to the production requests. The electronic versions of the responses were emailed on
07lt9l18.
Also included on separate CD's are Avista's CONFIDENTIAL responses to PR 02C, 03C, 07C
and 018C. These responses contain TRADE SECRET, PROPRIETARY or
CONFIDENTIAL information and is separately filed under IDAPA 31.01.01, Rule 067 and233,
and Section 9-340D,Idaho Code. It is being provided under a sealed separate envelope, marked
CONFIDENTIAL.
If there are any questions regarding the enclosed information, please contact Paul Kimball at
[phone] or via e-mail at [e-mail]
Sincerely
Paul Kimball
Regulatory Analyst
Enclosures
CC (Email):Sierra Club (Ritchie, Boyd)
IPUC (Hanian)
Clearwater (Richardson, Reading, Lewallen, Haugen)
Idaho Conservation League (Otto)
Idaho Forest Group (Miller, Williams, Crowley)
Corp.
CC (Paper):C learwater (Richardson)
AVISTA CORPORATION
RESPONSE TO REQUEST FOR INFORMATION
JUzuSDICTION:
CASE NO:
REQUESTER:
TYPE:
REQUEST NO.:
IDAHO
AVU-E- 1 8-03/AVU-G- 1 8-02
Staff
Production Request
Staff-01
DATE PREPARED: 07 11212018WITNESS: N/A
RESPONDER: Paul Kimball
DEPARTMENT: Regulatory Affairs
TELEPHONE: (509) 49s-4584
REQUEST:
Please provide all audit and data request questions and responses that have been asked in current
depreciation cases in other states by all parties. This should include confidential questions and
responses. Please consider this an ongoing request.
RESPONSE:
Avista has and will continue to provide copies of data requests, along with corresponding data
responses, from all parties to this proceeding as they are completed.
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AVISTA CORPORATION
RESPONSE TO REQUEST FOR INFORMATTON
JURISDICTION:
CASE NO:
REQUESTER:
TYPE:
REQUEST NO.:
IDAHO
AVU-E- I 8-03/AVU-G- l 8-02
Staff
Production Request
Staff-02
DATE PREPARED: 07 ll2l20l8WITNESS: N/A
RESPONDER: Thomas Dempsey
DEPARTMENT: Energy Resources
TELEPHoNE: (s09) 49s-4960
REQUEST:
Please provide the three most recent annual business plans and capital budgets for the Colstrip
Power Plant provided by the operator to the owner group every September.
RESPONSE:
Please see StaflPR_O2C, which contains TRADE SECRET, PROPRIETARY or
CONFIDENTIAL information and are separately filed under IDAPA 31.01.01, Rule 067 and
233, and Section 9-340D, Idaho Code.
Please see StaflPR_O2C Confidential Attachments A through F for the three most recent business
plans and capital budgets.
AYISTA CORPORATION
RESPONSE TO REQUEST FOR TNFORMATTON
JURISDICTION: IDAHO
CASE NO: AVU-E-I8-03/AVU-G-18-02
REQUESTER: StaffTYPE: Production Request
REQUEST NO.: Staff-03
DATE PREPARED: 07 ll2l20l8WITNESS: N/A
RESPONDER: Thomas Dempsey
DEPARTMENT: Energy Resources
TELEPHONE: (s09) 49s-4960
REQUEST:
Please provide the meeting minutes for the three most recent Colstrip Power Plant annual
September owners' meetings.
RESPONSE:
Please see StaflPR_03C, which contains TRADE SECRET, PROPRIETARY or
CONFIDENTIAL information and are separately filed under IDAPA 31.01.01, Rule 067 and
233, and Section 9-340D,Idaho Code.
Please see Staff PR_03C Attachments A-C for the three most recent annual September owners'
meetings.
AVISTA CORPORATION
RESPONSE TO REQUEST FOR TNFORMATTON
JURISDICTION:
CASE NO:
REQUESTER:
TYPE:
REQUEST NO.:
IDAHO
AVU-E- l 8-03/AVU-G- 1 8-02
Staff
Production Request
Staff-04
DATE PREPARED: 07 lt2l20l8WITNESS: N/A
RESPONDER: James Gall
DEPARTMENT: Energy Resources
TELEPHONE: [phone]
REQUEST:
Please describe in detail the minimum set of conditions needed for Avista to continue to
economically receive generation from the Colstrip plant. Please include a comprehensive list of
conditions, including mandates and policies passed in other states and at the federal level,
including carbon prices, fuel availability and price, and environmental control requirements, etc.
RESPONSE:
Two value streams must be evaluated for Avista to continue to economically receive generation
from Colstrip. The first is energy value and the second is capacity value. For the energy value, this
means generating power at a lower marginal price than what could otherwise be received from the
energy market. The costs used in this comparison is the variable component of fuel costs, variable
O&M, and any variable taxes or fees (including greenhouse gas charges). Changes to any of these
factors could place the plant at a higher price than the energy market from time to time. Also, since
the energy market is dynamic there will be times when the plant is economic to dispatch and not
economic to operate as with other plants in the northwest. Over the course of a year, this energy
value is the total operating revenue from plant dispatch.
The second value Colstrip offers customers is capacity. This is Colstrip's ability to generate power
during peak load events in the winter (or summer). Without this facility, Avista has demonstrated
in its 2017IRP, a requirement to add new generation to offset the loss of these units. Colstrip's
"capacity value" is measured by the total cost of replacement if it was shut down (considers fixed
and variable operating costs). If it remains a lower cost to pay all associated operating expenses for
Colstrip to generate rather than acquire or build altemative new capacity, the plant remains
economic when taking into account the energy value calculation above.
In the 2017 Avista IRP forecast, Colstrip Units 3 and 4 remain cost effective with the assumed
carbon pricing expected from the original 'oClean Power Plan" reduction requirements and the
current fuel price forecast. On page l2-4 of the 2017 IRP, it indicates a carbon price of $38.78 per
metric ton between203l and2037 would be enough to make the plant uneconomic. These prices
take into account the current environmental control requirements expected over the next 20 years
at the facility.
AVISTA CORPORATION
RESPONSE TO REQUEST FOR INFORMATION
JURISDICTION:
CASE NO:
REQUESTER:
TYPE:
REQUEST NO.:
IDAHO
AVU-E- I 8-03/AVU-G- 1 8-02
Staff
Production Request
Staff-05
DATE PREPARED: 07 ll2l20l8WITNESS: N/A
RESPONDER: James Gall
DEPARTMENT: Energy Resources
TELEPHONE: [phone]t89
REQUEST:
In the 2017 IRP, the Company established Colstrip Units 3 and 4 would operate during the entire
2}-year planning time frame. Please describe all the factors and assumptions (costs, mandates and
policies passed in other states and at the federal level including carbon prices, fuel availability and
price, and environmental control requirements, etc.) that have changed or were not considered
from those assumed in the 2017 IRP that would potentially change the Company's plan for
Colstrip. For each factor or assumption, please provide a relative likelihood that each could occur
and the relative impact of each factor or assumption in determining the closure date.
RESPONSE:
The following response outlines key assumptions included in the 2017 IRP regarding Colstrip and
their respective changes (if any) since the IRP's filing:
a
a
Greenhouse Gas Regulation: The 2017 IRP included the Clean Power Plan level of
reductions for the state of Montana. This target's implied price per metric ton of COz was
approximately $6 in 2025 and escalating to $28 by 2037 (this is a calculated cost using
energy production cost model to reduce emissions to the prescribed levels for the state of
Montana). Since the filing of the IRP, the Supreme Court has not ruled or removed the stay
of the Clean Power Plan and the EPA submitted a replacement proposal to the White
House in early July 2018. In the State of Washington, a potential carbon reduction plan
may be on the November ballot through the initiative process. This initiative (if approved)
will place a $15 per metric ton fee beginning in2020 with a price escalator. This fee will
impact the dispatch of the plant for the share of the units serving the State of Washington.
Changes in greenhouse gas regulation could have an impact on the closure of Colstrip, but
any closure would require actions of all member owners. Avista believes a form of carbon
regulation will happen in the future on a state or federal basis, but cannot predict when it
will happen, what form it will come in, or how it will affect the plant.
Fuel Availability and Pricing: The 2017 IRP assumes coal will be available to Avista to
fuel its share of Colstrip for the next 20 years. At this time no contract extension is in place
beyond 2019 therefore Avista's anticipated assumptions about how the price of fuel will
change under a future contract from that included in Avista's 2017 IRP fuel price
assumption. For fuel to be available after 2027 (assuming existing annual burn rate)
additional areas (F & G) will need to be permitted. Avista does not believe fuel pricing will
have an impact on Avista's economic question of the plant closing, unless fuel becomes
unavailable, prices are large magnitudes different than existing forecasts, or alternative
fuel sources such, as natural gas, decline to lower levels than existing prices.
Capital Budget: The2017 IRP used the2017 budget estimates for future capital spending
in common future forecast years. Budgets are updated annually for the next 10 year budget
cycle and have since changed. A summary of the budget changes for Avista's shares are
a
a
shown below in Table I for IRP years after the budget cycle increase with inflation. Avista
does not believe these changes will impact the likelihood of plant closure.
Table 1: Colstrip Capital Budget Estimates
(Avista's Shares Millions $)
2017IRP 2018 Budget Change
2019 t0.49 8.71 (1.78)
2020 8.94 6.60 (2.34)
2021 3.75 3.55 (0.20)
8.54 8.34 (0.20)
2023 7.43 10.25 2.82
2024 2.48 3.s3 1.05
2025 4.00 6.9s 2.95
2026 3.55 5.29 t.74
O&M: The 2017 IRP used the 2017 budget estimates for future O&M spending in
common future forecast years. Budgets are updated annually for the next 5-year budget
cycle and have since changed. A summary of the budget changes for Avista's shares are
shown below in Table 2, for IRP years after the budget cycle increase with inflation. Avista
does not believe these changes will impact the likelihood of plant closure.
