20040712Falkner Rebuttal.pdf

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DAVID J. MEYER
VICE PRESIDENT AND CHIEF COUNSEL FOR L: ,I;j fijC;LIC
REGULATORY AND GOVERNMENTAL AFFAtRSf!LS COf'"11~1ISSI0t1
VISTA CORPORATION
O. BOX 3727
1411 EAST MISSION AVENUE
SPOKANE, WASHINGTON 99220-3727
TELEPHONE: [phone]
FACSIMILE: [phone]
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BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE APPLICATION
OF A VISTA CORPORATION FOR THE
AUTHORITY TO INCREASE ITS RATES
AND CHARGES FOR ELECTRIC AND
NATURAL GAS SERVICE TO ELECTRIC AND
NATURAL GAS CUSTOMERS IN THE ST ATE~ ID~O
CASE NO. A VU-04-
CASE NO. AVU-04-
REBUTTAL TESTIMONY
DON M. FALKNER
FOR A VISTA CORPORATION
(ELECTRIC AND NATURAL GAS)
CONTENTS
Section Pa2e
Introduction
Overall Company Rebuttal Case Introduction
III Combined Revenue Requirement Summary
Electric Section
Uncontested Adjustments
Contested Adjustments
Revenue Requirement Summary
Natural Gas Section
Uncontested Adjustments
Contested Adjustments
Revenue Requirement Summary
Exhibit No. 26 - Electric Revenue Requirement and Results of Operations (pgs 1-12)
Exhibit No. 27 - Natural Gas Revenue Requirement and Results of Operations (pgs 1-10)
Falkner, Di - Reb
A vista Corporation
INTRODUCTION
Please state your name, business address, and present position with
A vista Corp.
My name is Don M. Falkner. My business address is 1411 East Mission
Avenue, Spokane, Washington. I am employed by A vista Corp., doing business as A vista
Utilities ("A vista" or "Company ) and my current position is Manager of Revenue
Requirements in the Department of State and Federal Regulation.
Have you previously provided direct testimony in this Case?
Yes. My testimony covered accounting and financial data in support of the
Company s need for the proposed increase in rates. I explained pro formed operating results
including expense and rate base adjustments made to actual operating results and rate base.
Are you sponsoring any exhibits to be introduced in this proceeding?
Yes. I am sponsoring Exhibit Nos. 26 and 27, which were prepared under my
supervision and direction.
What is the scope of your rebuttal testimony in this proceeding?
I will be providing a summary of the Company s revised revenue requirement
as well as introducing certain other aspects of the rebuttal testimony sponsored by other
Company witnesses. My rebuttal testimony and exhibits will consolidate the Company
rebuttal position on all the general case revenue requirement adjustments proposed by Staff
witnesses which impact the Company s proposed results of operations.I will list the
adjustments proposed by Staff that the Company is willing to accept for purposes of this case
and will address other proposed adjustments with which the Company does not agree. I will
Falkner, Di - Reb
A vista Corporation
also address the comments of Potlatch witness, Dr. Peseau, regarding the test year utilized in
this filing.
II.OVERALL COMPANY REBUTTAL CASE INTRODUCTION
Would you please introduce the other Company witnesses that are
sponsoring rebuttal testimony and note the issues that each will be addressing?
Certainly. For context, with the exception of Mr. Jon Powell, all the following
Company witnesses have previously provided direct testimony in this proceeding. Dr. Avera
will be addressing Staff and Intervenor proposals regarding the appropriate Return on Equity
ROE") for the Company s Idaho utility operations. The Company maintains, through Dr.
Avera s testimony, that the initial recommended 11.50% ROE is appropriate given the unique
circumstances attendant to A vista.
Staff has proposed for purposes of this case that the capital structure and cost of
capital components, other than ROE, should be the embedded December 31 , 2003 actual
levels.The Company concurs, for purposes of this case, that this is a reasonable
recommendation based upon a review of the appropriate utility peer group. The resulting
requested authorized Rate of Return, utilizing the cost of capital components recommended
by Staff witness Ms. Carlock, with the exception of the Company s continued recommended
11.50% ROE, is 9.72%.
Mr. Lafferty will address Potlatch recommendations on the recoverability of the
Company s CS2 investment, Staff recommendations on small generation project Boulder
Park investment recoverability, and Staff and Potlatch recommendations regarding the
appropriate regulatory treatment of the cost of purchased gas contracts listed in previous
Falkner, Di - Reb
A vista Corporation
direct testimony as "Deal A and Deal B." The Company s position remains that the costs
associated with the Deal A and Deal B contracts were prudent at the time and should
ultimately be recoverable through the Idaho PCA mechanism.Mr. Lafferty s rebuttal
testimony, in response to Dr. Peseau and Mr. Hessing, supports the reasonableness of the
costs associated with Deal A and Deal B, and explains that the transactions were consistent
with the Company s planning criteria.
Mr. Kopczynski will address the comments and recommendations by Staff regarding
customer service and Company Call Center operations, as well as responding to the Staff s
adjustment to pro forma vegetation management costs.
Mr. Powell, Avista s Demand Side Management Program Manager, will address Staff
and Intervenor proposals regarding Demand Side Management programs and low income
pro gram funding.
Ms. Knox will address Intervenor proposals associated with Cost of Service
assignment and allocation issues.
Finally, Mr. Hirschkorn will respond to Staff and Intervenor testimony regarding rate
spread and rate design. He will also provide guidelines that can be used by the Commission
to implement rate spread and rate design, regardless of the approved level of revenue
requirement.
III.COMBINED REVENUE REQUIREMENT SUMMARY
What are the Company s revised revenue requirements, for both the
electric and natural gas operating systems for its Idaho jurisdiction, after taking into
account Staff's proposed adjustments that have been accepted by Avista?
Falkner, Di - Reb
A vista Corporation
After taking into account the Company s acceptance of several of the Staff s
proposed revenue requirement adjustments, the Company revised electric revenue
requirement is an increase of $31 070 000, or 21.24%, as detailed in Exhibit No. 26. This
should be compared with the original request for an increase of $35 222 000, or 24.08%.
The Company s revised gas revenue requirement is an increase of $4 061 000, or
82%, as outlined in Exhibit No. 27. This should be compared with the original request for
an increase of $4 754 000, or 9.16%.
On a stand-alone basis, the overall electric percentage request is 21.24%, but after
taking into account the Company s original proposed reduction to the power cost surcharge
currently in effect, the overall electric increase would be 8.6%, down from the 11.
originally filed.
IV.ELECTRIC SECTION
UNCONTESTED ADJUSTMENTS
With which adjustments proposed by Staff does the Company concur?
The Company concurs with the following adjustments proposed by Staff that
are noted by Staff direct column identifier and then followed by the column identifier that I
utilized in my Exhibit No. 26:
Cabinet Gorge E2/ak (estimate updated to actual)
Boulder Park Depr E3/al (depr synchronized between states)
Skookumchuck E5/am (sale approved by IPUC 4/28/04)
Deferred FIT E6/ an (appropriate deferred accounting treatment)
Coyote Springs E7/ao (estimate updated to actual)
Small Gen Options E8/ap (similar treatment to other unfinished plant)
Labor- Non-exec E9/aq (estimate updated to actual)
Falkner, Di - Reb
A vista Corporation
Labor-Exec EI0/ar (estimate updated to actual)
Depreciation E14/as (depr synchronized between states)
Corp Fees E15/at (similar treatment for other Idaho utilities)
Misc Exp E17/au (similar to prior IPUC treatment)
WECC Exp E 18/av (reflects current WECC status)
Adv. Exp E19/aw (similar to prior IPUC treatment)
A vista Foundation E20/ax (correctly assigned to non-utility)
By accepting the adjustments proposed by Staff above, the Company s revised revenue
requirement is reduced from $35 222 000 to $31 070 000, or $4 152 000.
CONTESTED ADJUSTMENTS
Could you please list the various electric revenue requirement
adjustments (other than cost of capital) that are still at issue from the Company
original filing; in doing so, please note the impact of Staff's recommended adjustment
to Net Operating Income ("NOI") and Rate Base as compared to the Company
original filing.
Certainly. Please see the table below. Since the revenue requirement items
still at issue have been recommend by Staff, for convenience, I will be using the Column
references that can be found in the Staff s summary exhibit sponsored by Ms. Patricia Harms.
Electric Adjustments Still at Issue
(Dollars are in thousands)
COL DESCRIPTION Staff Staff
NOI Rate Base
Transmission $230 $(8,518)
Boulder Park Disallowance 085)
Ell Vegetation Mana2ement 288
E12 Accts. Rec. Fees 357
E13 Pension Expense 554
E16 Lee;al Expenses 366
E2l Restate Debt Interest
Falkner, Di - Reb
A vista Corporation
Transmission
On pages 8 through 11 of Ms. Harms ' direct testimony, the Staff
recommends that the full test year level of costs associated with the Company s recent
transmission investment, as filed by the Company, be reduced to reflect only one month
of service for average rate base purposes. Do you agree with Staff recommendation
regarding the Company s transmission upgrades?
No.The portion of the Company s current multi-year upgrade to our
transmission system that we included in our general filing has already been completed and
moved to plant-in-service. It is known and measurable and currently providing service to our
customers.
The reasons for which the Company has undertaken the transmission upgrade
projects, outlined by Mr. Kopcyznski in his direct testimony, are valid and have not been
refuted by any party in this proceeding. At the same time, no parties have submitted that the
investment included in the Company s filing is imprudent. For these reasons alone, the
investment should be included in rate base for a full 12 months.
How does the Company respond to Staff's contention, that by not
including any reduced costs or increased revenues associated with the investment, the
filing does not provide proper matching of cost and benefits (Harms, Di, pg 8, II 15-19)?
The financial benefits of being able to maintain our ability to import and
export energy, either through secondary sales or through transmission capacity revenue, are
captured in the Company s power supply model. Additionally, had the Company not moved
Falkner, Di - Reb
A vista Corporation
to improve our 230 kV capabilities, there was the potential of "Hydro Caps" being imposed
by the Bonneville Power Administration at the Company s Cabinet/Noxon hydro electric
facilities. In other words, we could have been put in the situation of having to reduce
generation during certain times of the year, specifically during spring runoff. The financial
benefits of being able to continue to optimize the generation capabilities of the Clark Fork
projects are also captured in the Company s power supply model.
