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DECISION MEMORANDUM TO: COMMISSIONER KJELLANDER COMMISSIONER SMITH COMMISSIONER HANSEN JEAN JEWELL RANDY LOBB LISA NORDSTROM DON HOWELL BEVERLY BARKER RON LAW TONYA CLARK GENE FADNESS WORKING FILE FROM: TERRI CARLOCK DATE: MAY 6, 2002 SUBJECT: AVISTA AMENDMENT REQUEST; CASE NO. WWP-U-97-1. RECOMMEND: APPROVAL WITH REPORTING REQUIREMENTS Avista Corporation (Avista) requests authority to modify Order No. 27153 in Case No. WWP-U-97-1 to specifically include interest rate swap language. Avista proposes the following amendment to the Order: IT IS FURTHER ORDERED that from time to time, the Applicant may be able to reduce its borrowing costs by issuing fixed- or floating-rate debt and entering into one or more series of interest rate swap ("swap") contracts to convert fixed interest payments into favorable floating-rate payments or vice versa, or to convert floating-rate payments tied to one index (e.g., LIBOR) into floating-rate payments tied to another index (e.g., the Federal Reserve Composite Rate for commercial paper). Utilizing Swaps, when appropriate, will result in savings for ratepayers. STAFF DISCUSSION AND RECOMMENDATION The ability to explore and enter into swap provisions can be an important financing tool. Staff recommends Avista be allowed to enter into cost-effective swaps. To determine if a swap is cost-effective, Staff recommends that Avista provide within seven days of entering a swap, and retain through the term of the swap, documentation showing the all-in cost for the swap compared to the all-in cost for conventional financing mechanisms. COMMISSION DECISION Should the Amendment be approved with Staff's recommended reporting requirements? _________________________ Terri Carlock TC:udmemos/wwpu971_05-6-02.TC.doc