Table 2: Colstrip O&M Budget Estimates
(Avista's Shares Millions $)
Year 2017IRP 2018 Budget Change
20t9 16,981 16,799 (l 82)
2020 17,502 17,257 (24s)
2021 13,766 14,495 729
Depreciation: As part of the pending merger agreements in Washington and Idaho,
Colstrip Units 3 and 4 are to be fully depreciated by 2027 . This change does not impact or
determine the closure date. As previously noted, closure will require action of all of the
owners.
Year
2022
AVISTA CORPORATION
RESPONSE TO REQUEST FOR INFORMATION
JURISDICTION:
CASE NO:
REQUESTER:
TYPE:
REQUEST NO.:
IDAHO
AVU-E- r 8-03/AVU-G- 1 8-02
Staff
Production Request
Staff-06
DATE PREPARED: 0711212018WITNESS: N/A
RESPONDER: James Gall
DEPARTMENT: Energy Resources
TELEPHONE: (s09) 495-2189
REQUEST:
What did the Company assume in its 2017 IRP regarding the closure of Units I and2 that affect the
cost (common costs, operation and maintenance costs, decommissioning costs, etc.) and
operational life of Units 3 and 4?
RESPONSE:
Avista's 2017 IRP assumed Colstrip Units I and 2 would close in JuJy 2022. Due to the units
closure, Avista assumed shared overhead O&M costs would increase due to less plant capacity to
share common costs. Avista's allocated share of this increase is estimated to be $2 million per
year, escalating with inflation.
In addition to additional shared O&M costs, Avista anticipates two additional capital investments
due to the closure of Units I and2. The first is to purchase shared assets from the owners of Units
I and2 for $1.5 million (Avista's allocated share). This is an estimated cost since the assets have
not been itemized at this time.
The second piece requires that the Company install enhanced Mercury controls for $1.79 million
(Avista's allocated share).
AVISTA CORPORATION
RESPONSE TO REQUEST F'OR INFORMATION
JURISDICTION:
CASE NO:
REQUESTER:
TYPE:
REQUEST NO.:
IDAHO
AVU-E- I 8-03/AVU-G- 1 8-02
Staff
Production Request
Staff-07
DATE PREPARED: 07 ll2l20l8WITNESS: N/A
RESPONDER: James Gall
DEPARTMENT: Energy Resources
TELEPHONE: [phone]
REQUEST:
Please provide all analyses conducted or commissioned by Avista studying the economic effects of
a carbon tax imposed by the State of Washington on the continued operation of Colstrip.
RESPONSE:
Please see StaflPR_07C, which contains TRADE SECRET, PROPRIETARY or
CONFIDENTIAL information and are separately filed under IDAPA 31.01.01, Rule 067 and
233,and Section 9-340D, Idaho Code.
At this time, Avista has only performed preliminary analysis of the impact of the proposed carbon
tax in the State of Washington (see attached files for the proposed tax's preliminary impact to
power supply costs). Additional analysis is currently in development and the Company will
supplement this response when complete. In this preliminary analysis, Colstrip's dispatch is
reduced to nearly 50 percent of its capability (this assumes Idaho's portion of Avista's share
continues to dispatch without a carbon tax).
AVISTA CORPORATION
RESPONSE TO REQUEST FOR TNFORMATTON
JURISDICTION:
CASE NO:
REQUESTER:
TYPE:
REQUEST NO.:
IDAHO
AVU-E- I 8-o3/AVU-G- 1 8-02
Staff
Production Request
Staff-08
DATE PREPARED
WITNESS:
RESPONDER:
DEPARTMENT:
TELEPHONE:
07112120t8
N/A
Thomas C Dempsey
Energy Resources
(soe) 4es-4960
REQUEST:
Please provide the current expected operational life of the Rosebud Mine. Please include details,
assumptions, and sources used to determine the operational life.
RESPONSE:
The Company cannot respond to the Westmoreland Coal Companies current expected
operational life of the Rosebud Mine. Avista can, however, provide a link to a recent report filed
at the SEC by Westmoreland:
https:/lwr.vr.v.sec.gov/Archives/edgar/data/106455/0001 I 93 125 I 8171 308/d58zl273de.x99l .htm
Page 8 of the report lists the total reserves as approximately 241 million tons. In a typical non-
outage year Units 3&4 burn on the order of 6.5-7.0 million tons. This is enough coal to last at
least 30 years if you assume that all 241 million tons is available. It should be noted that
Western Energy's SEC filing has an "Estimated Mine Life" column that has an entry of 2029.
Avista assumes that the reason this year is listed is because the total reserve number includes
areas of the mine that are not yet permitted, namely Area's F & G. There are also a number of
important factors that can greatly impact the life of the mine:
Units 1&2- These units are shutting down prior to the depletion of that coal supply-
Areas A&8. This coal can be used for Units 3&4by permit, but the owners of Units 3&4
do not currently have contractual rights to Areas A&B's coal.
Economic Dispatch- Units 3&4 do not operate at full load all of the time; nor do they
stay online all of the time. As a result, it is not unusual to see annual coal consumption
fall below 6 million tons.
Plant outages- the units are overhauled every third and sometimes fourth years. This
significant off line period reduces coal demand. Additionally, forced outages reduce coal
consumption.
a
o
a
AVISTA CORPORATION
RESPONSE TO REQUEST FOR INFORMATION
JURISDICTION: IDAHO
CASE NO: AVU-E-I8-03/AVU-G-18-02
REQUESTER: StaffTYPE: Production Request
REQUEST NO.: Staff-09
DATE PREPARED: 07 ll2l20l8WITNESS: N/A
RESPONDER: Thomas C. Dempsey
DEPARTMENT: Energy Resources
TELEPHONE: (s09) 495-4960
REQUEST:
Is Area F expansion for the Rosebud Mine required to operate the Colstrip plant until the current
depreciation terminal lives of 2034 and 2036 for Units 3 and 4? Please explain.
RE,SPONSE:
Please see the answer to StaflPR_O8. Avista believes that with Units 1&2 shutting down,
Westmoreland will be able to supply coal through approximately 2027 from areas A, B & C. This
could be reduced or extended depending on Units l&2, and depending on how frequently the units
are dispatched, etc. Western Energy will have to go into Area F and/or Area G to supply more
coal, which have not yet been permitted.
AVISTA CORPORATION
RESPONSE TO REQUEST FOR INFORMATION
JURISDICTION: IDAHO
CASE NO: AVU-E-I8-03/AVU-G-18-02
REQUESTER: StaffTYPE: Production Request
REQUEST NO.: Staff-l0
DATE PREPARED: 07 11212018WITNESS: N/A
RESPONDER: Thomas C Dempsey
DEPARTMENT: Energy Resources
TELEPHONE: (509) 49s-4960
REQUEST:
Please provide the current coal supply agreement for Colstrip Units 3 and 4 between the plant
ownership group and Western Energy Company (WECO).
RESPONSE:
The agreement is included as StaflPR_l0 Attachment A and is provided in electronic format only.
AVISTA CORPORATION
RESPONSE TO REQLTEST FOR TNFORMATION
JURISDICTION:
CASE NO:
REQUESTER:
TYPE:
REQUEST NO.:
IDAHO
AVU-E- I 8-03/AVU-G- 1 8-02
Staff
Production Request
Staff-l 1
DATE PREPARED: 07 ll2l20l8WITNESS: N/A
RESPONDER: Thomas C. Dempsey
DEPARTMENT: Energy Resources
TELEPHONE: (509) 49s-4960
REQUEST:
Please describe how the potential Westmoreland bankruptcy could affect the operation of Colstrip.
Please include impacts to cost, fuel availability, etc.
RESPONSE:
Avista is unable to know with certainty how a Westmoreland bankruptcy could affect the operation
of Colstrip. That being said, the current agreement for Colstrip is a "cost plus" type of agreement
that we believe makes the operation of the mine at Colstrip a profitable component of
Westmoreland with minimal financial risk to the miner. For this reason we believe that it is likely
that mining operations at Colstrip would continue unintemrpted in the event of a Westmoreland
Company bankruptcy.
AVISTA CORPORATION
RESPONSE TO REQUEST FOR INFORMATION
JURISDICTION
CASE NO:
REQUESTER:
TYPE:
REQUEST NO.:
IDAHO
AVU-E- 1 8-03/AVU-G- I 8-02
Staff
Production Request
Staff-12
DATE PREPARED: 07 ll2l20l8WITNESS: N/A
RESPONDER: Paul Kimball
DEPARTMENT: Regulatory AffairsTELEPHONE: [phone]
REQUEST:
Please provide Avista's response to Request for Information PSC-028, prepared March 28,2018,
by Jason Thackston. Please include the Ownership and Operation Agreement, for Colstrip Units 3
and 4.
RESPONSE:
Please see Sta[PR_I2 Attachments A and B for the requested information. Both documents are
being provided in electronic format only.
AVISTA CORPORATION
RESPONSE TO REQIIEST FOR TNFORMATTON
JURISDICTION:
CASE NO:
REQUESTER:
TYPE:
REQUEST NO.:
IDAHO
AVU-E- 1 8-03/AVU-G- r 8-02
Staff
Production Request
Staff- 13
DATE PREPARED: 0711212018WITNESS: N/A
RESPONDER: Karen Schuh
DEPARTMENT: Regulatory Affairs
TELEPHONE: (s09) 495-2293
REQUEST:
Please provide a table showing ownership percentage and current terminal depreciation year used
by other owners for Colstrip Units 3 and 4.
