20060126final_order_no_29962.pdf

Office of the Secretary
Service Date
January 26, 2006
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE APPLICATION
OF A VISTA CORPORATION FOR AN
ACCOUNTING ORDER REGARDING
TREATMENT OF CERTAIN ASSET
RETIREMENT OBLIGATIONS RESULTING
FROM IMPLEMENTATION OF SF AS 143
CASE NO. A VU-O5-
A VU-O5-
ORDER NO. 29962
On November 30, 2005, Avista Corporation ("Avista" or "Company ) filed an
Application with the Idaho Public Utilities Commission ("Commission ) seeking an accounting
order authorizing the Company to treat certain asset retirement obligations ("AROs ) for the
current and future fiscal years in accordance with Statement of Financial Accounting Standards
(SFAS) 143. Pursuant to Idaho Code 9 61-524, the Commission is empowered to establish a
system of accounts to be kept by public utilities subject to its jurisdiction.
In its Application, A vista has requested an accounting order authorizing the
Company to (1) record, as a regulatory asset or a regulatory liability, the cumulative financial
statement impact resulting from the Company s implementation of SF AS 143; and (2) record, on
an ongoing basis, as a regulatory asset or a regulatory liability, an amount equal to the difference
between the annual SPAS 143 accretion and depreciation expense and the annual depreciation
expense based on Commission-approved depreciation rates. Under SF AS 143, entities are
required to recognize and account for certain asset retirement obligations in a manner different
from the way that A vista and other public utilities have traditionally recognized and accounted
for such costs. Specifically, if a legally enforceable ARO, as defined by SPAS 143 , is deemed to
exist, an entity must measure and record the liability for the ARO on its books.
Avista is required to implement SPAS 143 as clarified by FASB interpretation (FIN)
47 in order to comply with generally accepted accounting principles. Due to the lack of an active
market for AROs, A vista intends to use the expected present value method to determine its ARO
liabilities and offsetting assets. The accounting changes proposed by A vista are supported by a
series of workpapers identifying the proposed journal entries the Company believes are needed
to comply with SF AS 143. The Company states that the proposed accounting treatment will
ORDER NO. 29962
have no impact for ratemaking purposes.The Company further states that nothing in the
Application is intended to request any approval regarding future ratemaking treatment.
STAFF RECOMMENDATION
On December 20, 2005, the Commission issued a Notice of Application and a Notice
of Modified Procedure with regards to this matter. During the written comment period allowed
by the Commission, only Staff filed written comments.
Although Staffs review identified immaterial inconsistencies in Avista
Application, Staff recommended approval for A vista to record, as a regulatory asset or regulatory
liability, the cumulative financial statement impact resulting from the implementation of SF
143, and to record the ongoing annual differences between the SF AS 143 depreciation and
accretion expenses and the annual depreciation expenses that are currently authorized by the
Commission in depreciation rates.
Staff recommended that the Company record in separate sub-accounts the
depreciation expense for asset retirement costs and the accretion of the liability for the asset
retirement obligations. Staff believes this will aid tracking these items in subsequent cases.
Staff also recommended that the Commission require in its accounting order that
A vista file annually and as part of its rate case filings, all journal entries made under the
requirements of SPAS 143, including documents supporting the determination of regulatory
assets and liabilities and related dollar amounts. Due to the nature of these entries, Staff will be
reviewing the underlying support for them during analyses of assets and depreciation. As a
result, Staff recommended that the Company maintain financial records associated with these
entries similar to the long-lived assets to which they relate.
Because these new accounting entries will not change the level of the costs included
in rates, Staff made no recommendation regarding the treatment of SF AS 143 regulatory assets
and regulatory liabilities in future rate cases.
ORDER
IT IS HEREBY ORDERED that the Application of A vista Corporation for an
accounting order for the treatment of certain asset retirement obligations resulting from
implementation of SPAS 143 , Case Nos. AVU-05-9 and AVU-05-, is approved. The
Company is directed to record in separate sub-accounts the depreciation expense for asset
ORDER NO. 29962
retirement costs and the accretion of the liability for the asset retirement obligation. The
Company is further directed to file annually and as part of its rate case filings, all journal entries
made under the requirements of SF AS 143, including documents supporting the determination of
regulatory assets and liabilities and related dollar amounts.
THIS IS A FINAL ORDER. Any person interested in this Order may petition for
reconsideration within twenty-one (21) days of the service date of this Order. Within seven (7)
days after any person has petitioned for reconsideration, any other person may cross-petition for
reconsideration. See Idaho Code 9 61-626.
DONE by Order of the Idaho Public Utilities Commission at Boise, Idaho this ;;J.fg
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day of January 2006.
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MARSHA H. SMITH, COMMISSIONER
ENNIS S. HANSE , COMMISSIONER
ATTEST:
Commission Secretary
O:A VU-05-A VU-05-09 _cg2
ORDER NO. 29962