On pages 10 and 11 of Ms. Harms' direct testimony starting on line 8,
Staff has proposed an alternative regulatory treatment that would allow full rate base
treatment of the Company s transmission, while imputing an estimated level of
increased electric revenues and reduced maintenance costs. What is the Company
position regarding the Staff's proposed alternative transmission investment treatment?
Staff notes that this alternative treatment is consistent with the methodology
identified in Commission Order No. 29505, from Idaho Power Company s recent general
case, Case No. IPC-03-13. Ms. Harms goes on to state
Although this methodology does not provide precedential value, it offers
the Commission the option to include new transmission investment in rate
base while protecting customers from inequities of a mismatch.
We note that this Order was issued in May 2004, approximately 3 months after the
Company had made its February 2004 general case filing. Despite the Company s continued
stance that the transmission upgrades are currently used, useful, known and measurable and
provide customer benefits that are included in the Company s power supply model, if the
Commission were to determine in this case that an adjustment to revenues and/or expenses in
Falkner, Di - Reb
A vista Corporation
conjunction with the full rate base treatment of the new transmission adjustment was
necessary, Stafsf proposed alternative of including approximately $270 000 in additional
revenues and an expense maintenance reduction of $30 000 would be reasonable. The Staff s
recalculated rate base of $7 801 000 also correctly incorporates the updates for actual capital
costs and the change in depreciation rates. (Harms, Di, pg. 10, ll. 8-25).
~etation Mana2ement
On pages 12 through 14 of Ms. Stockton s direct testimony, the Staff lays
out their recommendation to reduce the Company s proposed Vegetation Management
expense level to a 6-year average of historical expenditures. Do you agree with the Staff
recommendation?
No. The testimony provided by Mr. Kopczynski supports the utilization of the
four-year average for 2004 through 2007 tree trimming expenditures recommended by our
Vegetation Management director. As he explains, vegetation management is important to
system reliability. Proper vegetation management reduces customer outages, improves safety
and enhances system reliability.
How would the Company propose to address the concerns noted by Ms.
Stockton in her direct testimony suggesting that the Company may not actually
dedicate the resources towards future vegetation management?
In response to the Staff s concerns, the Company recommends the use of a
one-way" balancing account. If the Commission were to authorize the level of vegetation
management costs outlined in our direct case, $1 771 000 for Idaho electric operations, the
Company would agree to commit that level of resources on an annual basis to vegetation
Falkner, Di - Reb
A vista Corporation
management going forward. If the Company were to spend less than the level noted above
the difference would be recorded as a liability and either spent in a future period, or returned
to customers through an appropriate tracking mechanism.
What would happen if the Company expended more than the $1,771,000
in vegetation management costs for Idaho electric operations?
Unless the Company was making up for a prior period of reduced spending,
the Company would absorb that difference as a period cost. It would not be tracked.
Implementation of the Company s proposal would ensure that the revenues collected for
vegetation management would be spent for that purpose, or returned to customers.
Do you have any comments regarding Staff's specific proposal to use a 6-
year historical average?
Yes. In some instances a multi-year average may be appropriate, as long as all
the years are reasonably representative of what ongoing expenditures might be. In this case
even Staff notes that 2002 vegetation management costs were "abnormally low." (Stockton
, page 12 , 11 24-25). In fact, the 2002 level of $550 255 is not even half of the 6-year
average of $1 322 000 calculated by Staff. If the Commission adopts a multi-year historical
average, the actual 2002 level should be excluded.
What level of vegetation management expense would result by modifying
Staff's proposal through exclusion of the 2002 period from the average?
The result would be $1,477 000 for Idaho electric operations, as compared to
Staffs proposed level of$1 322 000.
Falkner, Di - Reb
A vista Corporation
Accounts Receivable Fees
Do you agree with Staff recommendation regarding the Company
Accounts Receivable Fees?
Would you please comment on Ms. Stockton s proposal to remove the
fees associated with the Company s Accounts Receivable Sale Program?
Staff witness Stockton, at page 14, beginning at line 7 discusses the Staffs
proposal to remove fees associated with the sale of customer accounts receivable. As Ms.
Stockton points out in her testimony, the sale was initiated in 1988 and reduced the
Company s need for financing. The Commission has allowed the fees as a recoverable
expense previously.
The Account Receivable Sale program is a cost effective approach of funding the cost
of carrYing customer receivables on the Company s balance sheet. The alternative to selling
the accounts receivable would be a working capital addition to rate base at the Company
authorized rate of return.
Staff states that they have calculated working capital for the Company and that it is
negative. Then Staff concludes, at page 15 , lines 16 through 20 of Ms. Stockton s testimony,
that
, "
Because the Company asserts that the Accounts Receivable Sale Program is a
substitute for a working capital requirement and the Company does not have a working
capital requirement, I have removed the fees associated with the Accounts Receivable
Program.
Falkner, Di - Reb
A vista Corporation
Have you reviewed Staff's working capital workpapers and what have
you found?
Staff s workpapers show that working capital is in fact. positive.not negative.
Hence, the Staffs argument for removing the fees associated with the accounts receivable
sale is not valid. Also, the workpapers show that Staff included the accounts receivable sale
as a reduction to working capital. It is not proper to include the accounts receivable sale as a
reduction to working capital in determining whether working capital is positive. Working
capital should be calculated without the reduction for the accounts receivable sale. If the
result is positive working capital and the positive amount exceeds the accounts receivable
sale amount, then including the fees associated with the accounts receivable sale as an
operating expense is appropriate. Staff s workpapers show that working capital is, in fact
positive by an amount that exceeds the accounts receivable sale amount.
The purpose of my testimony is not to engage in a debate about working capital or the
individual components of working capital. The Company has not included a working capital
adjustment in the past due to the complexity of doing such a study and the fact that the
Commission has historically otherwise allowed the fees associated with the accounts
receivable sale as a recoverable operating expense. Staff has misinterpreted the results of
their working capital study.The Commission should continue to allow the fees as a
recoverable operating expense.
Pension Expense
Could you please briefly describe the Company s request in this case for
pension expense?
Falkner, Di - Reb
A vista Corporation
In my direct testimony (Falkner, Di, pg 24 ll. 11 - pg. 25 ll. 6), I outlined the
Company s request in this case to allow for recovery of the Company s 2004 recorded
pension expense accrual of $14 million, or $2.1 million to the Idaho electric jurisdiction, as
determined in accordance with Financial Accounting Standard 87 ("F AS-87"This
compares to Staffs recommendation for a pension expense level of $8 695 000, or
301 921 to the Idaho electric jurisdiction.
Would you please list the main arguments supporting the Company s use
of the FAS-87 pension accrual, and why the Staff's proposal should be rejected?
Certainly. The following bullet points outline the points I will be making:
. F AS-87 has been the standard for pension expense calculations since its adoption in
1987.
It has been previously accepted for regulatory purposes in all of Avista s service
territories, including Idaho.
The reduction of the return on asset assumption is supportable by actual fund return
history, as well as consistency with return reductions by other Northwest utilities.
Actual Company contributions to the pension fund have exceeded the level included
in Idaho general rates by $29 million since 1999.
Absent a larger than minimum contribution in 2002, the 2003 minimum contribution
level would have been approximately $14 million, which is the FAS-87 accrual level
being proposed in this case.
How long has the Company been following F AS-87 in determining its
pension expense amount to be included in customer rates?
The Company has been calculating and recording pension expense according
to F AS-87 since its required implementation date of January 1987.
Was pension expense, as calculated in accordance with F AS-87 financial
reporting rules, accepted for regulatory purposes in the Company s last Idaho general
rate case?
Falkner, Di - Reb
A vista Corporation
Yes. That was the accepted methodology utilized in the last Idaho general
case, electric case WWP-98-l1. FAS-87 was developed after a long period of review by
the accounting profession. Since it has also been adopted by the Securities and Exchange
Commission, it is the standard applied by all companies, including regulated utilities, for
financial reporting. The fundamental objective of F AS-87 is to recognize the compensation
cost associated with pension benefits over employees ' approximate service lives. As such, it
has been utilized and accepted in previous general filings in all our regulatory jurisdictions.
Similar to other expense items that are accrued for accounting purposes, this standard
requires the use of some assumptions to measure the Company s pension obligations and
annual expense: Assumptions that individually reflect best estimates and are consistent to the
extent that each reflects expectations of the same future economic conditions. These
assumptions include determinations for such items as future return on fund assets, an
appropriate discount rate, and compensation increases, each of which is reviewed annually,
and if necessary, adjusted to reflect updated information.
In determining Avista s pension plan expense, the Company uses an 80/0
actuarial assumption of future rates of return on assets in determining its estimated
pension expense. Can you please explain the 80/0 ROA assumption, and compare this to
the 3.880/0 rate referred to by Staff Witness English?
Yes. The assumption of an 8% return on assets ("ROA") used for determining
our 2004 pension expense was based on long-term expected pension fund returns taking into
account our plan portfolio mix. The 3.88% referred to by Witness English (English, Di, page
, ll. 7-10), was only incorporated to aid in forecasting pension plan assets in order to
Falkner, Di - Reb
A vista Corporation
determine the appropriate level of cash contributions the Company should make to the
current plan year. It was not used in the calculation of determining pension expense to be
recorded on Company books in 2004.
In 2002 the Company lowered its ROA from 90/0 to 80/0. Could you please
explain the Company s reasoning behind the decision to lower the plan ROA
percen tage?
In 2002, the company lowered its ROA percentage from 9% to 8%. This
decision was made in conjunction with a review of our historical returns, advice from
external advisors, and our external auditors. This change was in line with changes seen
throughout the utility industry and other publicly listed companies. At this same time, the
Securities and Exchange Commission communicated to the financial community that they
were concerned about ROA assumptions used in publicly listed company filings. As shown
below in Graphs 1 and 2 below, for March 31 , 2003 and December 31 , 2001 , respectively,
virtually all of the Northwest utility companies lowered their ROA assumptions from their
existing levels in 2001.
Gra ph 1
FAS 87 Assumptions
Northwest Utilities Return On Assets
as of March 31 , 2003
10.00%
50%
00%00%
50% Average=8.39%50%
00%
50%
00%
00%
mAvista Corp.