RESPONSE:
The table below lists the ownership percentage and current terminal depreciation years used by all
owners of Colstrip Units 3 and4:
Owner
Colstrip Unit 3
Oumership Current Terminal
Perygntagq Drplqc;lation Year
Colstrip Unit 4
Ownenhip Current Terminal
Percentage Depreciation Year
Avista
Puget Sourd Errcrry
PacifiCorp
Portland General Electric
Northwestem Enerry, LLC
Talen Enerry, LLC
2034
2027
2046
2030
No ownership
Not a rate-reguhted
entrty 0% No ownership
l5o/o
2s%
10%
20%
0%
30%
15%
2s%
t0%
20%
30%
2036
2027
2046
2030
2043
AYISTA CORPORATION
RESPONSE TO REQ[TEST FOR INFORMATION
JURISDICTION: IDAHO
CASE NO: AVU-E-I8-03/AVU-G-18-02
REQUESTER: StaffTYPE: Production Request
REQUEST NO.: Staff-I4
DATE PREPARED: 07 ll2l20l8WITNESS: N/A
RESPONDER: Paul Kimball
DEPARTMENT: Regulatory Affairs
TELEPHONE: (s09) 49s-4s84
REQUEST:
Please provide a copy of the testimony of Christopher S. Hancock of the Staff of the Washington
Utilities and Transportation Commission in Docketu-170970 dated April 10, 201 8.
RESPONSE:
Please see Staff PR_I4 Attachment A the revised testimony of Christopher Hancock filed May 7,
2018.
In the Matter of the Joint Application of
Hydro One Limited and Avista
Corporation for an Order Authorizing
Proposed Transaction
BEFORE THE WASHINGTON
UTILITIES AIID TRANSPORTATION COMMISSION
Exh. CSH-1Tr
Docket U-170970
Witness: Christopher S. Hancock
DOCKET U-I7O97O
TESTIMONY OF
Christopher S. Hancock
STAFF OF
WASHINGTON UTILITIES AND
TRANSPORTATION COMMISSION
Commission Staffs Testimony in Support of Settlement
April 10,2018
Revised May 7, 2018
Staff_PR_1 4 Attachment A Page 1 of 33
TABLE OF CONTENTS
I. TNTRODUCTION
II. STAFF'S TNTERESTS IN THIS PROCEEDTNG .2
,4
.5
.5
.6
III. HOW STAFF'S TNTERESTS HAVE BEEN ADDRESSED
A. Commitments to Important Public Service Obligations
l. Customer service, reliability, and safety..
2. Support for low-income customers
3. Energy efficiency, conservation, and environmental
stewardship 7
B.
C.
D.
E.
F.
G.
Protection from Costs Associated with the Proposed Transaction
Protecting the Commission's Ability to Regulate the Utility
..9
in the Public Interest .... I I
Ringfencing.
Managerial and Financial Fitness
Other Interests....
t9
l9
ry THE STANDARD OF REVIEW FOR PROPERTY TRANSFERS
AND HOW THE SETTLEMENT MEETS THE STANDARD......
A. Net Benefits
.26
.26
.29
.30
B. The Public Interest
TESTIMONY OF CHRISTOPHER S. HANCOCK
Docket U-170970
Staff_PR_1 4 Attachment A
Exh. CSH-lTr
Page i
Page 2 of 33
Exh. CSH-2
Exh. CSH-3
Exh. CSH-4
Exh. CSH-5
Exh. CSH-6
Exh. CSH-7
LIST OF EXHIBITS
Attachment A to Hydro One Response to ICNU Data Request No. 30, Moody's
Attachment B to Hydro One Response to ICNU Data Request No. 30, S&P
Hydro One Q4 2017 Analyst Call Slides
Attachment A to Avista Response to UTC Staff Data Request No. 8, Moody's
Attachment B to Avista Response to UTC Staff Data Request No. 8, S&P
Avista Response to NWEC Data Request No. l8
TESTIMONY OF CHRISTOPHER S. HANCOCK
Docket U-170970
Staff_PR_1 4 Attachment A
Exh. CSH-lTr
Page ii
Page 3 of 33
I
2
aJ
4
5
6
7
8
9
a.
A.
a.
A.
I. INTRODUCTION
Please state your name and business address.
My name is Christopher Scott Hancock. My business address is The Richard
Hemstad Building, 1300 S. Evergreen Park Drive S.W., Olympia, WA 98504.
By whom are you employed and in what capacity?
I am employed by the Washington Utilities and Transportation Commission
(Commission) as a Regulatory Analyst in the Energy Regulation Section of the
Regulatory Services Division.
Are you the same Christopher Scott Hancock who is sponsoring joint testimony
in Exh. JNT-IT?
Yes. My educational and professional background is included in Exh. JNT-2.
Have you prepared any other exhibits in support of your testimony?
Yes. I have prepared four exhibits addressing the ratings outlook for Hydro One
Limited (Hydro One) and Avista Corporation ("Avista" or "Company"),
respectively. These are Exhibits CSH-2, CSH-3, CSH-5, and CSH-6. In addition, I
provide Exhibit CSH-4, which is a series of slides presented during Hydro One's
Fourth Quarter 2017 Eamings Teleconference. Finally, I provide Exhibit CSH-7
which contains information on the amount of Avista's asset retirement obligations
(AROs) associated with Colstrip.
l0
ll
t2 a.
l3
t4 A.
15
16 a.
t7 A.
l8
t9
20
2t
22
23
TESTIMONY OF CHRISTOPHER S. HANCOCK
Docket U-170970
Staff_PR_1 4 Attachment A
Exh. CSH-1Tr
Page I
Page 4 of 33
I
2
J
4
5
6
7
8
9
a.
A.
Please describe the scope of your testimony in this docket.
I articulate Commission Staffls (Staff s) support of the Settlement Stipulation and
Agreement ("Settlement") entered into by all parties to this docket. The Settlement
expresses the parties' support for the proposed acquisition of Avista by Hydro One
(Proposed Transaction), conditioned upon the commitments listed in the Settlement.
To explain Staff s support of the Settlement, I include additional detail on certain
commitments in the Settlement that address Staff s concerns in this case. In addition
I provide StafPs perspective on the new "net benefit" standard as it applies to this
case.
II. STAFF'S INTERESTS IN THIS PROCEEDING
What standard governs the Commission's decision to approve or deny the
Proposed Transaction?
RCW 80.12.020 requires that mergers and acquisitions of public service companies
like Avista in Washington be approved by the Commission. In order to approve the
Proposed Transaction, the Commission must find "that the transaction would provide
a net benefit to customers of the company."
In the Commission's property transfer rules, WAC 480-143-170 provides that
if "the commission finds the proposed transaction is not consistent with the public
interest, it shall deny the application."
l0
ll
t2
13 a.
t4
15 A.
16
t7
l8
l9
2l
20
22
TESTIMONY OF CHRISTOPHER S. HANCOCK
Docket U-170970
Staff_PR_1 4 Attachment A
Exh. CSH-1Tr
Page2
Page 5 of 33
a.
A.
What are Staffls interests in this proceeding?
Staff is interested in ensuring that the Proposed Transaction meets the Commission's
standard for approval, meaning that Avista's ratepayers will receive a net benefit
from the Proposed Transaction, and that the Proposed Transaction is in the public
interest.
In more detail, Staffls principal concerns with the Proposed Transaction are
as follows:
l) Whether there are commitments by the purchaser to important public
service obligations such as:
i) Customer service;
ii) Safety;
iii) Reliability;
iv) Resource adequacy including energy efficiency and conservation;
v) Support for low-income customers;
vi) Environmental stewardship;
2) Whether customers are protected from rate increases that might result
from the transaction and from financial distress that might occur as a
result of the manner in which the purchase was financed or distress at
other companies affiliated with the purchaser;
3) Whether the Commission's ability to regulate the utility in the public
interest is fully protected, including preserving access to all necessary
information;
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TESTIMONY OF CHRISTOPHER S. HANCOCK
Docket U-170970
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4) Whether the purchaser has the financial and managerial fitness to own
and operate the utility in fulfillment of its public service obligations;
5) Whether the commitments made in the transaction are enforceable.l
Does Staff believe that the Settlement addresses all of these concerns?
Yes. Taken together, the Settlement reasonably assures that the Proposed
Transaction provides a net benefit to customers, and is in the public interest.
To my knowledge, the result contains the most comprehensive provisions and
protective arrangements surrounding a transfer of property that this Commission has
ever considered.
III. HOW STAFF'S INTERESTS HAYE BEEN ADDRESSED
a. How will you address how StafPs interests have been met?
A. This testimony will highlight particular commitments the Parties have agreed to in
Appendix A to the Settlement (Exh. JNT-3). Specific considerations around net
benefits and the public interest are addressed in section IV of this testimony.
The Joint Testimony (Exh. JNT-lT) provides an overview of the Settlement.
This testimony will highlight specific commitments that address Staff s concerns in
this proceeding.
I In the Matter of the Joint Application of Puget Holdings LLC and Puget Sound Energt, Inc. For an Order
Authorizing ProposedTransaction, Docket U-072375, Order 08, 48-49,n I l5 (Dec. 30,2008) (PSE-
Macquarie Order).
TESTIMONY OF CHRISTOPHER S. HANCOCK
Docket U-170970
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A. Commitments to Important Public Service Obligations
1. Customer service, reliability, and safety
a. Which customer service commitments would you like to highlight?
A. The Settlement provides several commitments from Hydro One and Avista (together
"Joint Applicants") that support consumer protection.
Commitment7l, "Security Deposits," provides for the return of security
deposits to residential customers, and a discontinuation of the practice of requiring
security deposits from these customers going forward.
Commitment72, "AMI Consumer Protection," provides for guidelines
prohibiting the remote-disconnection of customers under certain temperature
extremes as the Company's AMI program expands. [t also provides a path for
resolving matters around prepayment billing and remote disconnection.
CommitmentT9, "On Bill Repayment," establishes that Hydro One will
provide the initial funding for establishing an On-Bill Repayment program, while
establishing that the ratepayer population will not be responsible for defaults on
obligations paid through the On-Bill Repayment program. The Commitment also
establishes that customers will not be disconnected from service due to non-payment
of non-utility obl igations.
Commitment 33, "Commitments Binding," has been modified to include an
obligation by Hydro One and Avista to rectify any failure to comply with the merger
commitments.
