Notice of Hearing.pdf

Office of the Secretary
Service Date
July 7, 2000
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION

IN THE MATTER OF THE APPLICATION OF
AVISTA CORPORATION DBA AVISTA
UTILITIES—WASHINGTON WATER POWER
DIVISION FOR APPROVAL OF REVISED
ELECTRIC LINE EXTENSION SCHEDULE 51.
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CASE NO. AVU-E-00-1

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DEADLINE

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NOTICE OF HEARING

ORDER NO. 28429

On February 28, 2000, Avista Corporation dba Avista Utilities—Washington Water
Power Division (Avista) filed an Application with the Idaho Public Utilities Commission
(Commission) requesting approval of proposed revisions to its electric Schedule 51 Line
Extension, Conversion and Relocation tariff. The Company’s filing is in response to
Commission Order No. 28097 issued July 29, 1999, in Case No. WWP-E-98-11.
Avista states that it provided an informational letter in late December to
approximately twenty residential developers that the Company works with which outlined the
proposed changes to the Company’s line extension tariff.
On March 23, 2000, the Commission issued a Notice of Application and Modified
Procedure in Case No. AVU-E-00-01. The deadline for filing written comments was May 5,
2000. The Commission Staff was the only party to file comments. The Company filed a reply
on May 30. Also filed by way of reply was a letter from Shorewood Homes Inc.
Average Unit Costs
As reflected in the Company’s Application, the present Schedule 51 tariff
incorporates the principle of average costing for the installation of facilities commonly used in
extending electric service. The tariff sets forth “Basic Costs”, which are based on the average
material and labor costs for the installation of these facilities, such as transformers and conduit,

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which are used consistently in the installation of electric line extensions. The Basic Costs have a
fixed and variable component, with a variable component stated on a cost-per-foot basis. The
present tariff also provides a list “Exceptional Costs”, which are items not included in the Basic
Costs and that can materially increase the cost of a line extension project, such as trenching in
rock-soil conditions. Under the present tariff, Exceptional Costs must be paid by the customer or
developer.
The Company is not proposing to change the conceptual structure of the Schedule 51
tariff. The present tariff, it states, is relatively easy to apply, is fair and understandable to
customers, and has resulted in relatively few customer complaints. The Basic Costs set forth in
the tariff, however, have not been updated since 1990. As part of the proposed tariff, the
Company has updated all Basic Costs based on 1998 materials and labor costs.
Staff Comments
Staff supports continued use of average unit costs for residential jobs provided the
Company maintain a fairly extensive list of “exceptional costs” and be rigorous in assessing
them. Staff recommends individual cost estimates for non-residential jobs.
An average unit cost approach, Staff contends, has the advantage of simplicity and
predictability. An individual cost estimate approach (used by Idaho Power Company and
PacifiCorp for all jobs) has the disadvantages of being difficult to administer; it precludes up
front predictability; and it is often difficult to assess whether the cost estimate reflects a fair
price.
Staff finds the average unit costs proposed by the Company to be acceptable.
Staff notes the importance of the Company abiding by the requirement to annually
file updated average unit costs (by February 1) for Commission approval—over time, material
prices change, labor rates increase and technology changes.
Company Reply
The Company states that it compiles updated cost information to be used for line
extension purposes during the first quarter of each year to reflect information from the prior
calendar year. The Company recommends an April 1 file date for updated average cost
information.