. Cascade Natural Gas
0 IDACORP, Inc.
0 Northwest Natural Gas
. Pacificorp
I!!J Portland General Eectric
. Puget Energy
Falkner, Di - Reb
A vista Corporation
Graph 2
FAS 87 Assumptions
Northwest Utilities Return On Assets
as of December 31, 2001
10.00%
50%
00% 9.00%
A verage=9.11 %50%
00%
50%
8. 00%
50%
00%
Witness English states that at the time of the "assumption" change to
1m A vista Corp.
. Cascade Natural Gas
0 IDA CORP, Inc.
0 Northwest Natural Gas
. Pacificorp
mJ Portland General Bectric
. Puget Energy
lower the plan ROA to 80/0, the Company s actual pension fund average return (since
1995) was approximately 100/0. Could you please explain this?
Yes. Mr. English, without any real explanation, used a 9-year average (1995-
2003), which resulted in a 9.23% ROA for the period, which I am assuming was rounded to
10%. If Mr. English had instead used a 10-year average ending with our test period (also
ending in the year the assumption change was made (1993-2002)), the resulting average ROA
would have been 7.22%. In order to include known and measurable changes, using a 10-year
average ending in 2003 (1994-2003), the 10-year average "actual" ROA is 8.28%. Either
calculation, in combination with external advice and SEC concerns, supports the Company
decision to reduce the ROA assumption, and that an actuarial 8% ROA assumption is
reasonable.
Staff's position is that the appropriate pension expense amount to be
included in customer rates "in this case" should be determined by the minimum amount
Falkner, Di - Reb
A vista Corporation
the Company was legally required to contribute to the plan versus the F AS-87 expense
level. Do you agree with this?
No. But in fairness, Mr. English is not recommending this as a "strict policy.
Rather he goes on to state that
Given the speculative nature of pension contributions, I believe it is wise
for the Commission to reserve some discretion in determining amounts to
be recovered through rates based on the individual facts and circumstances
of each case." (English, Di, pages 9 and 10, starting on ll22).
Could you please discuss the contributions historically made to the
Company s pension plan and compare this to the minimum contribution calculation
required to be paid by the Company?
Yes, as described by Mr. English, the minimum contribution is the amount
that a company must fund in order to avoid a funding deficiency in the Funding Standards
Account. (English, Di , page 8, lll-
Historically, prior to 2002, A vista made the minimum required contributions to its
plan. Starting in 2002, due to expectations of higher annual required minimum contributions
extending for the next several years, A vista took a proactive approach by contributing more
than the minimum in order to smooth future cash outlays and to achieve a fully funded
pension plan incrementally over time. For example, as shown in Table 1 below, in 2002 the
Company s estimated calculation for the minimum contribution showed a steady increase in
future contributions.
Falkner, Di - Reb
A vista Corporation
Table 1 - Estimated as of 2002 (millions)2002 2003 2004 2005 2006 Total
Estimated Minimum Contribution Requirement $7.$14.$13.$15.$17.4 $68.
Shown below in Table 2 are the actual contributions for 2002 and 2003, planned
contributions for 2004, and updated estimated minimum contributions required going
forward.
-------
ACTUAL PMTS----
---
ESTIMATED MIN---
Table 2 - as of 2004 (millions)2002 2003 2004 2005.2006 Total
Contribution $12.$12.$15.$11.2 $17.$67.
Mr. English states at page 8, lines 18-23 that he proposes a reduction to
the Company s proposed pension expense amount (utilizing FAS-87 requirements) of
$14 million to approximately $8.million, calculated as the Company s minimum
required contribution for 2003 (utilizing "ERISA" requirements).How does this
compare to the tables described above?
The $8.7 million as described by Mr. English was the amount estimated
2003 as the minimum contribution to be paid in 2003. However, that 2003 minimum amount
was only determined (in 2003) at that level after Avista had already contributed more than the
minimum required amount in 2002, or an additional $4.5 million in 2002 ($7.5 minimum +
$4., totaling $12 million actual payment).
Falkner, Di - Reb
A vista Corporation
What was the impact of Avista s higher than minimum 2002 pension
contribution on the minimum required 2003 contribution that Staff is recommending
for inclusion for recovery in rates in this case?
The minimum contribution amount required in 2003 was reduced from
$14 million to $8.7 million, (down approximately $5.3 million from the original estimate
calculated in 2002), because the Company contributed $4.5 million more than the minimum
contribution in 2002.In other words. absent the Company larger than minimum
contribution in 2002. the minimum contribution required for 2003. would have been UA
million.
If A vista had not made a larger than minimum required pension fund
contribution in 2002, pursuant to ERISA rules, would the 2004 F AS-87 expense level
being proposed by the Company and the 2003 minimum contribution being proposed
by Staff both have been approximately $14 million, on a system basis?
Yes
Have the actual cash contributions made over time by A vista to the
employee pension fund been more or less than the system level of F AS-87 pension
expense included in Idaho customer rates through 2004?
During that time period, cash contributions have exceeded expense included in
rates by approximately $29 million.
Would you please explain why the Company still believes the pension
expense calculation required by F AS-87 is the appropriate methodology for
determining pension expense in this proceeding?
Falkner, Di - Reb
A vista Corporation
A vista has been calculating and recording pension expense according to F AS-
87 since its required implementation date of January 1987. F AS-87 was developed over a
long period of review and has been consistently applied annually across multiple industries
including the energy sector, since its inception. This Commission as recently as 1999
accepted it for regulatory purposes for A vista and it is the same methodology being utilized
in our other contiguous jurisdictions. Minimum contribution calculations can be impacted by
any contributions paid by A vista above the minimum, thus penalizing the Company for
proactively attempting to fully fund its plan incrementally over time in order to smooth
payments, or head off larger future payments.
Based upon my earlier discussion, the Company s decision to lower the ROA
assumption was reasonable, and consistent with the actions of other Northwest utilities.
Comparisons between the FAS-87 pension expense level included in Idaho customers' rates
and the level of cash contributions to the pension plan since 1999 show that Idaho customers
have not been disadvantaged. No evidence has been introduced that future cash contributions
will be materially different than the F AS-87 level of pension expense being proposed by the
Company in this case.
Le2al Expense
Staff Witnesses Harms and English sponsor adjustments to legal
expenses, arguing that such expenses should either have been directly assigned to
unregulated affiliates or were otherwise for extraordinary, non-recurring events.
Would you please respond?
Falkner, Di - Reb
A vista Corporation
Yes. In total, this adjustment, according to Staff Witness Harms, would
increase Idaho electric net operating income by $366 000 and reduce the Company s electric
revenue requirement by $573 000. (Harms, Direct Test. at page 21 , lines 2-14) (Similar
adjustments were made to increase gas net operating income by $13 000 and decrease the
Company s gas revenue requirements by $20 000.) Staff Witness English further elaborates
on the components of the adjustment: As shown in his Exhibit 123, he removed $14 035
from test year legal expense, as it relates to A vista Labs, and another $1 326 of expense
related to A vista Communications, arguing that these expenses relate to activities of a
subsidiary and should be disallowed. (English, Direct Test. at page 18, lines 15-25). With
respect to these two adjustments, the Company does not disagree; they were inadvertently
included in utility results of operations and should be removed.
The Company does take issue, however, with the balance of this adjustment to legal
expenses. Mr. English further removed $74 363 in legal expenses allocated to Idaho that the
Company incurred during the bankruptcy proceedings of Enron Corp. He acknowledged that
those expenses "were prudently incurred " but maintains that they were an "extraordinary
expense that the Company will not incur beyond the test year." (Id., at page 19, lines 1-7).
Similarly, Mr. English removes $478 000 in legal expenses relating to FERC's investigation
into A vista s trading practices. Here again, Mr. English agrees that these expenses may have
been "prudently incurred " but reasons that the investigation has been completed and these
expenses are "not likely to recur beyond 2003." (Id., at page 19, lines 8-14.
Why does the Company take issue with Staff's disallowance of the legal
expenses relating to the Enron bankruptcy and the FERC investigation?
Falkner, Di - Reb
A vista Corporation
By way of further explanation, the legal expenses associated with the Enron
bankruptcy were incurred in order to protect the interest of A vista s customers. A vista
incurred expense in arriving at settlements with Enron affiliates over power and gas
contracts, as a result of Enron s bankruptcy proceeding and the need to preserve Avista
claims. Similarly, A vista actively participated in FERC's investigation into trading practices
which investigations ultimately "cleared Avista of any wrongdoing," as recognized by Staff
Witness English. (Id., at page 20, lines 1-13). Therefore, Staff has raised no concerns about
whether these expenditures were either necessary or prudent only that they maybe non-
recurring or extraordinary.
The real question should be whether these expenses were part of a larger pool of legal
expenditures that reflect a representative level of ongoing legal expense. (Indeed, unlike
widgets '" every item of litigation could be argued , in the extreme, to be unique unto itself
and non-recurring; it would, however, be nonsensical to remove all legal expenses, nor does
Staff so contend.) What we do know is that, through time, the Company will continue to
incur some level of representative legal expense that covers a multitude of matters.
Therefore, absent a showing of imprudence (of which there is none here) a representative
level of expenses should be reflected in rates.
Have you analyzed what would constitute a "representative level of legal
expense" over time?
Yes, we have. Included below is a tabulation of legal expenses charged to
operating expense accounts from 1998 through 2003 (on a "system" basis).
Falkner, Di - Reb
A vista Corporation
000 000
000 000
000,000
000 000
000 000
Legal Fees by Year
Operational Expense only
1998 1999 2000 2001 2002 2003
What is especially noteworthy is that the overall level of expense has remained
constant through time, with little fluctuation from year to year, notwithstanding the
incurrence of expenses relating to the FERC investigation and the Enron bankruptcy. Stated
differently, it cannot be said that A vista does not experience a recurring level of legal expense
of approximately $3.8 million per year (system).
Would the Company agree to use a six-year average of legal expenses
charged to operational accounts, in order to "smooth out" any extraordinary items?