TESTIMONY OF CHRISTOPHER S. HANCOCK
Docket U-170970
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Which commitments address safety?
Commitment l5 ("Safety and Reliability Standards and Service Quality Measures");
and Commitment 80 ("Contract Labor"), which Washington and Northern Idaho
District Council of Laborers elaborates upon in its individual testimony.
Which commitment addresses reliability?
Commitment l5 ("Safety and Reliability Standards and Service Quality Measures")
provides for performance-based ratemaking of a sort. If Avista's reliability declines
significantly during the first ten years of Hydro One's ownership of Avista,
customers willreceive an increased rate credit of $250,000 annually. This represents
a substantial incentive for Avista to continue to provide reliable service to its
customers in Washinglon.
2. Support for low-income customers
Which commitments address support for low-income customers?
One of Staff s most important considerations in entering into the Settlement with the
Joint Applicants and the other parties was securing protections for low-income
customers. The broad support among the parties for addressing low-income issues is
captured in Commitments 64 through 74.
Commitment 67 ("Funding for Low-Income Participation in New
Renewables") dedicates $5 million in funding for renewable programs that benefit
low-income customers, and Commitment 70 ("Low Income Weatherization")
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Docket U-170970
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provides for $4 million of additional funding for weatherization of low-income
customers' homes.
Commitment 69 ("Replacement of Manufactured Homes") provides for the
replacement of inefficient manufactured homes by Hydro One over a ten-year
period. Homes built prior to 1976, which tend to be the least energy-efficient homes,
are prioritized for replacement. This commitment is important because it will not
only assist customers in lowering their bills but it will also increase conservation.
Two million dollars is allocated to this program.
Commitment 70 (Low Income Weatherization) similarly benefits individual
customers by potentially lowering bills and benefits all customers by increasing
conservation. The Commitment provides that existing funding for low income
weatherization will continue and, in addition, Hydro One will furnish $4 million over
l0 years in additional funding.
3. Energy efficiency, conservation, and environmental stewardship
Please describe Commitment 55, "Cost of Greenhouse Gas Emissions."
The Washington State Legislature recently considered proposed legislation on
pricing carbon emissions. The legislative effort failed, but the possibility of such
Iegislation remains.
The Joint Applicants agreed to acknowledge this possibility through Avista's
resource planning process. Commitment 55 requires Avista to work with its
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TESTIMONY OF CHRISTOPHER S. HANCOCK
Docket U-170970
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Integrated Resource Plan Advisory Group to determine a range of greenhouse gas
costs to model.
Have the Joint Applicants and other parties agreed to commitments around
conservation and energy efficiency?
Yes. Several of the commitments directly address conservation; some of these
directly target low-income customers, who stand to benefit the most from
conservation measures funded by a third-party.
Commitment 69 ("Replacement of Manufactured Homes") and Commitment
70 ("Low Income Weatherization") have been previously addressed in the discussion
of low-income issues, but merit acknowledgement here again as energy efficiency
and conservation issues.
Commitment 63 establishes a Professional Home Energy Audit program,
funded by Hydro One to reach approximately 2,000 homes over a ten year period.
This program will provide participating customers an understanding of the lowest-
hanging fruit for improving the energy diet of their homes, at no charge.
Commitment 6l ("Industrial Customers' Self Direct Conservation")
establishes the option for industrial customers to engage in large conservation
projects, using a mix of funding from Schedule 9l and the Joint Applicants. A
project under this program will then be repaid by the customer over a period of time
through the Schedule 9l charges to the customer. The program creates no financial
burden on other customers, and provides an energy efficiency benefit to all
customers.
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TESTIMONY OF CHRISTOPHER S. HANCOCK
Docket U-170970
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TESTIMONY OF CHRISTOPHER S. HANCOCK
Docket U-170970
Staff_PR_1 4 Attachment A
a.
A.
B. Protection from Costs Associated with the Proposed Transaction
How does the Sefflement protect customers from costs associated with the
Proposed Transaction?
Several items in the Settlement address this matter. Commitment l6 ("Treatment of
Net Cost Savings") requires that any cost savings that Avista achieves as a result of
the transaction will be captured in future rate proceedings.
Commitment l7 ("Pre-Transaction Test Year") establishes the test year to be
used in future general rate case filings, thus preventing controversy surrounding the
appropriate test year in those proceedings. Sub-item "c" in this commitment provides
for a second test year, presented for informational and comparison purposes only, in
order to capture the effect of the acquisition.
Commitment 8l ("Most Favored Nation") ensures that Washington
ratepayers can receive the benefits as well as protections that the Joint Applicants
agree to in other jurisdictions.
Commitment 24 ("Cost Allocations Related to Corporate Structure and
Affiliate Interests") provides important structure around cost allocations as Avista
integrates with Hydro One in the coming years.
Please describe how Commitment 17, "Treatment of Transaction Costsr"
addresses Staff s concerns.
Staffand other parties advocated for, and secured, clarifications to the proposed
commitment by the Joint Applicants around costs associated with the Proposed
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Transaction. The revisions to this commitment clarify the types of transaction and
transition costs that cannot be recovered from ratepayers.
These costs are to be tracked and furnished to the Commission. Specific costs
to be excluded from recovery must be identified, without limiting the ability of the
parties to dispute unspecified costs in a future general rate case. This Commitment
makes clear that the costs of the Proposed Transaction are to be borne by Avista and
its new shareholder, and not Avista's customers.
a. Please describe how Commitment 18,'(Rate Credits," addresses Staffs
concerns.
A The settlement process produced a larger rate credit than originally proposed by the
Joint Applicants, and represents a larger rate credit (five percent of base revenues,
rather than 3.1 percent) than was provided in the acquisition of Puget Sound Energy,
Inc. (PSE) by an investor consortium that included the Macquarie Group.2
Furthermore, the rate credit is delivered over a shorter period of time, increasing the
time-value of money to Avista's ratepayers. This concentrates the distribution of the
rate credit over the crucial first few years of Avista's integration into Hydro One.
A rate credit not only protects customers from cost increases due to the
Proposed Transaction; it provides a cost decrease for the five-year period in the
Commitment. This commitment undoubtedly confers a benefit to customers that,
absent the Proposed Transaction, would not otherwise exist.
2 See PSE-Macquarie Order
TESTIMONY OF CHRISTOPHER S. HANCOCK
Docket U-170970
Staff_PR_1 4 Attachment A
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Protecting the Commission's Ability to Regulate the Utility in the Public
Interest
a. Have the parties agreed to commitments that preserve the Commission's ability
to regulate the utility in the public interest?
A. Yes. Commitment 30 ("Commission Enforcement of Commitments") makes clear
that the Commission can compel not only Avista witnesses, but also witnesses from
Olympus Holding Co.p.'and Hydro One.
Commitment 23 ("Access to and Maintenance of Books and Records")
preserves the Commission's access to Avista's books, and makes clear that the
Commission may review Avista-related documents at Olympus Holding Corp. and
its subsidiaries, as well as at Hydro One.
Commitment 22 ("Separate Books and Records") requires separate books and
records for Avista, preventing unnecessary complication of records.
Commitment 3l ("Submittal to State Court Jurisdiction for Enforcement of
Commission Orders") further clarifies the enforceability of the Commitments the
Joint Applicants have made in this proceeding.
Commitment 47 ("Hold Harmless;Notice to Lenders; Restriction on
Acquisitions and Dispositions") requires the Joint Applicants to seek Commission
approval of any sale or transfer of any material part of Avista, or any other
transaction that would result in an entity other than Hydro One directly or indirectly
acquiring a controlling interest in Avista.
3 Olympus Holding Corp. is an intermediate corporate entity between Avista and Hydro One. See Appendix B
to Settlement Stipulation, Revised Post-Closing Corporate Structure.
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TESTIMONY OF CHRISTOPHER S. HANCOCK
Docket U-170970
Staff_PR_1 4 Attachment A
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Together, these commitments preserye, and in some cases enhance, the
Commission's ability and authority to regulate the Company in the public interest.
D. Financial Integrity
What are some concerns that arise when a regulated utility transitions from
being publicly-traded, to being privately-held?
A publicly-traded company is regulated both by financial regulators, like the
Securities and Exchange Commission ("SEC"), and its diverse body of shareholders.
When a company becomes privately-held, especially by a single entity like Hydro
One, it no longer is subject to balancing the competing interests of a large body of
owners with a diverse set of interests, and will instead begin to reflect the priorities
of the single shareholder, which can be myopic.
The concern is that Avista may be run in a manner that best suits the singular
interests of its singular owner, and not the diverse interests of a broad body of
shareholders.
The commitments obtained in this Settlement provide an analog for the
discipline that would otherwise be imposed on Avista by a large, diverse ownership
base.
TESTIMONY OF CHRISTOPHER S. HANCOCK
Docket U-170970
Staff_PR_1 4 Attachment A
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a.
A.
Have major credit ratings agencies commented on the Proposed Transaction?
Yes. Both Avista and Hydro One have maintained sound investment-grade ratings
from the major ratings agencies.a
a. What do ratings agencies think of Hydro One, given Hydro One's decision to
purchase Avista?
A. Both major ratings agencies have negative outlooks for Hydro One;s however, they
also explain that these negative outlooks are the result of an expectation of less
extraordinary support from the Province of Ontario for Hydro One. Despite the
negative outlooks, Hydro One maintains strong investment-grade ratings.
In addition, Moody's noted that "the additional debt that Hydro One Limited
plans to issue will not limit the ratings of Hydro One Inc."6
Hydro One has significant access to several billions of dollars of credit.T
What do ratings agencies think of 1!y!q1[4, given the announcement of a purchase
by Hydro One?
On the understanding that Hydro One Limited would issue the debt used to finance
the purchase of Avista, Moody's stated that it believed Hydro One Limited's
"ownership will be credit neutral." Moody's went on to say that "the stable rating
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Docket U-170970
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4 "Major ratings agencies" refers to Moody's and S&P.
s Hancock, Exh. CSH-2, Attachment A to Hydro One Response to ICNU Data Request No. 30, Moody's; Exh.
