20080522Application.pdf

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Corp.
Avista Corp.
1411 East Mission P.O. Box 3727
Spokane. Washington 99220-0500
Telephone [phone]
Toll Free 800-727-9170
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VIA OVERNIGHT MA
May 21,2008 Avu --E -oC§-O~
Ms. Jean D. Jewell
Commission Secretary
Idaho Public Utilities Commission
472 W. Washington
Boise, il 83702-5983
Re: Case No. A VU-E-08- C:~
Application of A vista Corporation for an Order Authorizing Deferral
of Colstrp Lawsuit Settlement Payment
Dear Ms. Jewell:
Encwsed is Avista's Application for an Order Authorizing Deferal of Colstrp Lawsuit Settlement
Payment. The deferred accounting request perains to a settlement payment to be incurred as a result
of the recent settlement of a lawsuit in the State of Montana over alleged damages caused by the
operation of the Colstrip Generating Project in Colstrip, Montana. The filing consists of an original
and seven copies of Avista's Application.
Please direct any questions regarding this filing to Ron McKenzie at [phone].
Sincerely,
~ ,J..ww
Kelly Norwood
Vice President, State and Federal Regulation
Enclosure
c: See attached service list
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David J. Meyer, Esq.
Vice President and Chief Counsel of
Regulatory and Governental Affairs
A vista Corporation
1411 E. Mission Avenue
P. O. Box 3727
Spokane, Washington 99220
Phone: [phone], Fax: [phone]
22 ~ì\ \0: 29l~~~lt~~
BEFORE TH IDAHO PUBLIC UTILITIES COMMSSION
IN THE MATTER OF THE APPLICATION OF )
AVISTA CORP., dba AVISTA UTILITIES, FOR )
AN ORDER AUTORIING DEFERR OF )
COLSTR LAWSUIT SETTLEMENT PAYMNT )
Case No. A VU-E-08- 03
APPLICATION OF
AVISTA CORPORATION
I. INTRODUCTION
1.Avista Corporation, doing business as Avista Utilties (hereinafter Avista or
Company), at 1411 East Mission Avenue, Spokane, Washington, pursuant to Section 61-524
Idaho Code and Rule 52 of the Idaho Public Utilities Commission ("Commission Rules of
Procedure"), hereby applies to the Commission for an order authorizing the deferral of a
settlement payment to be incured as a result of the recent settlement of a lawsuit in the State
of Montana over alleged damages caused by the operation of the Colstrp Generating Project
in Colstrp, Montana. Pursuant to Commission Rule of Procedure 201, the Company
requests that this fiing be processed under the Commission's Modified Procedure rules.
2.Avista is a utility that provides service to approximately 352,000 electric customers
and 215,000 natural gas customers in a 26,000-square-mile area in eastern Washington and
northern Idaho. Avista Utilities also serves 95,000 natural gas customers in Oregon. The
largest community served in the area is Spokane, Washington, which is the location of the
corporate headquarers. Communications in reference to this Application should be
addressed to:
APPLICATION OF AVISTA CORP.Page 1 of6
Kelly O. Norwood
Vice President
State and Federal Regulation
A vista Corporation
1411 E. Mission Avenue
Spokane, Washington 99220
Phone: [phone]
Fax: [phone]
E-mail: kelly.norwood(iavistacorp.com
David J. Meyer, Esq.
Vice President and Chief Counsel of
Regulatory and Governental Affairs
A vista Corporation
1411 E. Mission Avenue
Spokane, Washington 99220
Phone: [phone]
Fax: [phone]
E-mail: david.meyer(iavistacorp.com
II. BACKGROUND
3.In May 2003, varous paries (all of which are residents or businesses of Colstrp,
Montana) filed a consolidated complaint against the owners of the Colstrp Generating
Project (Colstrp) in Montana District Court.l Colstrp consists of four plant units, with
related facilities: Units 1 & 2, rated at 307 net megawatts each; and Units 3&4, at 704 net
megawatts each. A vista owns a 15 percent interest in Units 3 & 4 of Colstrp. The plaintiffs
alleged damages to buildings as a result of rising groundwater, as well as damages from
contaminated waters leaking from the holding ponds of Colstrp. The plaintiffs sought
compensatory and punitive damages for abatement, unjust enrchment, trespass, property
diminution, and emotional distress. Appended as Attachment A is a memorandum that
provides additional background with respect to the natue of the lawsuit and the settlement
that was reached.
i Aney et aL. v. PPL Montana, LLC, etal. (Montaa Sixteenth Judicial Distrct Cour, Rosebud Co.)