Yes. To do so would be consistent with the existing practice of using a six-
year average for "injuries and damages.Utilizing the amounts from the tabulation above
the six-year average is $3 803 000 at a system level, while the 2002 test year level was
870 000. The Company s weighted Four Factor allocation levels for 2002 are 25.48% for
electric and 5.69% for natural gas. Using the "Four Factor" allocators for 20021 would
produce allocated Idaho reductions to legal expenses of $17 100 and $3 800 for the electric
1 Idaho Electric weighted Four Factor - 25.48% / Idaho Natural Gas weighted Four Factor - $5.69%.
Falkner, Di - Reb
A vista Corporation
and natural gas systems, respectively. Combining this adjustment for the use of a 6-year
average, with the incorrectly assigned payments for Avista Labs ($14 035-Electric, $3 136-
Gas) and Avista Communication ($1 326-Electric, $303-Gas), noted earlier, would make the
Idaho allocated reductions to legal expense $32 500 and $7 239 for the electric and natural
gas systems, respectively.
Test Year Discussion
Would you please comment on Dr. Peseau s contention at pages 29
through 33 of his direct testimony, that there is a mismatch between revenues and
expenses in this case?
Yes. Dr. Peseau s contention is unfounded. Avista s adjustments included in
this case meet the standard ratemaking procedures that have been historically adopted by the
Commission and followed by Avista in this case and previous cases. The Commission
recent Order No. 29505 in Case No. IPC-03-, dated May 25, 2004, in the Idaho Power
Company case at page 4, reiterated the three general categories of adjustments as:
normalizing adjustments made for unusual occurrences, like one-time events or extreme
weather conditions, so they do not unduly affect the test year; 2) annualizing adjustments
made for events that occurred at some point in the test year to average their effect as if they
had been in existence during the entire year; and 3) known and measurable adjustments made
to include events that occur outside the test year but will continue in the future to affect
Company income and expenses. Each of A vista s adjustments falls into one of these three
categories. The Commission Staff has fully examined the Company s adjustments and have
made their recommendations regarding each individual adjustment.
Falkner, Di - Reb
A vista Corporation
Would you please comment on Dr. Peseau s statement regarding the
selection of a 2002 test year?
Yes. On page 29 at line 19 of Dr. Peseau s testimony he states
, "
For unknown
reasons, Avista chose a 2002 test year, rather than 2003." Avista had a deadline of March 31
2004 to file its electric general rate case. Commission Order No. 29377 in Case No. A VU-
03-6 dated November 18 , 2003 regarding Avista s Power Cost Adjustment ("PCA") status
report and PCA surcharge continuation established the March 31, 2004 deadline at page 12 in
the third ordering paragraph. It takes a number of months to prepare and file a general rate
case. There was not enough time for the Company to close it's 2003 financial records, and
then for the regulatory group to prepare a case using a 2003 test year and still meet the March
, 2004 filing deadline. Additionally, much of the information relative to a 2002 test year
had previously been prepared and the Commission Staff had already undertaken an audit of
the 2002 calendar year by the time Order No. 29377 was issued. Hence, the 2002 test year
was chosen for the Company s general rate case filing.
Has the Commission Staff accepted the use of a 2002 test year?
Yes. Ms. Stockton s testimony on page 4 at lines 16-18 states
, "
Staff accepts
the average of monthly average 2002 test year, and agrees with the beginning jurisdictional
results of operations.
Would you please comment on Dr. Peseau s statement regarding the use
of 2004 budget estimates?
Yes. On page 31 of his direct testimony, beginning at line 10, Dr. Peseau
states
, "
Avista s pro forma expense adjustments for items like increased labor, insurance, and
Falkner, Di - Reb
A vista Corporation
similar costs are simply 2004 budget estimates." Again, Dr. Peseau s statement is unfounded
and not supported by the evidence. The Pro Forma Insurance adjustment reflects the actual
cost of all signed, ongoing and renewed policies providing insurance for 2004. I noted this in
my direct testimony at page 42 beginning at line 15. Ms. Stockton on page 6 of her direct
testimony beginning at line 19 states that the adjustment reflects the actual cost of insurance
policies that are in effect for 2004. Likewise, with the labor expense adjustments, Staff
verified the amounts and made minor adjustments for information that became known after
the case was filed. Staff verified the insurance expense and labor expense amounts, as well
as the other adjustment amounts.
Would you please comment on Dr. Peseau s preferred recommendation at
page 33 to annualize revenues to 2004 year-end levels to correct what he perceives to be
a mismatch between revenue and expense?
Yes.First, the 2004 year-end levels of revenue won t be "known and
measurable" for another six months. Secondly, if this methodology of adjusting revenues to
year-end levels were to be followed, then all expenses and all rate base should also be
adjusted to year-end levels. Another major factor, and perhaps the most important, that is
overlooked by Dr. Peseau is that revenues from load growth caused by new customers are
offset by costs to serve the new customers. Line extension allowances are theoretically
established based on the amount of operating margin, revenue less power cost, that is
available from new customers to offset the capital costs, return and depreciation, associated
with the amount of plant investment that new customers are not required to pay for initially.
In other words, additional revenue is offset by additional cost.
Falkner, Di - Reb
A vista Corporation
In the case of load growth from existing customers, as Mr. Hirschkorn states in his
direct testimony on page 7, beginning at line 17, usage per customer appears to have declined
significantly for all customer classes. Continuation of this trend would produce a negative
load growth adjustment for existing customers, which would result in an increase to the
revenue requirement, not a reduction to the revenue requirement.
ELECTRIC REVENUE REQUIREMENT SUMMARY
Referring back to page 1, line 40, of Exhibit No. 26, for
identification, what was the actual and pro forma electric rates of return, as revised by
the accepted Staff proposed adjustments, realized by the Company during the test
period?
For the State of Idaho, the actual test period rate of return was 8.18%,
somewhat below the last authorized rate of return of 8.98%. The test period pro forma rate of
return is 5.08% under present rates. Thus, the Company does not, on a pro forma basis for
the test period, realize the 9.72% rate of return requested on rebuttal by the Company in this
case.
How much additional net operating income would be required for the
State of Idaho electric operations to allow the Company an opportunity to earn its
proposed 9.720/0 rate of return on a pro forma basis?
The net operating income deficiency amounts to $19 862 000, as shown on
line 4 of page 2 of Exhibit No. 26. The resulting revenue requirement is shown on line 6 and
amounts to $31 070 000, or an increase of 21.24% over pro forma general business revenues
exclusive of the Company s PCA surcharge reduction proposal.
Falkner, Di - Reb
A vista Corporation
NATURAL GAS SECTION
UNCONTESTED ADJUSTMENTS
With which adjustments proposed by Staff does the Company concur?
The Company concurs with the following adjustments proposed by Staff that
are noted by Staff direct column identifier and then followed by the column identifier that I
utilized in my Exhibit No. 27:
Deferred FIT G2/v
Labor-Exec G3/w
Labor-Non-exec G4/x
Depreciation G7/as
Misc Exp G9/z
Corp Fees GI0/aa
Adv. Exp Gll1ab
A vista Foundation G 12/ac
Actual Therm Usage Gl3/ad
Schedule M Allocator Gl4/ac
(appropriate deferred accounting treatment)
(estimate updated to actual)
(estimate updated to actual)
(depr synchronized between states)
(similar to prior IPUC treatment)
(similar treatment for other Idaho utilities)
(similar to prior IPUC treatment)
(correctly assigned to non-utility)
(updated to actual)
(conforms to elec system treatment)
By accepting the adjustments proposed by Staff above, the Company s revised revenue
requirement is reduced from $4 754 000 to $4 061 000, or $693 000.
CONTESTED ADJUSTMENTS
Could you please list the various natural gas, non-cost of capital, revenue
requirement adjustments that are still at issue from the Company s original filing and
note the impact of Staff's recommended adjustment to Net Operating Income ("NOI"
and Rate Base as compared to the Company s original filing.
Falkner, Di - Reb
A vista Corporation
Certainly. Please see the table below. Since the revenue requirement items
still at issue have been recommended by Staff, for convenience, I will be using the Column
references that can be found in the Staff s summary exhibit sponsored by Ms. Patricia Harms.
Natural Gas Adjustments Still at Issue
(Dollars are in thousands)
COL DESCRIPTION Staff Staff
NOI Rate Base
Gas Inventory (1,572)
Accts. Rec. Fees
Pension Expense 137
Lee;al Expenses
GIS Restate Debt Interest (49)
Does the Staff also make an adjustment to remove gas inventory from
rate base using their working capital reasoning?
Yes. Staff uses the same reasoning at page 23 , beginning on line 11 , of
Kathy Stockton s testimony to disallow gas inventory from rate base. Staff claims that since
gas inventory is normally considered part of working capital and since Staff claims that
working capital is negative, Staff removes gas inventory from rate base. As previously stated
above, Staff s interpretation of their working capital analysis is incorrect. Staff workpapers
show that working capital is positive, not negative. Also, Staffs classification of gas
inventory in their working capital analysis excludes it from working capital.The
Commission has historically allowed gas inventory to be included in rate base and should
continue to do so in this case.
As the remaining items still at issue in the natural gas case are the same
as those for the electric case, are the Company s responses to Commission Staff's
proposed adjustments the same as put forth earlier in the electric section?
Falkner, Di - Reb
A vista Corporation
Yes.
NATURAL GAS REVENUE REQUIREMENT SUMMARY
Referring back to page 2, line 40, of Exhibit No. 27, for identification,
what was the actual and pro forma natural gas rates of return, as revised by the
accepted Staff proposed adjustments, realized by the Company during the test period?
For the State of Idaho, the actual test period rate of return was 6.26%. The test
period pro forma rate of return is 5.43 % under present rates. Thus, the Company does not, on
a pro forma basis for the test period, realize the 9.72% rate of return requested by the
Company in this case.
How much additional net operating income would be required for the
State of Idaho natural gas operations to allow the Company an opportunity to earn its
proposed 9.72 % rate of return on a pro forma basis?
The net operating income deficiency amounts to $2 596 000, as shown on line
4 of page 2 of Exhibit No. 27. The resulting revenue requirement is shown on line 6 and
amounts to $4 061 000, or an increase of 7.82% over pro forma general business revenues
and transportation revenues.
Does this conclude your rebuttal testimony?
Yes it does.