CSH-3, Attachment B to Hydro One Response to ICNU Data Request No. 30, S&P.
6 Hancock, Exh. CSH-2.
7 Hancock, Exh. CSH-4, Q4 2017 investor report slides.
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outlook reflects our view that the pending acquisition by [Hydro One Limited] will
not materially affect the credit quality of Avista." 8
Moody's noted that it could provide a downgrade fAvista's "dividend
payout increased meaningfully to support the new parent company's acquisition
debt."e In this statement, Moody's has raised the possibility that Avista will be relied
upon to pay for the debt used to acquire itself.
S&P looked more favorably on the proposed transaction's effects on Avista,
revising its outlook from "stable" to "positive."l0
a. How leveraged is the Proposed Transaction?
A. If one considers the convertible debentures as debt, the Proposed Transaction is
leveraged at 53%o.t I However, as C$1.54 billion of the borrowings are unsecured,
and willbe converted upon closure of the Proposed Transaction, this portion of the
financing functions much more like equity. Treating the convertible debentures as
equity produces a debt leverage of approximately 24 percent.l2 As a matter of
comparison, the PSE-Macquarie deal was 20 percent leveraged, a figure the
Commission found to be "substantially less" than the leverage involved in the two
preceding transactions that the Commission approved.l3
8 Hancock, Exh. CSH-5, Attachment A to Avista Response to UTC Staff Data Request No. 8, Moody's.
e Id.
r0 Hancock, Exh. CSH-6, Attachment B to Avista Response to UTC Staff Data Request No. 8, S&P.
rr Leverage : total debt divided by total capital. Figures used are after accounting for retired debt + new debt.
$2.81 billion / $5.3 billion = 0.53.
tz $1.27 billion / $5.3 billion = 0.24.
13 PsE-Macquarie Order at 7, u l8.
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a.
A.
The entirety of this debt will sit on Hydro One's books, not Avista's.
Furthermore, Avista is not the sole entity available to service this debt.
How has the Settlement promoted financial integrity of Avista?
Staff sought to obtain commitments that promote continued financial integrity of
Avista. Absent the disciplining effects of being a publiclytraded company with a
broad and diverse base of shareholders, Avista's balance sheet may
disproportionately suit the interests of a single shareholder. Staff and other parties
worked together with Avista and Hydro One representatives to arrive at a suite of
commitments that promote continued financial health of Avista.
Which commitments that address financial integrity are of particular interest to
Staff?
Commitments 34 through 4l address Avista's financial integrity.
Commitment 34 ("Avista Capital Structure") ensures that the company
remains adequately capitalized, and Commitment 37 requires Avista and Hydro One
to notify the Commission within two business days of any downgrade of Avista's
credit rating to a non-investment grade status.
Additionally, Commitment22 requires Avista to maintain separate books and
records from affiliates
As a whole, do the commitments sufficiently address financial integrity at
Avista?
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TESTIMONY OF CHRISTOPHER S. HANCOCK
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A
TESTIMONY OF CHRISTOPHER S. HANCOCK
Docket U-170970
Staff_PR_1 4 Attachment A
Yes. The total balance of Commitments 34 through 4l promote sound financial
practices at Avista, and serve the interests of Avista's customers in the absence of the
moderating force of a diverse set of shareholders.
This group of commitments requires Hydro One to provide equity support of
Avista under reasonable terms and on a sustainable basis, the maintenance of
separate debt and preferred stock, continued evaluation by credit rating agencies,
prioritization of debt service over upward distributions; continued reporting to the
Securities and Exchange Commission, compliance with the Sarbanes-Oxley Act, and
maintenance of Avista's pension funding obligations.
Please address Commitment 38, "Restrictions on Upward Dividends and
Distributions."
This Commitment has been improved from the Joint Applicants' original filing.
Through negotiation, the parties have agreed that Avista will be required to have an
"investment" grade rating from both Standard & Poor's and Moody's, rather than
only one of these entities, before issuing a dividend to Hydro One or Olympus
Equity. This change is consistent with the requirements made of PSE and the
Macquarie Group in PSE's acquisition case.l4
By requiring several agencies to make an o'investment" grade assessment,
Avista's customers can have stronger assurance that Avista is not paying dividends
upstream unless it has a strong balance sheet and wide credibility in the eyes of
investors. Requiring that more than one ratings agency must find that Avista is
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'a See PSE-Macquarie Order at 29-30,n69.
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investment-grade would also be consistent with the requirements placed on PSE in
its merger/acquisition.
Absent meeting this condition, Avista can still make an upward distribution if
the ratio of Avista's EBITDA to interest expense is greater than or equal to 3.0. This
requirement ensures that Avista has pre-tax earnings more than sufficient to meet the
company' s debt obligations.
However, in either of these two scenarios, the Company is required to
maintain an equity ratio of at least 44 percent.
Altogether, these restrictions ensure that Avista's finances are not
jeopardized in order to satisfy parent organizations, and instead prioritize the use of
Avista's cash flow to service debt before paying dividends. [n its current status as a
publicly-traded company, Avista is not bound by such restrictions.
E. Ringfencing
What is ringfencing?
The Commission has aptly described ringfencing as "a term of art in the world of
mergers and acquisitions" that "refers to financial and corporate structuring in a
transaction that results in a newly acquired company being isolated from the
upstream corporate structure of its new owners and, thus, insulated and protected
from any financial distress suffered at the higher levels in the organization."ls
15 PsE-Macquarie Order at 8, n. 11.
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TESTIMONY OF CHRISTOPHER S. HANCOCK
Docket U-170970
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1Q.
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TESTIMONY OF CHRISTOPHER S. HANCOCK
Docket U-170970
Staff_PR_1 4 Attachment A
Please highlight some of the ringfencing commitments of particular interest to
Staff.
All parties have agreed to important commitments from the Joint Applicants that
hold Avista customers harmless from any business and financial risk exposures
associated with Hydro One, Olympus, and their affiliates. These commitments
provide important protections to Avista ratepayers if Hydro One, Olympus, or their
affiliates ever enter bankruptcy.
These commitments restrict the Company from acting as a lender to Hydro
One without the Commission's formal approval (Commitments 50 and 5l). The
parties have also agreed to commitments restricting the pledge of utility assets for the
benefit of any entity other than Avista (Commitment 46).
Importantly, Avista customers are protected from the cost of the debt Hydro
One issued to finance its purchase of Avista (Commitments 18, 25, and 35). Hydro
One, and not Avista customers, will bear the full risks of their investment in eastern
Washington's largest investor-owned utility.
Commitments were also secured that require obtaining a non-consolidation
opinion to independently verify that the ringfencing commitments obtained in this
settlement are suitable to insulate Avista and its ratepayers (Commitment 44). The
Company is required to notify lenders of these commitments as well (Commitment
47).The suite of ringfencing commitments is fortified by a restriction on modifying
these commitments without receiving Commission approval.
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a.
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F. Managerial and Financial Fitness
Is Hydro One financially and managerially fit to purchase Avista?
Yes. Hydro One has several decades of experience operating a large electric utility
over diverse topology in a highly variate climate with hot summers and bitterly cold
winters. As previously explained above, Hydro One is a financially-sound company
with investment-grade ratings from major credit ratings agencies.
Will Avista's experienced leadership team continue in their roles after the
Proposed Transaction is completed?
Yes. Hydro One has committed (Commitment 2) to retain Avista's leadership as
Avista transitions into ownership under Hydro One. Three of Avista's Board of
Directors will be individuals who are currently on Avista's board (Commitment 3).
This also ensures a smooth transition and retains valuable institutional knowledge.
G. Other Interests
What other commitments would Staff like to highlight?
Commitment 76 addresses the depreciable life of Colstrip Units 3 and 4. An array of
circumstances provided for a unique opportunity to more quickly recover
depreciation expense of these units in a manner that provides no increase in rates.
a.
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Docket U-170970
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a. What confluence of factors provided the opportunity for addressing Colstrip?
A. On December 5,2017, the Commission issued Order 08 in Dockets UE-I70033 and
UG-170034, Puget Sound Energy's most recent general rate case.l6 Many parties to
the current proceeding were parties to those dockets. Order 08 approved a settlement
which, among other things, uses Production Tax Credit dollars to pay for costs
associated with Colstrip Units 1 and2. Furthermore, that settlement established an
end-of-life date of December 31,2027, for Colstrip Units 3 and 4.
On December 22,2017 , the Tax Cuts and Jobs Act ("TCJA") was passed,
and was enacted on January 1,2018. The reduction in the corporate tax rate from
35%o to 2lYo resulted in an excess amount of deferred federal income taxes on
Avista's books, to the tune of several millions of dollars.
Subsequently, on February 22,2018, the Company filed a depreciation study
in Dockets UE-180167 and UG-180168. This depreciation study found a useful
economic life of Colstrip Units 3 and 4 to be 2034 and2036, respectively.rT
The confluence of these events provided an opportunity to address the
recovery of Colstrip 3 and 4 costs from customers, in a docket that included parties
interested in this matter. This proceeding has the right parties at the right time.
t6 l(qsh. Utils. & Transp. Comm'n v. Puget Sound Energt, Dockets LIE-170033 and UG-170034, Order 08
(Dec. 5, 2017) (Order 08).
t1 In the Mqtter of the Petition of Avista Corporation, d/b/a Avista Utilities, For an Order Authorizing the
Company to Revise its Electric Book Depreciation Rates and Authorizing Defeted Accounting Treatmentfor
the Difference in Depreciation F*pense, Attachment C, p. III-10, Docket UE-I80167; In the Matter of the
Petition of Avista Corporation, d/b/a Avista Utilities, For an Order Authorizing the Company to Revise its
Natural Gas Book Depreciation Rates and Authorizing Deferued Accounting Treatmentfor the Dffirence in
Depreciation Expense, Attachment C, p. III-10, Docket UG-180168.
