20071121notice_of_application_avu.pdf

Office of the Secretary
Service Date
November 21 2007
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE APPLICATION
OF AVISTA CORPORATION DBAAVISTA
UTILITIES FOR AN ACCOUNTING
ORDER AUTHORIZING DEFERRAL OF
SETTLEMENT LEASE PAYMENTS
CASE NO. A VU-O7-
NOTICE OF APPLICATION
NOTICE OF
MODIFIED PROCEDURE
NOTICE OF
COMMENT/PROTEST DEADLINE
YOU ARE HEREBY NOTIFIED that on November 1 2007, Avista Corporation dba
Avista Utilities (Avista; Company) filed an Application with the Idaho Public Utilities
Commission (Commission) requesting an accounting order authorizing deferral of settlement
lease payments. The deferred accounting request pertains to costs to be incurred as a result of
the recent settlement of a lawsuit in the State of Montana over the use of the riverbed resulting
from the Company s ownership of the Noxon Rapids and Cabinet Gorge hydroelectric projects
located on the Clark Fork River.
Background
In October 2003, a lawsuit was originally filed against private owners of
hydroelectric dams in Montana, including A vista. In this lawsuit, the State of Montana alleged
that the hydroelectric facilities are located on state-owned riverbeds and the owners of the dams
have never paid lease payments to the State for occupying such lands. The lawsuit requested
lease payments prospectively and also requested damages for trespassing and unjust enrichment
for periods of time dating back to the construction of the respective dams in the 1950s.
The Montana State Court previously ruled on several pre-trial motions for summary
judgment, finding that, as a matter of law, the Clark Fork River was navigable and the State of
Montana owns the riverbeds, that such lands are school trust fund lands, and therefore, the
statutes of limitations have not run on the State of Montana s claims for prior damages. This left
only the issue of damages to be decided at time of trial, set for October 22, 2007, with the State
asserting $200 million owing by A vista for prior trespass since the dams were constructed, and
$8.4 million owing prospectively on an annual basis.
NOTICE OF APPLICATION
NOTICE OF MODIFIED PROCEDURE
NOTICE OF COMMENT/PROTEST DEADLINE
On October 19, 2007, the Company reached a settlement with the State of Montana
resolving this matter. Application, Appendix 2
, "
Memorandum of Negotiated Settlement
Terms.Pursuant to the settlement, Avista has agreed to make lease payments in the initial
amount of $4 million per year beginning February I , 2008, for the calendar year 2007, and
continuing through calendar year 2016, adjusted each year by the Consumer Price Index (CPI),
with no payment for prior damage claims.
The level of the payments, the start date of the payments, as well as other terms and
conditions of settlement, were all integral to the resolution of these claims. Because of the
State s insistence on an initial payment in February 2008 for the year 2007, Avista contends it is
necessary to have deferred accounting to address recovery of these costs.
On or before June 30, 2016, A vista and the State of Montana will determine whether
the annual lease payments remain consistent with the principles of law as applied to the facts and
negotiate an adjusted lease payment for the remaining term of Avista s Federal Energy
Regulatory Commission (FERC) license for its hydroelectric facilities on the Clark Fork River
which expires in 2046. If A vista and the State of Montana do not agree on an adjusted lease
payment, the parties will engage in advisory arbitration and submit the arbitrator
recommendation to the State Board of Land Commissioners (Land Board) for approval. The
settlement also contains provisions that could reduce the amount of Avista s lease payments as a
result of future judicial determinations in related cases or governmental actions.
A vista Corporation and the State of Montana will request a consent decree from the
Montana State Court adopting the terms of settlement, as well as final approval by the State
Land Board.
In this filing, the Company is requesting an Order allowing for the deferral of lease
payments. In the Company s next general rate case it will address the prudence and recovery of
the settlement lease payments, and propose an appropriate amortization period for future
recovery of the deferred costs. Avista contends that the Noxon Rapids and Cabinet Gorge
hydroelectric projects are the Company lowest-cost resources and are integral to the
Company s resource base. The proposed accounting treatment would provide the Company with
the opportunity to recover the costs associated with owning and operating these projects, while
customers receive the benefit from these low cost resources.