Falkner, Di - Reb
A vista Corporation
DAVID J. MEYER
VICE PRESIDENT AND CHIEF COUNSEL FOR
RE G ULA TOR Y AND GO VE RNME NT AL AFF AIRS
VISTA CORPORATION
O. BOX 3727
1411 EAST MISSION AVENUE
SPOKANE, WASHINGTON 99220-3727
TELEPHONE: [phone]
FACSIMILE: [phone]
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE APPLICATION
OF AVISTA CORPORATION FOR THE
AUTHORITY TO INCREASE ITS RATES
AND CHARGES FOR ELECTRIC AND
NATURAL GAS SERVICE TO ELECTRIC AND
NATURAL GAS CUSTOMERS IN THE ST ATE~ ID~O
CASE NO. A VU-04-
EXHIBIT NO. 26
DON M. FALKNER
FOR A VISTA CORPORATION
(ELECTRIC ONLY)
A VISTA UTILITIES
ELECTRIC RESULTS OF OPERATION
IDAHO PRO FORMA RESULTS-REBUIT AL CASE
TWELVE MONTHS ENDED DECEMBER 31, 2002
(OOO'S OF DOLLARS)
WITH PRESENT RATES WITH PROPOSED RATES
Actual Per Proposed Pro Forma
Line Results Total Pro Forma Revenues &Proposed
No.DESCRIPTION Report Adjustments Total Related Exp Total
REVENUES
Total General Business $153 639 $ (7 501)$146 138 $31,070 $177,208
Interdepartmental Sales 110 110 110
Sales for Resale 22,051 075)976 16,976
Total Sales of Electricity 175,800 (12 576)163 224 070 194 294
Other Revenue 067 (14 370)697 697
Total Electric Revenue 194 867 (26 946)167 921 070 198 991
EXPENSES
ProductIon and Translll1ssion
Operating Expenses 144 (22 897)247 247
Purchased Power 39,904 655 46,559 559
Depreciation and Amortization 575 942 517 10,517
Taxes 619 270 889 889
Total Production & Transmission 105 242 030)212 212
Distribution
Operating Expenses 887 606 493 493
Depreciation 670 (348)322 322
Taxes 010 (1,901)109 335 444
Total Distnoution 567 (643)924 335 16,259
Customer Accounting 102 187 289 387
Customer Service & Infonnation 016 (2,536)480 480
Sales Expenses 385 (21)364 364
Administrative & General
Operating Expenses 343 999 342 422
Depreciation 878 (186)692 692
Taxes
Total Admin. & General 221 819 040 120
Total Electric Expenses 150 533 224 142 309 513 142 822
OPERATING INCOME BEFORE FIT 44,334 (18 722)612 557 169
FEDERAL INCOME TAX
Current Accrual 405 985)420 695 115
Deferred Income Taxes (746)210 464 464
NET OPERATING INCOME $35,675 ($13 947)$21 728 $19 862 $41 590
RATE BASE
PLANT IN SERVICE
Intangtole $11,353 $11,353 $11,353
Production 247 926 819 305 745 305 745
Transmission 100 112 10,569 110,681 110 681
Distribution 257 643 (478)257 165 257 165
General 363 363 363
Total Plant in Service 653 397 910 721,307 721 307
ACCUMULATED DEPRECIATION 213 999 252 218 251 218 251
ACCUM. PROVISION FOR AMORTIZATION 368 368 368
Total Accwn. Depreciation & Amort.217 367 252 221,619 221,619
GAIN ON SALE OF BUILDING (625)(625)(625)
DEFERRED TAXES (71 183)(71,183)(71 183
TOTAL RATE BASE $436 030 ($8 150)$427 880 $427 880
RATE OF RETURN 18%08%72%
Exhibit No. 26, Page 1 of 12
D. Falkner
Avista Corporation
Line
No.
VISTA UTILITIES
Calculation of General Revenue Requirement
Idaho - Electric System
TWELVE MONTHS ENDED DECEMBER 31, 2002
(OOO'S OF DOLLARS)
REVISED REBUTTAL CASE CALCULATION
Description
Pro Forma Rate Base
Proposed Rate of Return
Net Operating Income Requirement
Pro Forma Net Operating Income
Net Operating Income Deficiency
Conversion Factor
Revenue Requirement
Total General Business Revenues
Percentage Revenue Increase
I IDAHO
$427 880
720%
$41 590
$21 728
$19 862
63926135
$31 070
$146 248
21.24%
Exhibit No. 26 Page 2 of 12
D. Falkner
Avista Corporation
Line
Number
VISTA UTILITIES
CALCULATION OF CONVERSION FACTOR: IDAHO ELECTRIC
TWELVE MONTHS ENDED DECEMBER 31, 2002
Description
Revenue:
Expense:
Uncollectibles (1)
Commission Fees (2)
Idaho Income Tax (3)
Total Expense
Net Operating Income Before FIT
Federal Income Tax ~ 35%
REVENUE CONVERSION FACTOR
Factor
000000
003164
002577
010780
016521
983479
344218
639261
Exhibit No. 26, Page 3 of 12
D. Falkner
Avista Corporation
A VISTA UTILITIES
ELECTRIC RESULTS OF OPERATION
IDAHO PRO FORMA RESULTS - REBUTTAL
TWELVE MONTHS ENDED DECEMBER 31, 2002
(OOO'S OF DOLLARS)
Per Deferred Deferred Gain Colstrip 3 Colstrip KettleLineResultsFITon Office AFUDC Common Falls
No.DESCRIPTION Report Rate Base BuUdinl!Elimination AFUDC Disallow.
REVENUES
Total General Business $153,639
Interdepamnental Sales 110
Sales for Resale 22,051
Total Sales of Electricity 175 800
Other Revenue 19,067
Total Electric Revenue 194 867
EXPENSES
Productlon and Transl1llssion
Operating Expenses 144
Purchased Power 904
Depreciation and Amortization 575 218Taxes619
Total Production & Transl1llssion 105,242 218
Distnoution
Operating Expenses 887
Depreciation 670
Taxes 010
Total Distribution 16,567
Customer Accounting 102
Customer Service & Infonnation 016
Sales Expenses 385
Administrative & General
Operating Expenses 343
Depreciation 878
Taxes
Total Admin. & General 221
Total Electric Expenses 150 533 218
OPERATING INCOME BEFORE FIT 334 (218)
FEDERAL INCOME TAX
CuJTent Accrual 405
DefeJTed Income Taxes 746
NET OPERATING INCOME $35,675 $218)
RATE BASE
PLANT IN SERVICE
Intangi.ole $11 353
Production 247 926 229 313 009)TransmIssion 100 112
Distribution 257 643
General 363
Total Plant in Service 653,397 229 313 009)
ACCUMULATED DEPRECIATION 213,999 086 (1,574)ACCUM. PROVISION FOR AMORTIZATION 368
Total Accum. Depreciation & Amort.217 367 086 574)
GAIN ON SALE OF BUILDING (625)
DEFERRED TAXES (60 998)219
TOTAL RATE BASE $436 030 ($60 998)($406)143 313 ($1,435)
RATE OF RETURN 18%
Exhibit No. 26, Page 4 of 12
D. Falkner
A vista Corporation
A VISTA UTILITIES
ELECTRIC RESULTS OF OPERATION
IDAHO PRO FORMA RESULTS - REBUTTAL
TWELVE MONTHS ENDED DECEMBER 31, 2002
(OOO'S OF DOLLARS)
MOPS Weatherizn Hydro Eliminate
Line Deferred and DSM Customer Subtotal Revenue Relicensing Franchise
No.DESCRIPTION Costs Investment Advances Actual Adjustment Adj Fees
REVENUES
Total General Business $153 639 $15 947 $ (1,682)
Interdepartmental Sales 110
Sales for Resale 22,051
Total Sales of Electricity 175 800 947 682)
Other Revenue 067
Total Electric Revenue 194 867 947 682)
EXPENSES
Production and Transmission
Operating Expenses 144 257
Purchased Power 904
Depreciation and Amortization (59)734
Taxes 619
Total Production & Transmission (59)105 401 257
Distribution
Operating Expenses 887
Depreciation 670
Taxes 010 171 (3)(1,660)Total Distribution 567 171 (3)660)
Customer Accounting 102
Customer Service & Infonnation 016
Sales Expenses 385
Administrative & General
Operating Expenses 343
Depreciation 878
Taxes
Total Admin. & General 221
Total Electric Expenses (59)150 692 262 254 (1,660)
OPERATING INCOME BEFORE FIT 175 685 (254)(22)
FEDERAL INCOME TAX
Current Accrual 405 490 (89)(8)
Deferred Income Taxes (725)
NET OPERATING INCOME $38 $35 495 $10 195 ($165)($14)
RATE BASE
PLANT IN SERVICE
28.Intangible $11,353
Production 110 262,569
TransmIssion 100 112
Distribution (478)257 165
General 363
Total Plant in Service 110 (478)667 562
ACCUMULATED DEPRECIATION 216,511
ACCUM. PROVISION FOR AMORTIZATION 368
Total Accum. Depreciation & Amort.219 879
GAIN ON SALE OF BUILDING (625)
DEFERRED TAXES (60 779)
TOTAL RATE BASE 110 ($478)$386 279
RATE OF RETURN
Exhibit No. 26, Page 5 of 12
D. Falkner
A vista Corporation
A VISTA UTILITIES
ELECTRIC RESULTS OF OPERATION
IDAHO PRO FORMA RESULTS - REBUTTAL
TWELVE MONTHS ENDED DECEMBER 31, 2002
(OOO'S OF DOLLARS)
Injuries Restate
Line Property Uncollect.Regulatory and Debt Idaho
No.DESCRIPTION Tax Expense Expense Damal!es FIT Interest PCA
REVENUES
Total General Business $ (24 862)
Interdepamnental Sales
Sales for Resale
Total Sales of Electricity (24 862)
Other Revenue
Total Electric Revenue (24,862)
EXPENSES
Production and Transnnssion
Operating Expenses (11 261)
Purchased Power
Depreciation and Amortization
Taxes
Total Production & TransmissIon (11 261)
Distribution
Operating Expenses
Depreciation
Taxes (266)Total Distribution (266)
Customer Accounting (66)(79)Customer Service & Infonnation
Sales Expenses
Administrative & General
Operating Expenses (52)(64)
Depreciation
Taxes
Total Admin. & General (52)(64)
Total Electric Expenses (65)(51)(11 670)
OPERATING INCOME BEFORE FIT (36)(16)(13 192)
FEDERAL INCOME TAX
Current Accrual (13)(6)663)184 (8,559)
Deferred Income Taxes 112 947
NET OPERATING INCOME ($23)$42 ($10)$33 551 ($3 184)($8 580)
RATE BASE
PLANT IN SERVICE
Intangible
Production
Transmission
Distnoution
General
Total Plant in Service
ACCUMULATED DEPRECIATION
ACCUM. PROVISION FOR AMORTIZATION
Total Accum. Depreciation & Amort.