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TESTIMONY OF CHRISTOPHER S. HANCOCK
Docket U-170970
Exh. CSH-1Tr
Page20
Page 23 of 33Staff_PR_1 4 Attachment A
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a.
A.
a.Of what relevance is Colstrip and excess deferred federal income tax to this
case?
A core consideration in this case is whether or not Hydro One's purchase of Avista
provides a net benefit for Avista's ratepayers. One area in which Hydro One's
purchase of Avista, and the attending process, can provide a benefit to ratepayers is
by rectifying Colstrip-related generational inequities that may burden current and
future ratepayers, and mitigating the risks of an earlier-than-expected closure of
Units 3 and 4.
A
What do you mean by Colstrip-related generational inequities?
Avista has recently filed a depreciation study that continues to indicate an economic
end-otlife for Colstrip Unit 3 at2034, and Colstrip Unit 4 at2036. However, coal-
fired power plants around the country are closing much sooner than anticipated by
utilities and their regulators. It is already the case that ratepayers in the near and
medium term will incur more than their fair share of costs; if utilities and regulators
had a crystal ball, and that ball said that 2035 was the end-of-life for Colstrip 3 and
4, past depreciation expenses related to Colstrip 3 and 4 would have been higher, and
future depreciation expenses related to these plants would be lower.
For example, not a single dollar for Asset Retirement Obligations, or AROs,
has ever been collected from ratepayers.ls In Avista's recently-filed depreciation
r8 Hancock, Exh. CSH-7, Avista Response to NWEC Data Request No. 18. An Asset Retirement Obligation is
a liability associated with the future retirement of a long-lived capital asset.
TESTIMONY OF CHRISTOPHER S. HANCOCK
Docket U-170970
Stafi_PR_1 4 Attachment A
Exh. CSH-lTr
Page2l
Page 24 of 33
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study, the Washington-allocated balance for AROs stands at $37.6 million, or over
37o/o of the depreciable balance.le
The Legislature also recently considered a bill, backed by Governor Inslee,
which would have implemented a carbon tax. While that bill narrowly failed to pass
the Legislature, Washinglon voters may approve a ballot initiative adopting a carbon
tax. Such a program is likely to make electricity generated from fossil fuel plants
more expensive, and thus likely to reduce the economic life of fossil fuel plants like
Colstrip 3 & 4. With a non-zero probability that such a policy may become law, it
would be wise to consider the impact of a carbon tax on the economic viability of
Colstrip 3 & 4 - and the accompanying ratemaking ramifications.
Staff believes that it is appropriate to exercise some caution in this area, and
to take advantage of a unique set of circumstances that can ameliorate the
generational inequities that have already occurred, and that may occur in the future.
Does the Settlement adjust the depreciable life of Colstrip Units 3 and 4?
Yes. The Settlement establishes an economic end-of-life of December 31,2027 , for
Colstrip Units 3 and 4.
Does the Settlement establish a closure date for Colstrip Units 3 and 4?
No. The parties agree that there is no agreement to shut down or cease operations at
Colstrip Units 3 and 4.
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TESTIMONY OF CHRISTOPHER S. HANCOCK
Docket U-170970
Staff_PR_1 4 Attachment A
22
re The total incremental change to the depreciable balance of Colstrip Units 3 and 4 is $42.7 million, of which
approximately $37.6 million is AROs.
Exh. CSH-lTr
Page22
Page 25 of 33
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a.Other than addressing intergenerational equity concerns, what benefits are
there to adjusting the depreciable life of Colstrip Units 3 & 4 to the year 2027?
Doing so provides the following benefits:
o Aligns Avista Colstrip 3 & 4 with PSE;
o Removes barriers to early closure, if such a situation arises;
o Addresses Colstrip 3 & 4 depreciable life, before Avista potentially enters
a three-year stayout period ifthe stayout is approved in the pending
Avista general rate case in Dockets UE-170485 and UG-170486.
A
a. Why is this a good idea?
A. The Tax Cuts and Jobs Act, or TCJA, was recently enacted. Its most significant
change to law for our purposes is a reduction ofthe corporate tax rate, from 35% to
2lo/o.However, under the 35Yo tax rate, Avista collected funds from ratepayers for
the purpose of paying taxes at a future date in the form of Deferred Federal Income
Taxes, or DFIT. Because these funds were collected for the purpose of paying
federal income taxes that the company now is no longer obligated to pay, it is
appropriate to return these funds to customers.
However, "ratepayers" is a constantly-changing group. [n a perfect world, we
would identify the exact amount of excess taxes paid by every single customer prior
to the enactment of the TCJA, and retum that amount to these individuals and
organizations. That is simply impossible. Typically, we would just retum these funds
to "ratepayers" writ large - creating a generational inequity between previous
generations of ratepayers, and the ratepayers of today and tomorrow.
TESTIMONY OF CHRISTOPHER S. HANCOCK
Docket U-170970
Staff_PR_1 4 Attachment A
Exh. CSH-lTr
Page23
Page 26 of 33
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We are therefore faced with two intergenerational inequities that run in
opposing directions to one another. The intergenerational inequity posed by Colstrip
3 and 4 benefits previous ratepayers at the expense ofthe ratepayers oftoday and
tomorrow. The intergenerational inequity posed by the reduction in corporate tax rate
benefits the ratepayers of today and tomorrow at the expense of previous generations
of ratepayers.
This Settlement presents a unique opportunity to resolve these
intergenerational inequities, by assigning funds collected from previous generations
ofratepayers to cover costs that were not recovered from previous generations of
ratepayers.
How does Commitment 76 accomplish this?
First, *ll-funds available for immediate return to customers (approximately $*6#10;[
million)2o will be put towards the balance of customer liabilities related to Colstrip 3
and 4. This produces an immediate reduction in Net Plant of $*#l_Q.4 million.
Second, the Settlement establishes that the depreciation expense for these
assets will remain at the current level of approximately $4.53 million per year,
through 2027.The cumulative amount of Net Plant recovered through2027 will be
approximately $45 million.
Third, the Settlement proposes that the remaining portion of customer
liabilities (approximately $5*58;L million) related to Colstrip 3 and 4 are accounted
for
20 This eensists ef unpreteeted exeess DFIT as rvell as preteeted exeess DFIT thal meets the r\verage Rate'I'his consists of unprotercted
excess DI:I'I' as of December 31. 20 17.
a.
A.
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TESTIMONY OF CHRISTOPHER S. HANCOCK
Docket U-170970
Revised 5/7/18
Exh. CSH-lTr
Page24
Staff_PR_1 4 Attachment A Page 27 of 33
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as a regulatory asset. [n other words, the remaining plant balance of Colstrip 3 and 4
is split between a regulatory asset, and what will remain in Net Plant.
Under this commitment, Avista will receive a retum of (that is, would
recover) the balance of the regulatory asset through amortization of the asset. The
company will also earn a return on the regulatory asset, as it would be included in
rate base. Thus, the Company is made whole.
A key element is the length of the amortization period. The Settlement calls
for the regulatory asset to be amortized in a manner than best matches the
amortization of the regulatory liability that is protected Excess DFIT.
a. What is accomplished by amortizing the regulatory asset in this manner?
A. By matching the amortization schedule of the regulatory asset (which can be thought
of as the portion of Colstrip 3 & 4 costs under-recovered from previous generations
of customers) to the amortization schedule of the regulatory liability (which are
excess taxes paid by previous generations of customers), we will have matched a
stock and flow of funds from previous generations of customers to cover a stock and
flow of costs attributable to previous generations of customers.
As a result, we will have mitigated intergenerational inequities2l related to
Colstrip 3 and 4, particularly in the event that Colstrip 3 and 4 have a shorter
economic life than currently anticipated - all while maintaining the status quo for
ratepayers in terms of recovering depreciation expense.
2r Similar reasoning around intergenerational equity was used to justif, the use of Production Tax Credits in
the PSE general rate case, See, e.g., Order 08 at 40, !f I I 0.
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TESTIMONY OF CHRISTOPHER S. HANCOCK
Docket U-170970
Staff_PR_1 4 Attachment A
Exh. CSH-1Tr
Page25
Page 28 of 33
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IV. THE STAI\IDARD OF REYIEW FOR PROPERTY TRANSFERS ATID
HOW THE SETTLEMENT MEETS THE STANDARD
A. Net Benefits
a. What is the language of the "net benefits" standard?
A. This is found in RCW 80.12.020(l)
Are there specific criteria for determining whether a net benefit is provided to
customers of the company?
No. "Net benefits" are not further defined in statute or in rule.
What differentiates this standard from the previous standard?
The previous standard was known as the "no harm" standard, and was developed
through Commission "case law." The no harm standard required the Commission to
deny an application for transfer of property if the Commission found that it was 'onot
consistent with the public interest." There was no mention in statute or rule of "net
benefit to customers." A "no harm" standard required that ratepayers be, at worst,
indifferent to the transfer of property. In contrast, a "net benefits" standard requires
that the transfer ofproperty leave ratepayers better offas a result.
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TESTIMONY OF CHRISTOPHER S. HANCOCK
Docket U-170970
Staff_PR_1 4 Attachment A
Exh. CSH-lTr
Page26
Page 29 of 33
"The commission shall not approve any transaction under this section that
would result in a person, directly or indirectly, acquiring a controlling interest
in a gas or electrical company without a finding that the transaction would
provide a net benefit to the customers of the company" (emphasis added).
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Is the "net benefit'o standard really just a repackaged 6'no harm" standard?
No. The Legislature took action to change the language of the law, which I
understand to mean that the intent was to change the practical effect of the law.