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Residential Developments
For residential developments the total Basic Cost is proposed to increase from
$1,120 to $1,400 per lot. Of the total $280 increase, $130 represents an increase in Primary,
Secondary and Transformer costs and $150 represents an increase in service line costs. As the
developer is responsible for Primary, Secondary and Transformer costs, a cash deposit or credit
instrument is required from developers for these costs until such time as the residents begin
taking service. As Primary, Secondary and Transformer costs increase by $130 per lot under the
proposed tariff, the developer deposit or credit instrument is also being increased $130 per lot,
from $910 to $1,040. However, if the developer provides the ditching within the development,
the deposit or credit instrument required will be only $760 per lot, reflecting Avista’s average
ditching cost savings of $280 per lot ($1,040 - $280 = $760). Additionally, as the Company is
proposing a revised residential allowance of $1,300, as discussed below, the developer would
receive a refund of $940 if a cash deposit was made ($1,300 allowance less $360 service cost).
Staff Comments
Staff agrees with the Company’s proposal to increase the total cost per lot from $1120
to $1400 (service cost plus basic cost). Staff also agrees with the Company’s proposed change in
the trenching credit/deposit.
Staff notes that its investigation revealed relatively few instances where there were
charges assessed for work outside the development. Staff suggests that the Company’s practice
in this area be closely monitored.
Residential Allowance
As part of its review of its Schedule 51 tariff, the Company states that it examined
the present level of the line extension allowances. An allowance is the amount of credit the
customer receives against the estimated cost of the line extension based on future energy
consumption and resulting margin to the Company. If the estimated line extension cost exceeds
the allowance, the customer is required to pay the excess cost in the form of a cash contribution
(Contribution In Aid of Construction). The present level of the residential single family
allowance is $1,000. The Company is proposing to increase that level to $1,300. The increase in
the allowance of $300 approximates the increase in the Basic Costs of $280 per lot for residential

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developments, therefore the majority of new residential customers will be unaffected by the
proposed changes.
The Company’s present allowance level of $1,000 was based on the average energy
consumption of all residential electric customers, a net margin that recovers the incremental cost
of the line extension, and a first year rate of return equal to the Commission-authorized level in
1990. The derivation of the present allowance also assumes that all of the Company’s costs are
variable and will increase proportionately with the addition of a new customer, i.e., a fully
distributed cost of service approach.
The Company states that it no longer believes that a fully distributed cost of service
approach is reasonable. It does not believe that all of the Company’s costs will increase
proportionately with the addition of new customers. Rather than estimating the variability of
each cost account, the Company employed an overall reasonableness test regarding the
“contribution to system costs” resulting from the proposed allowance of $1,300. The Company
performed a revenue requirement analysis assuming a line extension investment of $1,300 (equal
to the proposed allowance), a required (levelized) rate of return based on the level authorized by
the Commission in Case No. WWP-E-98-11, and an estimated annual gross margin received
from the customer of $261. The gross margin estimate is based on the estimated electric revenue
from a typical customer using gas heat and water-heat less the customers average production cost
from the Company’s cost-of-service study filed in its general rate case. Based on these
assumptions, a new customer would provide a contribution to approximately 47% of system
costs. The result based on the proposed allowance level of $1,300 is that a new customer will
contribute approximately 1.3¢ per kilowatt hour to system transmission and distribution costs,
compared to an embedded average of approximately 2.7¢ per kilowatt hour.

Staff Comments
Staff believes that it is necessary to shift to new customers those costs that exceed the
investment supportable by existing rates. The Company proposes to increase the existing
allowance of $1,000 to $1,300. Staff contends that increasing allowances will cause upper
pressure on rates and require subsidization of new customers by existing customers.

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Staff contends that the Company’s investment in distribution/terminal facility
(transformer, meter & service drop) for each new customer (allowance) should be equal to the
embedded costs of the same facilities used to calculate rates. Costs in excess of embedded costs,
Staff contends, should be paid through one-time capital contributions by the new customers.
Based on assumptions and calculations set forth in Staff comments and attachments, Staff
recommends a residential customer allowance of $875 (as corrected).
Staff notes that the Company’s method for determining allowances uses a revenue
requirement model. Avista, Staff states, assumes that not all costs increase incrementally with
the addition of a single new customer. Staff disagrees. Staff believes that all costs increase
incrementally with the addition of a single new customer.
Company Reply
The Company contends that Staff’s embedded investment approach for determining
residential allowance is unreasonable. Historical (embedded) distribution costs per customer, the
Company maintains, have no direct relationship to present line extension costs. Additionally, the
Company contends that Staff’s approach fails to address incremental margin, or contribution to
costs, produced by new customers in their allowance calculation.
The Company’s proposed allowance ($1300) is based on an analysis, it states, which
estimates the incremental margin (revenue less energy cost) provided by a new customer,
provides for the recovery of all incremental line extension costs, and provides for a significant
contribution toward non-line extension (“system”) costs.
The Company disagrees with Staff’s assertion that all Company system (non-line
extension) costs (transmission, distribution, O&M, customer service, A&G expense) increase
proportionately with the addition of new customers. It is impossible, the Company contends, to
measure or predict what level of future system cost increases are due to the addition of new
customers. Much of the future change in system costs, the Company maintains, will occur
whether or not new customers are added.
The Company notes that the $1300 allowance proposed by Avista is still considerably
less than the present allowance authorized for Idaho Power ($1926) or Utah Power ($1432).

