20080707_2290.pdf

DECISION MEMORANDUM
TO:COMMISSIONER REDFORD
CO MMISSI 0 NER SMITH
CO MMISSI 0 NER KEMPTON
COMMISSION SECRETARY
COMMISSION STAFF
LEGAL
FROM:NEIL PRICE
DEPUTY ATTORNEY GENERAL
DATE:JULY 2, 2008
SUBJECT:A VISTA'APPLICA TION FOR AUTHORIZA TION TO DEFER
COLSTRIP LAWSUIT SETTLEMENT PAYMENT; CASE NO. A VU-08-
On May 22, 2008 , Avista Corporation ("Avista" or "Company ) filed an Application
with the Idaho Public Utilities Commission ("Commission ) seeking an accounting order
authorizing the Company to defer payment of its portion of a lawsuit settlement payment
originating from litigation involving the Colstrip Generation Project in Colstrip, Montana.
Pursuant to Idaho Code 9 61-524, the Commission is empowered to establish a system of
accounts to be kept by public utilities subject to its jurisdiction.
THE APPLICATION
In May 2003 , various parties (all of which are residents or businesses of Colstrip,
Montana) filed a consolidated complaint against the owners of the Colstrip Generating Project
(Colstrip) in Montana District Court. Avista states that it owns a 15 percent interest in Units 3 &
4 of the Colstrip Generating Project. The plaintiffs alleged damages to buildings as a result of
rising groundwater, as well as damages from contaminated waters leaking from the holding
ponds of Colstrip. The plaintiffs sought compensatory and punitive damages for abatement
unjust enrichment, trespass, property diminution, and emotional distress.
A vista estimates that its share of the lawsuit settlement payment, absent any recovery
from applicable insurance carriers, is $2 084 3. Avista claims that it could potentially recover
approximately $734 035 under the relevant insurance policies and thereby reduce its out of
pocket expense to approximately $1 350 408. The defendant, Colstrip Generating Project, is
DECISION MEMORANDUM-
currently seeking indemnification from its insurance carriers. A vista does not hazard a guess as
to the possible outcome.
A vista asserts that the settlement terms represent a favorable resolution of this matter
because it (1) offers a final resolution of more than five years of disputed litigation; (2)
represents a substantial reduction of Avista s potential exposure for "excessive compensatory
and punitive damages ; (3) facilitates Avista g negotiation with the Montana Department of
Environmental Quality concerning appropriate remediation efforts at the Colstrip facility; and (4)
assists the defendants in limiting any future claims by providing them with "rights of first refusal
with respect to plaintiffs' properties." Application at
A vista requests an "order allowing for the deferral of the settlement payment.Id.
4. The Company states that it will more fully "address the prudency and recovery of the
settlement payment, and propose a method of recovery of the settlement payment(,)" minus "any
reimbursement from insurance carriers " in its next general rate case, or any other proceeding the
Commission deems appropriate. Id.
The Company specifically requests the "authority to defer the Colstrip settlement
payment in Account 186 - Miscellaneous Deferred Debits.Id. The Company states that the
settlement payment will be allocated to the Washington and Idaho jurisdictions based on the
current Production/Transmission allocation of 64.59% to Washington and 35.41 % to Idaho, and
placed in separate Washington and Idaho 186-=accounts.Id. The Company would apply the
typical customer deposit rate to Idaho s share of the deferrals. Id.
ST AFF RECOMMENDATION
Staff recommends that the Company s Application be processed through Modified
Procedure with a 21-day comment period. Staff believes that this should allow sufficient time
for interested parties to review the Company s Application and file their comments with the
Commission. IDAPA 31.01.01.201-.204.
DECISION MEMORANDUM- 2
COMMISSION DECISION
Does the Commission wish to process Avista s Application through Modified
Procedure pursuant to Commission Rules of Procedure 201 through 204? Does the Commission
approve of a comment period of 21 days?
Neil Price
Deputy Attorney General
M:A VU-O8-03 - np
DECISION MEMORANDUM- 3