Furthermore, the Commission has distinguished between the "no harm"
standard and the "net benefits" standard itself, relatively recently. For example, in
the PSE-Macquarie Order, the Commission said of the'ono harm" standard that was
applicable at the time: "To be 'consistent with the public interest,' a transaction need
not confer net benefits on customers or the public by making them better off than
they would be absent the transaction. It is sufficient if the transaction causes no
harm."2z Clearly, the Commission has found these to be distinctly different
standards.
Has the Commission considered the new "net benefits" standard in any other
proceeding?
Yes, in a recent filing involving the corporate reorganization of Northwest Natural
into a holding company structure. In its order approving the reorganization, the
Commission stated, "our decision today does not provide specific guidance for future
transactions under RCW 80.12.020," noting that its finding of net benefits "is based
on the particular facts and circumstances of NW Natural's reorganization request and
the negotiated commitments."23 I glean from the Commission's decision that it is
22 PsE-Macquarie Order at 48, !f I 15.
23 In the Matter of Nortlrwest Natural Gas Company's Applicationfor Approval of Corporate Reorganization
to Create a Holding Company, Docket UG-170094, Order 01, 3, l[ 14 (Dec.28,2017).
TESTIMONY OF CHRISTOPHER S. HANCOCK
Docket U-170970
Staff_PR_1 4 Attachment A
Exh. CSH-1Tr
Page27
Page 30 of 33
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a.
A.
important to identify the benefits of a transaction and to seek protections against
harms based on the individual context of each proceeding.
Are benefits limited to those than can be dollar-denominated?
No. Benefits can be tangible or intangible; they can be financial or non-financial.
Although it may be tempting to account for the net benefits of a transaction in
currency, this measure only tells part of the story.
Are all previously approved transfers of property, which passed a "no harm"
standard, necessarily short of the "net benefits" standard?
No. It is quite possible that previous mergers and acquisitions, approved under the
"no harm" standard, would have passed a "net benefits" standard as well. For
example, the Commission noted in the PSE-Macquarie Order that "there is a
persuasive argument that PSE and its customers will be better off under the
transaction than under the status quo,but we need not decide that issue under the 'no
harm' standard."2a
Does the Settlement provide a net benefit to Avista's customers?
Yes. Staff and the other parties have secured important commitments from the Joint
Applicants on all of the matters previously identified as concerns for Staff in this
matter. These include protections from potential harms as well as identifiable
benefits. Collectively, the Settlement produces an improvement from the status quo
2a PSE-Macquarie Order at 49, n. 70.
a.
A
TESTIMONY OF CHRISTOPHER S. HANCOCK
Docket U-170970
Staff_PR_1 4 Attachment A
a.
A.
Exh. CSH-lTr
Page 28
Page 31 of 33
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for Avista's customers. The unanimous support of all parties to this proceeding
strongly indicates that the Settlement provides net benefits to customers.
a. Has the Commission made any other relevant comments on the 'net benefitst
standard?
A. Yes. In the PSE-Macquarie Order, the Commission also noted that "a 'net benefit'
standard effectively imposes a burden on the shareholders' right to sell by making
any potential buyer pay a premium to non-owners. This imposes costs in addition to
those necessary to protect the public interest from harm."25
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Does the Settlement impose costs on Hydro One that are both reasonable and
necessary to meet the standard?
In Staff s view, yes.
B. The Public Interest
Is approving the Proposed Transaction in the public interest?
Yes, but only with the protections and benefits of the Settlement. The Settlement
renders the Proposed Transaction in the public interest not only because it provides
net benefits to Avista's customers, but also because it benefits a community that
extends beyond ratepayers. Prime examples are the commitments that support energy
efficiency, conservation, and renewable energy (Commitments 52-63). These
25 PsE-Macquarie Order at 50, tf I 18.
TESTIMONY OF CHRISTOPHER S. HANCOCK
Docket U-170970
Slaff_PR_1 4 Attachment A
Exh. CSH-lTr
Page29
Page 32 of 33
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commitments are in the public interest because they provide for a greener, cleaner
means of meeting customer energy demand, which ultimately benefits everyone in
the region. Further examples are found in the "community contributions"
commitments in Commitment I I and Commitment 641' and in Commitment 77
("Montana Community Transition Fund").
Together, these commitments provide for millions of dollars of one-time
contributions and ongoing community support.
V. CONCLUSION
Do you recommend that the Commission approve the Settlement?
Yes. I recommend that the Commission approve the Settlement, thereby authorizing
the Proposed Transaction between Avista and Hydro One. The Settlement is
supported by all parties to this proceeding, representing the interests of industrial
customers, environmentalists, laborers, residential and small business customers,
Commission Staff, and low income customers. The commitments in the Settlement
provide substantial benefits for Washington ratepayers. These benefits, as well as
protections secured by the commitments, render the Proposed Transaction in the
public interest.
Does this conclude your testimony?
Yes.
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TESTIMONY OF CHRISTOPHER S. HANCOCK
Docket U-170970
Staff_PR_1 4 Attachment A
Exh. CSH-1Tr
Page 30
Page 33 of 33
AVISTA CORPORATION
RESPONSE TO REQIIEST FOR INFORMATTON
JURISDICTION:
CASE NO:
REQUESTER:
TYPE:
REQUEST NO.:
IDAHO
AVU-E- l 8-03/AVU-G- I 8-02
Staff
Production Request
Staff-I5
DATE PREPARED: 0711212018WITNESS: N/A
RESPONDER: John Spanos
DEPARTMENT: Consultant
TELEPHONE: (s09) 495-2293
REQUEST:
In the 2016 Gannett Fleming Depreciation Study the estimation of the service lives and the net
salvage values are made on the basis of various assumptions, namely: informed judgement, review
of company practices and outlook, and consideration of current industry practices. Please
specifically identiff all assumptions used for each account, group or functional group of accounts.
RESPONSE:
The determination of life and net salvage parameters are explained in Part III and Part IV of the
Depreciation Study. Additionally, a listing of each account is provided where the statistical
analyses was a strong indicator which includes support from the current estimate for Avista and an
understanding of other utilities in the industry.
Some specific information obtained during the conduct of this depreciation study were as follows
Electric Accounts 356 and 365 - The life expectancy of overhead conductor will have similar life
cycles as the related poles. In the future, more conductor will be retired due to load requirements,
which will increase retirements of conductor older than 50 years.
Electric Account 371 - Electric Vehicle Charging Stations are a relatively new asset class. The
industry average service lives have ranged from 5 to l0 years, with amajority using a l0-year
average life. Avista has two types of EV stations, however, there are no expected differences in
life expectancy.
Electric Accounts 366 and 367 - The replacement programs for underground conduit and
conductor have slowed in recent years, however, there is an expectation that high retirements will
occur in the next l0 years. The levels will not be as high as those experienced prior to the 2010
study. Also, given the manner at which underground conduit and conductor are replaced, the cost
of removal and salvage are assigned as a lump sum. Therefore, the net salvage percents for the two
accounts were determined by combined analyses.
Gas Account3T6 - The level of retirements and associated cost of removal over the last three years
is consistent with future expectations. The 55-year average service life is consistent with what
Avista personnel would expect for gas distribution mains across the jurisdictions. Also, the level
of cost of removal due to the size of projects will be consistent to what we have seen in recent
years, which is less negative than the current estimate of negative 30 percent.
Transportation Equipment - Based on current practices of maintenance and miles and year
thresholds, the life for all transportation equipment should be slightly longer than the current
Page I of2
estimates. This study determines life characteristics by type of vehicle so a more accurate life
parameter is established.
Page2 of2
AVISTA CORPORATION
RESPONSE TO REQUEST FOR INFORMATION
JURISDICTION:
CASE NO:
REQUESTER:
TYPE:
REQUEST NO.:
IDAHO
AVU-E- 1 8 -o3/AVU-G- 1 8-02
Staff
Production Request
Staff-16
DATE PREPARED: 07 ll2l20l8WITNESS: N/A
RESPONDER: John Spanos
DEPARTMENT: Consultant
TELEPHONE: [phone]
REQUEST:
Please provide detailed factors used in the determination of the life of all the Hydraulic Production
Plant facility associated with the following accounts: 331 ,332,333,334.
RESPONSE:
The life component of all Hydraulic Production Plant facilities were determined based on
historical data and informed judgment. For production facilities there are two life components.
First is the interim survivor curye, which is based on historical data and discussions with
management regarding past and future retirements, as well as estimates of others, and the current
estimate for Avista for each account. See the discussion in Part III and pages VII-17 through
VII-63 of the Depreciation Study. Second, the life span component is the same periods as
established in the last study. These dates were supplied by Avista to reflect the FERC Order and
plans for relicensing for each facility.
Page I ofl
AVISTA CORPORATION
RESPONSE TO REQUEST FOR INFORMATION
JURISDICTION:
CASE NO:
REQUESTER:
TYPE:
REQUEST NO.:
IDAHO
AVU-E- I 8-03iAVU-G- 1 8-02
Staff
Production Request
Staff-17
DATE PREPARED: 07 ll2l20l8WITNESS: N/A
RESPONDER: Monica Bannon
DEPARTMENT: Fixed Assets Acctg.
TELEPHONE: (s09) 495-2057
REQUEST:
Please provide a list showing all plant details included in the following accounts:
a) Electric: 316 Miscellaneous Power Plant Equipment,
b) 335 Miscellaneous Power Plant Equipment,
c) 392.50 Transportation Equipment - Other,
d) 396.50 Power Operated Equipment - Other
e) Gas: 357.00 Other Equipment,
RESPONSE:
Please see Staff PR_I7 Attachment A for details for letters a. - e. above. ln2012, the Company
went live with a new fixed asset accounting system. All plant assets were loaded in to this system
by FERC account and at that time the Company did not unitize those assets down to the retirement
unit level. Today new assets are being unitized as they are added. The Company is currently
working through the unitization process. The Company will supplement this data request with the
detail of the types of retirement units that could be included in these FERC accounts once it
becomes available.