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The Company further notes that the Commission in Order No. 26780 approving
changes in Idaho Power’s line extension tariff stated
Recovery of those costs in excess of embedded costs must (also) be
provided for and the impact on rates of existing customers is an
important part of our consideration. We (also) recognize that requiring
the payment of all costs above embedded investment from new
customers could have severe economic effects.

If Staff’s proposed allowance is approved, the Company contends that it may result in significant
economic consequence on Avista in its Idaho service territory—in those areas where Avista
competes with Kootenai Electric Cooperative. Kootenai, Avista contends, is able to offer more
“flexible” line extension terms than Avista and does not require a cash deposit or credit
instrument to insure build-out of the development. Any difference in the level of service
provided by the Company to developers, the Company contends, will not outweigh the
substantial amount of refundable cash payment required under the Staff’s proposed residential
allowance.

Other Proposed Schedule 51 Changes

Commercial/Industrial Extensions
Presently, the Company performs a customer-specific analysis to determine the cost
and allowance associated with extending service to a commercial or industrial customer who
uses over 72,000 kilowatt hours (kWh) per year. All commercial customers who use less than
72,000 kWh hours per year presently receive a fixed allowance of $1,300. The present
allowance of $1,300 was based on the average energy usage for all Commercial Schedule 11
customers and the 72,000 kWh hour level was based on the maximum annual usage for a
customer taking service under Schedule 11. Based on an analysis similar to that performed for
residential customers, an appropriate allowance level for a commercial customer using 72,000
kWh hours would be several times the present level of $1,300. Therefore, the Company is
proposing that a customer specific analysis be performed on all commercial and industrial
customers, using their estimated energy usage and the appropriate allowance per kilowatt hour

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depending on the rate schedule, in order to determine the allowance. The allowances for all rate
schedules other than Residential Schedules 1 and 12 are stated on a per kilowatt basis and are
being increased based on the present rates of those schedules and a financial analysis similar to
that per Residential Schedule 1.
The line extension costs for commercial and industrial customers will be analyzed
differently depending on if they require a single-phase or three-phase service. Basic Costs set
forth in the tariff are based on single-phase service. For customers requiring three-phase service,
the line extension cost will be based on the total estimated costs derived from internally
published average costs.
Staff Comments
Staff supports the Company’s proposal to compute an allowance based on a
customer-specific analysis for all commercial and industrial customers using their estimated
annual energy usage and the appropriate allowance per kilowatt hour for each rate schedule.
Staff contends however that the allowances per kilowatt proposed by Avista are too high. Staff’s
proposed allowances are based on the amount of embedded distribution investment per customer.
For Schedules 11-12 (general service) customers, Staff recommends an allowance of
$0.080/kWh of estimated annual load. For Schedules 21-22 (large general service) and 31
(pumping), because the computed allowances are very close, Staff recommends that the
allowance for both classes be set at $0.060/kWh of estimated annual load. Staff recommends
that the proposed allowances for Schedules 11, 21 and 31 be explicitly shown in the line
extension tariff.
Staff believes that the Basic Costs set forth in the tariff should include costs for both
single-phase and three-phase service. Staff does not believe that it is acceptable to base three-
phase extension costs on estimates derived from “internally published” average costs.
For industrial customers, Schedule 25, Staff recommends that allowances be
determined on a case-by-case basis.
Company Reply
The difference in proposed allowances for new commercial and industrial customers
(Schedules 11, 21, 31), the Company states, reflects the same difference in approach used by the