GAIN ON SALE OF BUILDING
DEFERRED TAXES
TOT AL RATE BASE
RATE OF RETURN
Exhibit No. 26, Page 6 of 12
D. Falkner
A vista Corporation
A VISTA UTILITIES
ELECTRIC RESULTS OF OPERATION
IDAHO PRO FORMA RESULTS - REBUTIAL
TWELVE MONTHS ENDED DECEMBER 31, 2002
(OOO'S OF DOLLARS)
Nez Perce Remove PGE Monetiz Payroll
Line Settlement Mise Tariffs Amort Clearing Coyote Small
No.DESCRIPTION Adjustment Adjustment Adjustment Adjustment Sprin2s 2 Generation
REVENUES
Total General Business $3,096
Interdepartmental Sales
Sales for Resale
Total Sales of Electricity 096
Other Revenue
Total Electric Revenue 096
EXPENSES
Production and TranslDlsslon
Operating Expenses (24)150 296
Purchased Power
Depreciation and Amortization 926 887 629 232
Taxes
Total Production & Transmission (24)926 887 150 949 288
Distribution
Operating Expenses 103
Depreciation
Taxes (5)(32)(3)
Total Distribution (32)(3)
Customer Accounting
Customer Service & Infonnation 542)
Sales Expenses
Administrative & General
Operating Expenses 122
Depreciation
Taxes
Total Admin. & General 122
Total Electric Expenses (24)463 887 432 917 285
OPERATING INCOME BEFORE FIT 633 (2,887)(432)(2,917)(285)
FEDERAL INCOME TAX
Current Accrual 221 (151)(1,021)(100)
Deferred Income Taxes 010)
NET OPERATING INCOME $16 $412 ($1 877)($281)($1 896)($185)
RATE BASE
PLANT IN SERVICE
Intangible
Production 39,096 453
TranslDlssion
Distribution
General
Total Plant in Service 096 453
ACCUMULATED DEPRECIATION 629 191
ACCUM. PROVISION FOR AMORTIZATION
Total Accum. Depreciation & Amort.629 191
GAIN ON SALE OF BUILDING
DEFERRED TAXES (502)
TOTAL RATE BASE $36 965 343
RATE OF RETURN
Exhibit No. 26, Page 7 of 12
D. Falkner
A vista Corporation
A VISTA UTILITIES
ELECTRIC RESULTS OF OPERATION
IDAHO PRO FORMA RESULTS - REBlITT AL
TWELVE MONTHS ENDED DECEMBER 31, 2002
(OOO'S OF DOLLARS)
Capital Costs Pro Forma Pro Forma
Line Small Gen Power Pro Forma Pro Forma Labor
No.DESCRIPTION Options Supply Pension Insurance Non-Exec
REVENUES
Total General Business
Interdepartmental Sales
Sales for Resale (5,075)
Total Sales of Electricity (5,075)
Other Revenue (14 366)
Total Electric Revenue (19 441)
EXPENSES
Production and TransmissIOn
Operating Expenses (13,915)237 $390
Purchased Power 655
Depreciation and Amortization $184
Taxes
Total Production & TransmissIon 184 260)237 390
Distribution
Operating Expenses 163 272
Depreciation
Taxes (131)(7)(11)(12)
Total Distribution (131)156 (11)260
Customer Accounting 140
Customer Service & Infonnation
Sales Expenses
Administrative & General
Operating Expenses 193 009 273
Depreciation
Taxes
Total Admin. & General 193 009 273
Total Electric Expenses 184 391)684 998 084
OPERATING INCOME BEFORE FIT (184)(12,050)(684)(998)084)
FEDERAL INCOME TAX.
CuJ'Tent Accrual 218)(239)(349)(379)
DefeJ'Ted Income Taxes (64)
NET OPERATING INCOME ($120)($7 832)($445)($649)($705)
RATE BASE
PLANT IN SERVICE
Intangible
Production $829
Transtnlssion
Distribution
General
Total Plant in Service 829
ACCUMULATED DEPRECIATION
ACCUM. PROVISION FOR AMORTIZATION
Total Accum. Depreciation & Amort.
GAIN ON SALE OF BUILDING
DEFERRED TAXES (290)
TOTAL RATE BASE $539
RATE OF RETURN
Exhibit No. 26, Page 8 of 12
D. Falkner
A vista Corporation
A VISTA UTILITIES
ELECTRIC RESULTS OF OPERATION
IDAHO PRO FORMA RESULTS - REBUTTAL
TWELVE MONTHS ENDED DECEMBER 31, 2002
(OOO'S OF DOLLARS)
Pro Forma Pro Forma Pro Forma Pro Forma DIRECT
Line Labor Vegetation Transmission Cabinet Gorge Pro Forma
No.DESCRIPTION Executive Mana2ement Proiect Project TOTAL
REVENUES
Total General Business $146 138
Interdepartmental Sales 110
Sales for Resale 976
Total Sales of Electricity 163 224
Other Revenue 701
Total Electric Revenue 167 925
EXPENSES
Production and Transmission
Operating Expenses $23 $150 447
Purchased Power 559
Depreciation and Amortization $252 10,846
Taxes 136 894
Total Production & Transmission 150 388 746
Distn"bution
Operating Expenses 070 495
Depreciation 670
Taxes (13)(4)097
Total Distn"bution 057 (4)262
Customer Accounting 296
Customer Service & Infonnation 480
Sales Expenses 421
Administrative & General
Operating Expenses 17,889
Depreciation 878
Taxes
Total Admin. & General 768
Total Electric Expenses 207 384 143 973
OPERATING INCOME BEFORE FIT (23)(1,207)(384)(26)952
FEDERAL INCOME TAX
Current Accrual (8)(422)(285)(65)774
Deferred Income Taxes 150 466
NET OPERATING INCOME ($15)($785)($249)($17)$20 712
RATE BASE
PLANTIN SERVICE
Intangt"ble 353
Production 261 310 208
TransmissIOn 050 109,162
Distn"bution 257 165
General 363
Total Plant in Service 050 261 724 251
ACCUMULATED DEPRECIATION 126 218 458
ACCUM. PROVISION FOR AMORTIZATION 368
Total Accum. Depreciation & Amort.126 221,826
GAlN ON SALE OF BUILDING (625)
DEFERRED TAXES (75)(28)(61 593)
TOTAL RATE BASE 849 232 $440 207
RATE OF RETURN 71%
Exhibit No. 26, Page 9 of 12
D. Falkner
A vista Corporation
A VISTA UTILITIES
ELECTRIC RESULTS OF OPERATION
IDAHO PRO FORMA RESULTS - REBUTI AL
TWELVEMONTHS ENDED DECEMBER 3 I, 2002
(OOO'S OF DOLLARS)
Staff Adj Staff Adj Staff Adi Staff Adi Staff Adi
Line Cabinet Gorge Boulder Park Skookumchuck Deferred FIT Coyote Springs
No.DESCRIPTION Depr - E3
UNCONTESTED STAFF ADJUSTMENTS
REVENUES
Total General Business
Interdepartmental Sales
Sales for Resale
Total Sales of Electricity
Other Revenue (4)
Total Electric Revenue (4)
EXPENSES
Production and Transmission
Operating Expenses (2)(174)
Purchased Power
Depreciation and Amortization (88)(10)(94)
Taxes (2)(4)
Total Production & Transmission (2)(87)(16)(268)
Distribution
Operating Expenses
DeprecIation
Taxes
Total Distribution.
Customer Accounting
Customer Service & Information
Sales Expenses
Administrative & General
Operating Expenses
Depreciation
Taxes
Total Admin. & General
Total Electric Expenses 265
OPERATING INCOME BEFORE FIT 265
FEDERAL INCOME TAX
Current Accrual
Deferred Income Taxes
NET OPERATING INCOME $57 $172
RATE BASE
PLANT IN SERVICE
Intangible
Production (111)(199)(3,324)
TransmissIOn 519
Distribution
General
Total Plant in Service (Ill)(199)805)
ACCUMULATED DEPRECIATION (44)(68)(95)
ACCUM. PROVISION FOR AMORTIZATION
Total Accum. Depreciation & Amort.(44)(68)(95)
GAIN ON SALE OF BUILDING
DEFERRED TAXES (31)966)
TOTAL RATE BASE ($110)$13 ($104)($9 966)($1 621)
RATE OF RETURN ($17)($87)($28)($1,442)($504)
Exhibit No. 26, Page 10 of 12
D. Falkner
A vista Corporation
A VISTA UTILITIES
ELECTRIC RESULTS OF OPERATION
IDAHO PRO FORMA RESULTS - REBUTI' AL
TWELVE MONTHS ENDED DECEMBER 31 , 2002
(OOO'S OF DOLLARS)
Staff Adi Staff Adj Staff Adj Staff Adj Staff Adj
Line Small Gen Labor (Non-Labor (Exec)Depreciation Corp. Fees
No.DESCRIPTION Options - E8 Exec) - E9 EIO E14 ElS
REVENUES
Total General Business
Interdepartmental Sales
Sales for Resale
Total Sales of Electricity
Other Revenue
Total Electric Revenue
EXPENSES
ProductIon and Transmission
Operating Expenses (12)
Purchased Power
Depreciation and Amortization (137)
Taxes
Total ProductIon & Transmission (12)(137)
Distribution
Operating Expenses (2)
Depreciation (348)
Taxes
Total Distribution (1)(341)
Customer Accounting (7)
Customer Service & Information
Sales Expenses (1)
Administrative & General
Operating Expenses (19)(17)(115)
DepreciatIon (186)
Taxes
Total Admin. & General (19)(17)(186)(115)
Total Electric Expenses (40)(14)(664)(114)
OPERATING INCOME BEFORE FIT 664 114
FEDERAL INCOME TAX
Current Accrual 232
Deferred Income Taxes
NET OPERATING INCOME $26 $432 $74
RATE BASE
PLANT IN SERVICE
Intangible
Production (829)
TransmIssion
Distribution
General
Total Plant in Service (829)
ACCUMULATED DEPRECIATION
ACCUM. PROVISION FOR AMORTIZATION
Total Accum. Depreciation & Amort.