E D-3 16000 STEAM PROD UCTION PLANT-M ISCELLAN EO US EQU I PM E NT
ent - Steam3{6 Misc Power Plant E ui
1983
1988
L987
1984
1985
1986
1992
1993
1989
1990
1991
t994
1995
1996
L997
1998
1999
2000
200L
2003
2004
2005
2006
2007
2008
2009
201.0
Non-Unitized
20Lt
20L2
2072
2013
2014
20L5
20L6
2077
2018
Staff PR 17 Attachment A.xlsx 316-Misc Pwr Plant Equip Page 1 of9
Compressor - permanently installed
- com
Electrofisher - -each comple-te
Station / Encoder
Station / Encoder Total
20t3
2015
2017
2015
2075
2013
2016
20L7
Station Extension Unit
Bank (set)
20L3
20L3
2016
2077
Charger 20t3
2016
2017
2014
Boat Total
Boat Electrofi-sher-Rectifi er - each
Motor -
2015
2014
Trailer
nEN ard Maintenance Equipment
20t4
20L4
201s
20L7
335 Misc Power Plant Equipment - Hydro
Boards (set)2013
2016
2017
Cabinet 2013
20t6
20L7
HYDRO PRODUCTION PLANT-MISC EQUIPMENT 1906
L907
1908
1911
L9t2
1913
1915
1916
L9t7
1918
1919
L920
L922
t923
t924
7925
1926
L927
1.928
1930
t932
L934
1936
L937
1938
1939
1.940
Staff_PR_1.7 Attachment A.xlsx 335-Misc Pwr Plant Page 2 of 9
1943
1945
L947
1948
L949
1950
1951
1952
1953
1954
1955
1956
L957
1958
1959
1960
1951
1963
1964
1965
1966
t967
1968
1969
L97l
t972
1973
L975
t977
1980
1981
L982
1983
1984
1985
r986
t987
1988
1989
1990
1991
7992
r993
1994
1995
1996
Staff_PR_17 Attachment A.xlsx 335-Misc Pwr Plant Page 3 of 9
t997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2@7
2008
2009
2011
20t2
HYDRO PRODUCTION PLANT.MISCELLANEOUS EQUIPMENT-FISH AND WILDLIFE CONSERVATION
ED-335200 HYDRO PRODUCTION PIANT.MISC EQUIPMENT.RECREATION
1999
2000
2003
2004
2006
2008
2010
2003
2006
Fish Trans.po.rt Tank - each greaterthgn loQ Ca"! .". .
Hoist Frame - portable, intended for use around plant; e.g portable hoist frame fo1 f ifing head gates for mainenance
Hoist Llft Mechanism, manual or moter operated. lncludes chain falls. Includel moloJ of engine if leg! th?n 10 hp:
Misc. Portable nt - each sreale-l lhqn $1,qp! !-Sge Acct lnstr for examples.)
Motor - 10 HP or la
. ,291!
2015
2074
2015
Non-Unitized 20t2
20t4
20t6
20t7
2018
Permanent Weir TrapJib Crane - each complete
Permanent Weir Trap-Trap Box - each complete
20L3
Permanent Weir
Phone Line Connection Unit
r Panels -set for an installation
.. ?013
20t3
t2OL3
20t6
Pi - 3 inch and larger (FT)2013
Piping - smaller than 3 inch (FT)
P set for each installation
PIT Tag Array-En-closure - ea_ch
PIT Tag Array-M.a.ster-Controller - gach
- each
Receiver Tank - when
r Panel (complete)
'20L7
20t3
20L5
"20t720L7
20L7
2013
2016
r Amplifiers (set) - usually 5 2013
20L6
2017
peakers (set) - usually 5 in a set on one pole 2073
20t6
2077
Wildlife Proof Conta 20t7
Staff_PR_17 Attachment A,xlsx 335-Misc Pwr Plant Page 4 of 9
20L5
20L3
Bed - Flat or Dum
Box - Line Truck
Box - Service/Uti
CD-392056 G E N E RAL PLANT-TRANSPO RTATION EQU I PM ENT-CLASS 56
20L2
20L3
20L4
20L5
20L6
2073
2074
20L5
2076
20L7
392.50 Transportation Equipment - Other
2077
20t3
20L6
2000
2057 G E N E RAL PLANT-TRANSPO RTATION EQU I PM ENT-CLASS 57
Crane - includes and i lwinches
D ion and cranes
ED-392056 G E N E RAL PLANT-TRANSPO RTATION EQU I PM E NT.CLASS 56
2000
2006
2008
2009
2010
2012
2006
2013
20L6
2073
2002
2003
2004
2006
2007
2008
2009
2010
20LL
20L2
200LE D-392057 G E N ERAL PLANT.TRANSPORTATION EQU I PM E NT-CLASS 57
Fuel Conversion Kit - truck or sse vehicles
G D-392055 G E N ERAL PLANT-TRANSPO RTATIO N EQU I PM ENT.CLASS 55
:,2ooq
2007
2008
2010
20L2
20L5
1997
Staff_PR_17 Attachment A.xlsx 392.50-Tra nsportation Equip Page 5 of 9
Retirement Unit Long Description
izolz
G D-392056 G E N ERAL PLANT-TRANSPORTATIO N EQU I PM E NT-CLASS 56
G D-392057 G EN E RAL PLANT-TRANSPORTATION EQU I PM E NT-CLASS 57
G D-392058 G E N E RAL PLANT.TRANSPORTATIO N EQU I PM E NT-CLASS 58
General
Non-Unitized
2004
2005
2006
2008
2009
2010
20Lt
20L2
2004
2005
2006
2008
2004
2008
20L6
20L7
2018
20L3
20L5
20L7
20L3
Snow Plow - accessory to vehicle
Truck -D lbs GVW
2014
2015
2016
2017
Truck - Medium ', between 10,000 and 22,000 lbs GVW 2072
2073
20t4
20L5
2016
2017
20L2
20L6
i
Welder
Staff_PR_17 Attachment A.xlsx 392.50-Tra nsportation Eq uip Page 6 of 9
369.50 Power O rated E ui ment
ED-396055 G ENERAL PLANT-POWER OPERATED EQUI PM ENT.CLASS 55
ED-396056 G ENERAL PLANT-POWER OPERATED EQUI PM ENT-CLASS 56
ED.396057 G E N ERAL PLANT.POWER OPE RATED EQU I PM E NT-CLASS 57
ED-396058 GENERAL PLANT-POWER OPER EQUIP CLASS 58
G D-396058 G E N E RAL P LANT-POWE R OPE RE RATED EQU I PM E NT-CLASS 58
Staff_PR_17 Attachment A.xlsx 369.50-Pwr Op Equip Page 7 of 9
1983
198s
1986
1987
L994
1999
2007
1993
1993
L997
1989
2004
2008
20L2
1986
L987
1989
1991
2002
2005
2010
Staff_PR_17 Attachment A.xlsx 369.50-Pwr Op Equip Page 8 of 9
357 Gas Unde nd
L970
L972
L973
L974
L975
L976
L977
L978
L979
1980
1981
1983
1984
1985
1986
L987
1988
1990
1991
1993
7994
1995
1996
1997
1998
1999
200s
2006
2007
2008
2009
2010
207L
20L2
G D-357OOO GAS UN DERG ROUND STORAG E-OTHER EQU I PM ENT
Non-Unitized 20L2
2013
20L4
20L5
2016
2077
2018
Staff_PR_17 Attachment A.xlsx 357-Gas Other Equip Page 9 of 9
Storage - Other Equip
AYISTA CORPORATION
RESPONSE TO REQUEST FOR INFORMATION
JURISDICTION:
CASE NO:
REQUESTER:
TYPE:
REQUEST NO.:
IDAHO
AVU-E- I 8-03/AVU-G- 1 8-02
Staff
Production Request
Staff-18
DATE PREPARED: 0711212018WITNESS: N/A
RESPONDER: Thomas C. Dempsey
DEPARTMENT: Energy Resources
TELEPHONE: (s09) 495-4960
REQUEST:
Please provide details for the expenses incurred in complying with the Electric Utilities Finale
Rule of the Environmental Protection Agency's Disposal of Coal Combustion Residuals.
RESPONSE:
Please note that the Company's response to StaflPR_0I8C contains TRADE SECRET,
PROPRIETARY or CONFIDENTIAL information and are separately filed under IDAPA
31.01.01, Rule 067 and233, and Section 9-340D,Idaho Code.
AYISTA CORPORATION
RESPONSE TO REQUEST FOR INX'ORMATION
JURISDICTION:
CASE NO:
REQUESTER:
TYPE:
REQUEST NO.:
IDAHO
AVU-E- 1 8-03/AVU-G- l 8-02
Staff
Production Request
Staff-19
DATE PREPARED: 07 ll2l20l8WITNESS: N/A
RESPONDER: John Spanos
DEPARTMENT: Consultant
TELEPHONE: (s09) 495-2293
REQUEST:
Please provide the detailed support and reasons for the changes in the salvage values for the
following Gas accounts:376 Mains and 381 Meters.
RESPONSE:
The current net salvage percent for Account 376 Mains, is negative30o/o and for Account 381,
Meters, is negative 2Yo. As discussed in Part IV of the Depreciation Study, net salvage
percentages are determined by many factors, such as historical data and informed judgment. In all
accounts, the informed judgment includes an understanding of the assets, discussions with
management, estimate of others and the current estimate for Avista.
For Account 376 Mains, the current estimate is negative 30 percent, however, there is a trend to
less negative since the last study. The most recent three years, 2014-2016, which is the most
indicative of the future based on discussions with management, have averaged negative 26
percent. Since 2002, the net salvage percentage has averaged around 25 percent where the higher
amount of retirements have occurred. The negative 25 percent is most appropriate for future
expectations given all the available information.
For Account 381 Meters, the current estimate is negative 2 percent, however, in recent years the
cost of removal recorded has dropped. It is expected that cost of removal will exceed gross salvage
in the future, but will not be as high as that recorded prior to 2009. The negative 1 percent reflects
this plan.
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