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Company and Staff to derive the residential allowance. The Company’s proposed allowance, it
states, provides for the recovery of all incremental energy and line extension costs and provides a
substantial contribution (50%) toward future increases and system costs.
The Company has no problem with including the allowances for Schedule 11, 21 and
31 in the line extension tariff.
The Company states that there are not standard assemblies of distribution facilities for
a three-phase line extension as there are for a single-phase extension, hence there are no three-
phase Basic Costs similar to those used for single-phase extensions. Including three-phase costs
in the tariff, the Company contends, would require the listing of over 300 items. This amount of
detail would require annual update. As less than 10% of new line extensions are for three-phase
service, the Company contends that it does not make sense to add this to the tariff.
Exceptional Costs/Customer-Requested Costs
Under the present tariff, a residential or small commercial customer is required to
pay “Exceptional Costs”, which are the costs associated with unusual materials or labor.
Exceptional Costs presently include the cost associated with items which may be necessary to
install the extension, as well as items which may be requested by the customer but are not
necessary to install the extension. Under the proposed tariff the Company has created a new cost
category called “Customer-Requested Costs”, which is the “cost of unusual labor and/or
materials requested by the customer but which are not necessary to construct the line extension
based on the company’s minimum design, construction and operating practices.” The customer
will be required to pay for all Customer-Requested Costs.
Exceptional Costs still exist under the proposed tariff, however, they are limited to
those costs which are necessary to construct the line extension but which are not reflected in the
Basic Costs set forth under the tariff. This proposed change, the Company states, will not have a
significant effect on the amount of customer contributions required from single-party residential
customers and developers. For residential developments, the Basic Cost ($1,400) exceeds the
allowance ($1,300), therefore, any Exceptional Costs will be paid by the developer, as well as
any Customer-Requested Costs. With regard to single-party residential extensions, in nearly all
instances the Basic Costs will exceed the allowance. However, because of the significant

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increases in the allowance per kilowatt-hour for non-residential rate schedules, the allowance
could cover all or part of any Exceptional Costs for commercial line extensions.
Staff Comments
Staff has no objection to the Company’s proposal to create a new category of costs
called “Customer-Requested Costs.”
Miscellaneous Proposed Charges
Under the present tariff, customers who are estimated to use less than 4800 kilowatt
hours per year do not receive an allowance and must pay the entire cost of the line extension.
The rationale used to establish the present minimum use level of $4,800 is that the margin per
kilowatt hour provided under Residential Schedule 1 must at least recover the cost of providing
service from the primary or secondary line to the residents. Using the proposed average service
cost of $360 and the margin from Schedule 1, a minimum annual usage amount of 2500 kilowatt
hours would provide recovery of the service cost.
Staff Comments
Staff recommends approval of the Company’s proposal to reduce from 4500 kilowatt
hour/year to 2500 kilowatt hour/year, the minimum annual usage amount for residential
customers to be eligible for line extension allowance.

The residential allowance for dwellings which have more than four units
(apartments) is proposed to increase from $600 to $780 per unit. The proposed increase in the
allowance for these dwellings is proportional to the increase in the allowance for residential
dwellings with less than four units ($1,000 to $1,300).
Staff Comments
Staff recommends that the residential allowance for dwellings having more than four
units (apartments) be decreased from $600 to $525.
Company Reply
The Company notes that both Staff’s and the Company’s proposed allowances are
based on the ratio of their proposed residential single-family allowance to the Company’s
existing single-family allowance.