GAIN ON SALE OF BUILDING
DEFERRED TAXES 290
TOTAL RATE BASE ($539)
RATE OF RETURN ($78)($41)($14)($676)($116)
Exhibit No. 26, Page 11 of 12
D. Falkner
A vista Corporation
A VISTA UTILITIES
ELECTRIC RESULTS OF OPERATION
IDAHO PRO FORMA RESULTS - REBUTI AL
TWELVE MONTHS ENDED DECEMBER 31, 2002
(OOO'S OF DOLLARS)
Staff Adi Staff Adi Staff Adi Staff Adi AvistaLineMisc. Exp WECC Exp Adv. Exp Avista Foun-Rev. Restate RebuttalNo.DESCRIPTION E17 E18 E19 dation - E20 Debt Int TOTAL
REVENUES
Total General Business $146 138Interdepartmental Sales 110Sales for Resale 976
Total Sales of Electricity 163,224Other Revenue 697Total Electric Revenue 167 921
EXPENSES
Production and Transmission
Operating Expenses (15)247Purchased Power 559Depreciation and Amortization 517Taxes889Total Production & Transnussion (15)212
Distribution
Operating Expenses 493Depreciation322Taxes109Total Distribution 15,924
Customer Accounting 289Customer Service & Infonnation 480Sales Expenses (56)364
Administrative & General
Operating Expenses (388)(8)342Depreciation692Taxes
Total Admin. & General (384)(8)040
Total Electric Expenses 384 (15 142 309
OPERATING INCOME BEFORE FIT 384 612
FEDERAL INCOME TAX
Current Accrual 134 420Deferred Income Taxes 464
NET OPERATING INCOME $250 $10 $36 $64 $21 728
RATE BASE
PLANT IN SERVICE
Intangible 1 1,353Production305745Transmission110681Distribution257165General363Total Plant in Service 721 307
ACCUMULATED DEPRECIATION 218 251ACCUM. PROVISION FOR AMORTIZATION 368Total Accum. Depreciation & Amort 221,619GAIN ON SALE OF BUILDING (625)DEFERRED TAXES 183
TOTAL RATE BASE $427 880
RATE OF RETURN ($391)($16)($56)($8)$100 08%
Exhibit No. 26, Page 12 of 12
D. Falkner
A vista Corporation
DAVID J. MEYER
VICE PRESIDENT AND CHIEF COUNSEL FOR
REGULATORY AND GOVERNMENTAL AFF AIRS
VISTA CORPORATION
O. BOX 3727
1411 EAST MISSION AVENUE
SPOKANE, WASHINGTON 99220-3727
TELEPHONE: [phone]
FACSIMILE: [phone]
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE APPLICATION
OF A VISTA CORPORATION FOR THE
AUTHORITY TO INCREASE ITS RATES
AND CHARGES FOR ELECTRIC AND
NATURAL GAS SERVICE TO ELECTRIC AND
NATURAL GAS CUSTOMERS IN THE STATE
OF ID~O
CASE NO. A VU-04-
EXHIBIT NO. 27
DON M. FALKNER
FOR A VISTA CORPORATION
(NATURAL GAS ONLY)
A VISTA UTll..ITIES
GAS RESULTS OF OPERATION
IDAHO PRO FORMA RESUL TS-REBUTT AL POSITION
TWELVE MONTHS ENDED DECEMBER 31, 2002
(OOO'S OF DOLLARS)
WITH PRESENT RATES WITH PROPOSED RATES
Actual Per Proposed Pro Forma
Line Results Total Pro Forma Revenues &Proposed
No.DESCRIPTION Report Adjustments Total Related Exp Total
REVENUES
Total General Business $58 983 $ (8,008)$50,975 $4,061 $55,036
Total Transportation 198 (254)944 944
Other Revenues 884 (228)656 656
Total Gas Revenues 61,065 490)52,575 061 56,636
EXPENSES
Exploration and Development
Production
City Gate Purchases 42,560 (6,922)35,638 35,638
Purchased Gas Expense
Net Nat Gas Storage Trans
Total Production 42,700 897)35,803 803
Underground Storage
Operating Expenses 134 134 134
Depreciation III (6)105 \OSTaxes
Total Underground Storage 286 (2)284 284Distribution
Operating Expenses 987 220 207 207
Depreciation 125 125 125
Taxes 505 (1,156)349 393
Total Distribution 617 (936)681 725
Customer Accounting 049 064 077Customer Service & Infonnanon 530 (270)260 260
Sales Expenses 214 224 224Administrative & General
Operating Expenses 572 666 676
Depreciation 618 (37)581 581Taxes
Total Admin. & General 200 260 270Total Gas Expense 56,596 020 48,576 643
OPERATING INCOME BEFORE FIT 469 (470)999 994 993
FEDERAL INCOME TAX
Current Accrual 200 455 655 398 053Deferred FIT (2,966)(2,917)(2,917)Amort ITC (18)(18)(18)
NET OPERATING INCOME 253 ($974)279 $2,596 $5,875
RATE BASE: PLANT IN SERVICE
Underground Storage 041 041 041Distribution Plant 598 940 88,538 538General Plant 709 709 709
Total Plant in Service 348 940 100,288 100,288ACCUMULATED DEPRECIATION
Underground Storage 294 294 294
Distribution Plant 397 26,397 26,397
General Plant 702 702 702
Total Accurn. Depreciation 31,393 31,393 31,393
DEFERRED FIT 831)831)(9,831)
GAS INVENTORY 572 572 572GAIN ON SALE OF BUll..DING (197)(197)(197)
TOTAL RATE BASE $67,955 ($7,516)$60,439 $60 439
RATE OF RETURN 26%5.43%72%
Exhibit No. 27, Page 1 of 10
D. Falkner
Avista Corporation
Line
No.
VISTA UTILITIES
Calculation of General Revenue Requirement
Idaho-Gas
TWELVE MONTHS ENDED DECEMBER 31 2002
(OOO's OF DOLLARS)
REVISED REBUTTAL CASE CALCULATION
Description
Pro Forma Rate Base
Proposed Rate of Return
Net Operating Income Requirement
Pro Forma Net Operating Income
Net Operating Income Deficiency
Conversion Factor
Revenue Requirement
Total General Business Revenues
Percentage Revenue Increase
I IDAHO
$60 439
720%
875
279
596
639261
061
$51 919
82%
Exhibit No. 27, Page 2 of 10
D. Falkner
Avista Corporation
Line
Number
VISTA UTILITIES
CALCULATION OF CONVERSION FACTOR: IDAHO GAS
TWELVE MONTHS ENDED DECEMBER 31, 2002
Description
Revenues
Expense:
Uncollectibles (1)
Commission Fees (2)
Idaho Income Tax (3)
Total Expense
Net Operating Income Before FIT
Federal Income Tax ~ 35%
REVENUE CONVERSION FACTOR
Factor
1.000000
003164
002577
010780
016521
983479
0.344218
639261
Exhibit No. 27 Page 3 of 10
D. Falkner
Avista Corporation
A VISTA UTll..ITIES
GAS RESULTS OF OPERATION
IDAHO PRO FORMA RESULTS - REBUTTAL
TWELVE MONTHS ENDED DECEMBER 31, 2002
(OOO'S OF DOLLARS)
Per Deferred Deferred Gain Weatherization
Line Results FIT on Office Gas and DSM
No.DESCRIPTIO N Report Rate Base BuUdin!!:Inventory Investment
REVENUES
Total General Business $58,983
Total Transportation 198
Other Revenues 884
Total Gas Revenues 065
EXPENSES
Exploration and Development
Production
City Gate Purchases 42,560
Purchased Gas Expense
Net Nat Gas Storage Trans
Total Production 700
Underground Storage
Operating Expenses 134
Depreciation 111
Taxes
Total Underground Storage 286
Distribution
Operating Expenses 987
Depreciation 125
Taxes 505
Total Distribution 617
Customer Accounting 049
Customer Service & Information 530
Sales Expenses 214
Administrative & General
Operating Expenses 572
Depreciation 618
Taxes
Total Admin. & General 200
Total Gas Expense 596
OPERATING INCOME BEFORE FIT 469
FEDERAL INCOME TAX
Cun-ent Accrual 200
Deferred FIT 966)
Amort lIC (I 8)
NET OPERATING INCOME $4,253
RATE BASE: PLANT IN SERVICE
Underground Storage 041
Distribution Plant 598 941
General Plant 709
Total Plant in Service 99,348 941
ACCUMULATED DEPRECIATION
Underground Storage 294
Distribution Plant 26,397
General Plant 702
Total Accum. Depreciation 31,393
DEFERRED FIT 261)
GAS INVENTORY 572
GAIN ON SALE OF BUILDING (197)
TOTAL RATE BASE $67,955 ($7,261)($128)$1,572 $941
RATE OF RETURN 26%
Exhibit No. 27, Page 4 of 10
D. Falkner
Avista Corporation
A VISTA UTILITIES
GAS RESULTS OF OPERATION
IDAHO PRO FORMA RESULTS - REBUTTAL
TWELVE MONTHS ENDED DECEMBER 31, 2002
(OOO'S OF DOLLARS)
Eliminate
Line Customer Subtotal Franchise Property Uncollectible
No.DESCRIPTION Advances Actual Fees Tax Expense
REVENUES
Total General Business $58,983 $ (1,082)
Total Transportation 198 (14)
Other Revenues 884
Total Gas Revenues 61,065 (1,096)
EXPENSES
Exploration and Development
Production
City Gate Purchases 42,560
Purchased Gas Expense
Net Nat Gas Storage Trans
Total Production 42,700
Underground Storage
Operating Expenses 134
Depreciation 111
Taxes
Total Underground Storage 286
Distribution
Operating Expenses 987
Depreciation 125
Taxes 505 (1,148)
Total Distribution 617 (1,148)
Customer Accounting 049 (113)
Customer Service & Infonnation 530
Sales Expenses 214
Administrative & General
Operating Expenses 572
Depreciation 618
Taxes
Total Admin. & General 200
Total Gas Expense 56,596 (1,148 112
OPERATING INCOME BEFORE FIT 4,469 (5)112
