20230113AVU to Staff 1-3.pdf

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AVISTA CORPORATION
RESPONSE TO REQUEST FOR INFORMATION

JURISDICTION: IDAHO DATE PREPARED: 01/13/2023
CASE NO: AVU-E-22-16 / G-22-08 WITNESS: N/A
REQUESTER: IPUC RESPONDER: John Wilcox
TYPE: Production Request DEPARTMENT: Accounting
REQUEST NO.: Staff-001 TELEPHONE: [phone]

REQUEST:

Please provide all supporting documentation illustrating the calculations of the approximately $11
million in pension-related losses for 2022 that would otherwise be recognized on the Company's
income statement absent the requested accounting order.

RESPONSE:

It is important to note the final calculation of the settlement loss will not be completed until the end
of January. The calculation is dependent upon a full remeasurement of the pension plan as of
December 31, 2022 by Avista’s actuaries. Avista will supplement this response once the final
calculation is received later this month. Among other things, the actuarial calculation will impact
the pension benefit obligation and the unrecognized actuarial gains and losses.

Under ASC 715-30-35-82, any gain or loss from a settlement must be recognized in earnings 'if the
cost of all settlements during a year is greater than the sum of the service cost and interest cost
components of net periodic pension cost for the pension plan for the year." Avista triggered
settlement accounting as lump sum distributions (settlements) of $60.4 million exceeded the 2022
service cost ($23.5 million) and interest costs ($25.3 million) totaling $48.8 million. The service
and interest costs are computed by Avista’s actuaries based on numerous assumptions and
computed as of the beginning of the year. See Avista’s response to Staff-PR-003 attachment
“Staff_PR_003C Confidential Attachment - Avista 2022 preliminary valuation results”, page 29
for the service and interest cost values.

Service cost represents the cost of benefits attributable to service performed by
employees during the period. Service cost is the actuarial present value of projected
benefits attibuted to the current period based on the pension benefit formula, including
the effect of a substantive commitment to amend the plan.

Interest cost represents the portion of net benefit cost attributable to the cost of
"carrying" the pension obligation from one period to the next. The projected benefit
obligation is measured at present value, using a discount rate representing the time
value of money. Thus, the interest cost component of pension cost is the increase in the
projected benefit obligation due to the passage of time.

The $11 million in pension-related losses for 2022 was estimated by Avista’s actuaries in
December 2022. This was based on estimated unrecognized actuarial gains and losses of $110
million and the projected benefit obligation of $600 million. ASC 715 requires immediate
recognition in earnings of a pro rata portion of the unrecognized actuarial gains or losses when a
RECEIVED
Friday, January 13, 2023 12:21:57 PM
IDAHO PUBLIC
UTILITIES COMMISSION
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settlement event occurs. This pro rata portion is based on the settlement amount relative to the
benefit obligation. For the estimation this was based on settlements of $60 million (or 10%) of the
estimated benefit obligation of $600 million. The amount recognized when this occurs is not a new
cost; it is merely an acceleration of the recognition of the cost in earnings attributable to the
pension settlement. Avista would recognize 10% of the $110 million of unrecognized net periodic
benefit costs attributable to the $60.4 million of pension settlements in 2022.
AVISTA CORPORATION
RESPONSE TO REQUEST FOR INFORMATION

JURISDICTION: IDAHO DATE PREPARED: 01/13/2023
CASE NO: AVU-E-22-16 / G-22-08 WITNESS: N/A
REQUESTER: IPUC RESPONDER: Tia Benjamin
TYPE: Production Request DEPARTMENT: Regulatory Affairs
REQUEST NO.: Staff-002 TELEPHONE: [phone]

REQUEST:
Please explain how pension costs are allocated among the Company's fuel sources and
jurisdictions. Please provide the allocation method and the inputs that derive the allocation
percentage.

RESPONSE:

The Company allocates pension costs in line with labor costs. When allocating pension costs, the
Company first determines the O&M portion of the cost by following the Benefits loading
Expenditure Type, for 2022 determined to be 58.55%. The Company then uses Results of
Operation allocation factors, Note 4 and Note 7 to further allocate to each jurisdiction and service.

For illustrative purposes, if the estimated $11 million pension loss were assumed, the following
calculation would take place to determine Idaho’s share.

Example Pension Loss Amount

11,000,000
O&M Percent 58.55%

6,440,500
Allocate to Idaho Electric 1,525,247
0.70695 Note 7
0.33499 Note 4
Allocated to Idaho Gas 359,998
0.20228 Note 7
0.27633 Note 4
Please see Staff_PR_002 Attachment A for a full system allocation breakdown and O&M
determination transactional data.
AVISTA CORPORATION
RESPONSE TO REQUEST FOR INFORMATION

JURISDICTION: IDAHO DATE PREPARED: 01/12/2023
CASE NO: AVU-E-22-16 / G-22-08 WITNESS: N/A
REQUESTER: IPUC RESPONDER: Jason Lang
TYPE: Production Request DEPARTMENT: Finance
REQUEST NO.: Staff-003 TELEPHONE: [phone]

REQUEST:

Please provide copies of any and all communications between the Company and its actuaries
during the last 24 months including, but not limited to, actuarial reports, letters and email
communications, and discussions of assumption changes.

RESPONSE:

Please see Avista's response Staff_PR_003C, which contains TRADE SECRET, PROPRIETARY
or CONFIDENTIAL information and exempt from public view and is separately filed under
IDAPA 31.01.01, Rule 067 and 233, and Section 9-340D, Idaho Code.

AVISTA CORPORATION
RESPONSE TO REQUEST FOR INFORMATION

JURISDICTION: IDAHO DATE PREPARED: 01/12/2023
CASE NO: AVU-E-22-16 / G-22-08 WITNESS: N/A
REQUESTER: IPUC RESPONDER: Jason Lang
TYPE: Production Request DEPARTMENT: Finance
REQUEST NO.: Staff-003C TELEPHONE: [phone]

REQUEST:

Please provide copies of any and all communications between the Company and its actuaries
during the last 24 months including, but not limited to, actuarial reports, letters and email
communications, and discussions of assumption changes.

RESPONSE:

The attachments provided with the response to Staff_PR_003C contain TRADE SECRET,
PROPRIETARY or CONFIDENTIAL information and exempt from public view and is
separately filed under IDAPA 31.01.01, Rule 067 and 233, and Section 9-340D, Idaho Code.