NOTICE OF APPLICATION
NOTICE OF MODIFIED PROCEDURE
NOTICE OF COMMENT/PROTEST DEADLINE
Proposed Accounting Treatment
A vista requests authority to defer the lease payments in Account 186 -
Miscellaneous Deferred Debits. The lease payments would be allocated to the Washington and
Idaho jurisdictions based on the production/transmission allocation in effect at the time that the
deferrals are made and placed in separate Washington and Idaho 186 - Accounts. Interest would
accrue on the Idaho share of the deferrals at the customer deposit rate. In the Company s next
general rate case, the Company would propose the recovery of an amortization of deferred lease
payments and accrued interest that would be deferred prior to the effective date of rates
established in the next general rate case. The amortization period would begin with the effective
date of the new rates established in the next general rate case. In that rate case, the Company
would also address recovery of the ongoing lease payments.
YOU ARE FURTHER NOTIFIED that the Commission has reviewed the filings of
record in Case No. A VU-07-10. The Commission has preliminarily determined that the public
interest regarding the Company s request for an accounting order may not require a hearing to
consider the issues presented and that the issues raised by the Application may be processed
under Modified Procedure, i., by written submission rather than by hearing. Reference
Commission Rules of Procedure, IDAPA 31.01.01.201-204.
YOU ARE FURTHER NOTIFIED that the Commission may not hold a hearing in
this proceeding unless it receives written protests or comments opposing the use of Modified
Procedure and stating why Modified Procedure should not be used.
31.01.01.203.
Reference IDAP A
YOU ARE FURTHER NOTIFIED that the deadline for filing written comments or
protests with respect to the Application and the Commission s use of Modified Procedure in
Case No. A VU-07-10 is Wednesday, December 19, 2007. Persons desiring a hearing must
specifically request a hearing in their written protests or comments.
YOU ARE FURTHER NOTIFIED that if no written comments or protests are
received within the deadline, the Commission may consider the matter on its merits and may
enter its Order without a formal hearing. If comments or protests are filed within the deadline
the Commission will consider them and in its discretion may set the matter for hearing or may
decide the matter and issue its Order based on the written positions before it. Reference IDAP
31.01.01.204.
NOTICE OF APPLICATION
NOTICE OF MODIFIED PROCEDURE
NOTICE OF COMMENT/PROTEST DEADLINE
YOU ARE FURTHER NOTIFIED that written comments concerning Case
No. A VU-07-10 should be mailed to the Commission and Avista at the addresses reflected
below.
Commission Secretary
Idaho Public Utilities Commission
PO Box 83720
Boise, ID 83720-0074
Street Address for Express Mail:
David J. Meyer, Esq.
Vice President and Chief Counsel of
Regulatory and Governmental Affairs
A vista Corporation
PO Box 3727
1411 E. Mission Avenue, MSC-
Spokane, W A 99220
E-mail: david.meyer~avistacorp.com472 W. Washington Street
Boise, ID 83702-5983
Kelly Norwood
Vice President - State and Federal Regulation
A vista Corporation
PO Box 3727
1411 E. Mission Avenue, MSC- 7
Spokane, WA 99220-3727
E-mail: kelly.norwood~avistacorp.com
All comments should contain the case caption and case number shown on the first page of this
document. Persons desiring to submit comments via e-mail may do so by accessing the
Commission s home page located at www.puc.idaho.gov . Click the "Comments and Questions
icon, and complete the comment form, using the case number as it appears on the front of this
document. These comments must also be sent to the Applicant at the e-mail addresses listed
above.
YOU ARE FURTHER NOTIFIED that the Application in Case No. AVU-07-
may be viewed at www.puc.idaho.gov by clicking on "File Room" and "Electric Cases " or can
be viewed during regular business hours at the Idaho Public Utilities Commission, 472 W.
Washington Street, Boise, Idaho and at the Idaho business offices of Avista.
DATED at Boise, Idaho this ;2 /
sf day of November 2007.
ill iftd1Je . Jewell
Co mission Secretary
blslN:A VU-07-
NOTICE OF APPLICATION
NOTICE OF MODIFIED PROCEDURE
NOTICE OF COMMENT/PROTEST DEADLINE