FEDERAL INCOME TAX
Current Accrual 200 (2)
Deferred FIT 966)
Amort ITC (18)
NET OPERATING INCOME $4,253 $34 ($3)$73
RATE BASE: PLANT IN SERVICE
Underground Storage 041
Distribution Plant (1)538
General Plant 709
Total Plant in Service (1)100 288
ACCUMULATED DEPRECIA nON
Underground Storage 294
Distribution Plant 26,397
General Plant 702
Total Accum. Depreciation 31,393
DEFERRED FIT (7,192)
GAS INVENTORY 572
GAIN ON SALE OF BUll.DING (197)
TOTAL RATE BASE ($1)$63,078
RATE OF RETURN
Exhibit No. 27, Page 5 of 10
D. Falkner
A vista Corporation
A VISTA UTILITIES
GAS RESULTS OF OPERATION
IDAHO PRO FORMA RESULTS - REBUTTAL
TWELVE MONTHS ENDED DECEMBER 31, 2002
(OOO'S OF DOLLARS)
Regulatory Injuries Restate Payroll Revenue
Line Expense and Debt Clearing Gas Supply
No.DESCRIPTION Adjustment Damages FIT Interest Adjustment
REVENUES
Total General Business $ (6,949)
Total Transportation (240)
Other Revenues (228)
Total Gas Revenues (7,417)
EXPENSES
Exploration and Development
Production
City Gate Purchases (6,922)
Purchased Gas Expense
Net Nat Gas Storage Trans
Total Production (6,922)
Underground Storage
Operating Expenses
Depreciation
Taxes
Total Underground Storage
Distribution
Operating Expenses
Depreciation
Taxes (1)(2)
Total Distribution (2)
Customer Accounting (23)
Customer Service & Information (279)
Sales Expenses
Administrative & General
Operating Expenses (83)(19)
Depreciation
Taxes
Total Admin. & General (83)(19)
Total Gas Expense (82 107 (7,245
OPERATING INCOME BEFORE FIT (6)(107)(172)
FEDERAL INCOME TAX
Current Accrual (2)576 (37)(60)
Deferred FIT
Arnort ITC
NET OPERATING INCOME ($4)$53 ($71)($576)($70)($112)
RATE BASE: PLANT IN SERVICE
Underground Storage
Distribution Plant
General Plant
Total Plant in Service
ACCUMULATED DEPRECIATION
Underground Storage
Distribution Plant
General Plant
Total Accum. Depreciation
DEFERRED FIT
GAS INVENTORY
GAIN ON SALE OF BUll.nING
TOTAL RATE BASE
RATE OF RETURN
Exhibit No. 27, Page 6 of 10
D. Falkner
A vista Corporation
A VISTA UTILITIES
GAS RESULTS OF OPERATION
IDAHO PRO FORMA RESULTS - REBUTTAL
TWELVE MONTHS ENDED DECEMBER 31, 2002
(OOO'S OF DOLLARS)
Pro Forma Pro Forma DIRECT
Line Pro Forma Pro Forma Labor Labor Pro Forma
No.DESCRIPTION Pension Insurance Non-Exec Executive Total
REVENUES
Total General Business $50,952
Total Transportation 944
Other Revenues 656
Total Gas Revenues 552
EXPENSES
Exploration and Development
Production
City Gate Purchases 35,638
Purchased Gas Expense
Net Nat Gas Storage Trans
Total Production 35,803
Underground Storage
Operating Expenses 134
Depreciation 111
Taxes
Total Underground Storage 290
Distribution
Operating Expenses 111 207
Depreciation 125
Taxes (2)(2)(3)349
Total Distribution (2)108 681
Customer Accounting 068
Customer Service & Information 261
Sales Expenses 234Administrative & General
Operating Expenses 204 812Depreciation618
Taxes
Total Admin. & General 204 4,441Total Gas Expense 168 202 268 48,778
OPERATING INCOME BEFORE FIT (168)(202)(268)(13)774
FEDERAL INCOME TAX
Current Accrual (59)(71)(94)(5)554
Deferred FIT (2,917)
Amort ITC
NET OPERATING INCOME ($109)($131)($174)($8)$3,155
RATE BASE: PLANT IN SERVICE
Underground Storage 041Distribution Plant 88,538
General Plant 709
Total Plant in Service 100,288
ACCUMULATED DEPRECIATION
Underground Storage 294
Distribution Plant 26,397
General Plant 702
Total Accum. Depreciation 393
DEFERRED FIT (7,192)GAS INVENTORY 572
GAIN ON SALE OF BUILDING (I 97
TOTAL RATE BASE $63,078
RATE OF RETURN 00%
Exhibit No. 27, Page 7 of 10
D. Falkner
A vista Corporation
AVISTA UTILITIES
GAS RESULTS OF OPERATION
IDAHO PRO FORMA RESULTS - REBUTTAL
TWELVE MONTHS ENDED DECEMBER 31, 2002
(OOO'S OF DOLLARS)
Staff Adj Staff Adj Staff Adj Staff Adj Staff Ad
Line Deferred FIT Labor (Exec)Labor (Non-Depreciation Misc Exp
No.DESCRIPTION Exec) - G4
UNCONTESTED STAFF ADJUSTMENTS
REVENUES
Total General Business
Total Transportation
Other Revenues
Total Gas Revenues
EXPENSES
Exploration and Development
Production
City Gate Purchases
Purchased Gas Expense
Net Nat Gas Storage Trans
Total Production
Underground Storage
Operating Expenses
Depreciation (6)
Taxes
Total Underground Storage (6)
Distribution
Operating Expenses
Depreciation
Taxes
Total Distribution
Customer Accounting (4)
Customer Service & Infonnation (I)
Sales Expenses (I)Administrative & General
Operating Expenses (3)(4)(111)
Depreciation (37)
Taxes
Total Admin. & General (3)(4)(37)(109)
Total Gas Expense (3)(10)(43 (109
OPERATING INCOME BEFORE FIT 109
FEDERAL INCOME TAX
Current Accrual
Deferred FIT
Amort IIC
NET OPERATING INCOME
RATE BASE: PLANT IN SERVICE
Underground Storage
Distribution Plant
General Plant
Total Plant in Service
ACCUMULATED DEPRECIATION
Underground Storage
Distribution Plant
General Plant
Total Accum. Depreciation
DEFERRED FIT 639)
GAS INVENTORY
GAIN ON SALE OF BUILDING
TOTAL RATE BASE ($2 639)
RATE OF RETURN
Exhibit No. 27, Page 8 of 10
D. Falkner
Avista Corporation
AVISTA UTILITIES
GAS RESULTS OF OPERATION
IDAHO PRO FORMA RESULTS - REBUTTAL
TWELVE MONTHS ENDED DECEMBER 31, 2002
(OOO'S OF DOLLARS)
Staff Adj St~ff Adj Staff Adi Staff Adj Staff Adj
Line Corp Fees Adv Exp Avista Foun-Actual Thrm ScmM
No.DESCRIPTION GIO Gll dation - G12 Usal1;e - G13 Allocator-G 14
REVENUES
Total General Business $23
Total Transportation
Other Revenues
Total Gas Revenues
EXPENSES
Exploration and Development
Production
City Gate Purchases
Purchased Gas Expense
Net Nat Gas Storage Trans
Total Production
Underground Storage
Operating Expenses
Depreciation
Taxes
Total Underground Storage
Distribution
Operating Expenses
Depreciation
Taxes
Total Distribution
Customer Accounting
Customer Service & Infonnation
Sales Expenses (9)
Administrative & General
Operating Expenses (26)(2)
Depreciation
Taxes
Total Admin. & General (26)(2)
Total Gas Expense (26)(9)
OPERATING INCOME BEFORE FIT
FEDERAL INCOME TAX
Current Accrual (2)
DefeITed FIT
Amort ITC
NET OPERATING INCOME
RATE BASE: PLANT IN SERVICE
Underground Storage
Distribution Plant
General Plant
Total Plant in Service
ACCUMULATED DEPRECIATION
Underground Storage
Distribution Plant
General Plant
Total Accum. Depreciation
DEFERRED FIT
GAS INVENTORY
GAIN ON SALE OF BUILDING
TOTAL RATE BASE
RATE OF RETURN
Exhibit No. 27, Page 9 of 10
D. Falkner
Avista Corporation
A VISTA UTILITIES
GAS RESULTS OF OPERATION
IDAHO PRO FORMA RESULTS - REBUTTAL
TWELVE MONTHS ENDED DECEMBER 31 , 2002
(OOO'S OF DOLLARS)
Avista
Line Revised Rebuttal
No.DESCRIPTION Restate Debt Total
REVENUES
Total General Business
Total Transportation
Other Revenues
Total Gas Revenues
EXPENSES
Exploration and Development
Production
City Gate Purchases
Purchased Gas Expense
Net Nat Gas Storage Trans
Total Production
Underground Storage
Operating Expenses
Depreciation
Taxes
Total Underground Storage
Distribution
Operating Expenses
Depreciation
Taxes
Total Distribution
Customer Accounting
Customer Service & Infonnation
Sales Expenses
Administrative & General
Operating Expenses
Depreciation
Taxes
Total Admin. & General
Total Gas Expense
OPERATING INCOME BEFORE FIT
FEDERAL INCOME TAX
Current Accrual
Deferred FIT
Amort ITC
NET OPERATING INCOME ($23)
RATE BASE: PLANT IN SERVICE
Underground Storage
Distribution Plant
General Plant
Total Plant in Service
ACCUMULATED DEPRECIATION
Underground Storage
Distribution Plant
General Plant
Total Accurn. Depreciation
DEFERRED FIT
GAS INVENTORY
GAIN ON SALE OF BUILDING
TOTAL RATE BASE
RATE OF RETURN
$50,975
944
656
52,575
35,638
35,803
134
105
284
207
125
349
681
064
260
224
666
581
260
576
999
655
(2,917)
(18)
$3,279
041
88,538
709
100,288
294
26,397
702
393
831)
572
( 197)
$60,439
5.43%
Exhibit No. 27, Page 10 of 10
D. Falkner
A vista Corporation