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Lastly, the Company is proposing a revision under the “Conversions and
Relocations” section of the tariff. The present tariff requires a customer requesting a Conversion
or Relocation of facilities to pay both the cost of the new facilities plus the remaining value of
the existing facilities. As the revenue received from the customer will continue to pay for the
cost of existing facilities over time, they should only be charged for the cost of the new facilities.
Therefore, the provision for charging the customer for the remaining value of the existing
facilities has been deleted.
Staff Comments
Staff recommends approval of the Company’s request to revise the “Conversions
and Relocations” section of the tariff to relieve customers from paying the cost of new facilities
plus the remaining value of existing facilities.
YOU ARE HEREBY NOTIFIED that the Commission after reviewing the filed
comments in this case finds it reasonable to schedule the matter for hearing. Reference IDAPA
31.01.01.204.
YOU ARE FURTHER NOTIFIED that persons desiring to intervene in Case
No. AVU-E-00-01 for the purpose of becoming a party, i.e., to present evidence, to acquire
rights of cross-examination, to participate in settlement or negotiation conferences, and to make
and argue motions must file a Petition to Intervene with the Commission pursuant to Rules of
Procedure 72 and 73 of the Commission’s Rules of Procedure, IDAPA 31.01.01.072 and –073.
Persons intending to participate at the hearing must file a Petition to Intervene on or before
Friday, July 21, 2000.
YOU ARE FURTHER NOTIFIED that persons desiring to present their views
without parties’ rights of participation and cross-examination are not required to intervene and
may present their comments without prior notification to the Commission or to other parties.
YOU ARE FURTHER NOTIFIED that discovery is available in Case
No. AVU-E-00-1 pursuant to the Commission’s Rules of Procedure, IDAPA 31.01.01.221-234.

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YOU ARE FURTHER NOTIFIED that the Company’s Application together with
filings of record can be reviewed at the Commission’s office in Boise, Idaho and at the
Company’s Idaho offices during regular business hours.
YOU ARE FURTHER NOTIFIED that all proceedings in this case will be held
pursuant to the Commission’s jurisdiction under Title 61 of the Idaho Code and the Commission
may enter any final Order consistent with its authority under Title 61.
YOU ARE FURTHER NOTIFIED that all proceedings in this matter will be
conducted pursuant to the Commission’s Rules of Procedure, IDAPA 31.01.01.000 et seq.
YOU ARE FURTHER NOTIFIED that pursuant to agreement of the parties and the
Commission the following scheduling for simultaneous filing of direct testimony has been
adopted:
Friday, August 18, 2000

Friday, August 18, 2000
Prefile deadline—direct testimony
Staff/Intervenor

Prefile deadline—direct testimony
Avista

The prepared testimony and exhibits must conform to the requirements of Rule 266 and 267 of
the Commission’s Rules of Procedure. Reference IDAPA 31.01.01.266-267. The parties should
coordinate discovery requests and responses so that they are able to comply with the established
prefile deadline.
YOU ARE FURTHER NOTIFIED that the Commission will conduct a technical
hearing in Case No. AVU-E-00-1 commencing at 9:30 A.M. THURSDAY, SEPTEMBER 7,
2000 AT THE COMMISSION HEARING ROOM, 472 WEST WASHINGTON, BOISE,
IDAHO.
YOU ARE FURTHER NOTIFIED that all hearings and prehearing conferences in
this matter will be held in facilities meeting the accessibility requirements of the Americans with
Disabilities Act. In order to participate, understand testimony and argument at a public hearing,
persons needing the help of a sign language interpreter or other assistance may ask the
Commission to provide a sign language interpreter or other assistance as required under the

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Americans with Disabilities Act. The request for assistance must be received at least five (5)
working days before the hearing by contacting the Commission Secretary at:
IDAHO PUBLIC UTILITIES COMMISSION
PO BOX 83720
BOISE, ID 83720-0074
[phone] (TELEPHONE)
[phone] (TEXT TELEPHONE)
[phone] (FAX)

O R D E R
In consideration of the foregoing and as more particularly described above, IT IS
HEREBY ORDERED and the Commission does hereby adopt the scheduling and hearing date
set out above.
DONE by Order of the Idaho Public Utilities Commission at Boise, Idaho this
_______ day of July 2000.

DENNIS S. HANSEN, PRESIDENT

MARSHA H. SMITH, COMMISSIONER

PAUL KJELLANDER, COMMISSIONER

ATTEST:

Barbara Barrows
Assistant Commission Secretary

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