(Cause No. DV-03-109)
APPLICATION OF AVISTA CORP.Page 2 of6
4.A tral date was scheduled for June 2, 2008. The owners of Colstrp, however,
reached a settlement with the plaintiffs on April 30, 2008. Avista's share ofthe settlement
payment, prior to possible insurance recovery, amounts to $2,084,443 and is to be paid on or
before May 23, 2008. The Defendants are in the process of seeking recovery of a portion of
the settlement from applicable insurance carrers. The outcome of that endeavor is, at this
point, unown. In the event that A vista is able to fully recover from its carers, it is
Avista's interretation of the relevant insurance policies that it could potentially recover
approximately $734,035 of its $2,084,443 settlement payment, reducing its final out-of-
pocket settlement expense to approximately $1,350,408.
5.The negotiated terms of the settlement represent a favorable resolution to Avista and
its customers of contested matters, paricularly takng into account the following:
1) The settlement presents a full and final resolution of the claims of 55 plaintiffs
relating to the current and historical operation of Colstrp. As such, the settlement
resolves disputed issues covering more than three decades of operation of Colstrip,
and brings finality to more than five years of litigation proceedings;
2) The settlement reflects a substantial reduction of the Plaintiffs' litigation position,
significantly limits Avista's potential exposure for excessive compensatory and
punitive damages totaling well in excess of $36 milion, and provides increased
certainty to Avista and its customers;
3) The settlement facilitates Avista and the other Defendants' ongoing efforts to
negotiate and implement appropriate remediation efforts with the Montana
Department of Environmental Quality;
4) The settlement helps limit future claims by providing Defendants with valuable
rights of first refusal with respect to plaintiffs' properties.
6.Considering the risks oflitigation, together with the potential exposure to excessive
compensatory and punitive damages, the settlement reflects a reasonable compromise, and a
fair accommodation, to the interests of A vista and its customers.
APPLICATION OF AVISTA CORP.Page 3 of6
7. In this fiing, the Company is requesting an order allowing for the deferal of the
settlement payment. A vista wil address the prudence and recovery of the settlement
payment, and propose a method of recovery of the settlement payment in its next general rate
case filing or other futue proceeding, as appropriate. The negotiated settlement avoids the
potential of costly litigation and exposure to very substantial claims by the plaintiffs.
Colstrip is a low-cost resource that is integral to the Company's resource base. The
Company and the other Colstrip owners continue to make every effort to preserve the
generation from Colstrip for the benefit of their customers at the lowest possible cost. The
proposed accounting treatment would provide the Company with the opportity to recover
the costs associated with its ownership share of Colstrp, while customers receive the benefit
from the low-cost resource.
III. PROPOSED ACCOUNTING TREATMENT
8. The Company requests authority to defer the Colstrp settlement payment in Account
186 - Miscellaneous Defered Debits. The settlement payment wil be allocated to the
Washington and Idaho jurisdictions based on the current Production/ransmission allocation
of 64.59% to Washington and 35.41 % to Idaho, and placed in separate Washington and
Idaho 186-accounts. Interest would accrue on the Idaho share ofthe deferals at the customer
deposit rate. In a futue proceeding, the Company would propose a method of recover of
the deferred settlement payment and accrued interest. The proposed recover of costs in a
futue proceeding would be net of any reimbursement from insurance carers.
APPLICATION OF A VISTA CORP.Page 4 of6
iv. REQUEST FOR RELIEF
9.WHREFORE, A vista respectfully requests that the Commission issue an Order
allowing the deferral of the Colstrp settlement payment. The prudence and recovery of the
deferred settlement payment would be addressed in a future proceeding.
10. The Company requests that the matter be processed under the Commission's
Modified Procedure rules through the use of written comments.
Dated at Spokane, Washington this 21 st day of May 2008.
A VISTA CORPORATION
~~~tZtVice President and Chief Counsel of
Regulatory and Goverental Affairs
APPLICATION OF AVISTA CORP.Page 5 of6
STATE OF WASHIGTON )
)County of Spokane )
VERIICATION
David J. Meyer, being first duly sworn on oath, deposes and says: That he is the
Vice President and Chief Counsel of Regulatory and Governental Affairs of A vista
Utilties and makes this verification for and on behalf of A vista Corporation, being thereto
duly authorized;
That he has read the foregoing filing, knows the contents thereof, and believes the
same to be tre.pIri ."
SIGNED AN SWORN to before me this 21 st day of May 2008, by David J. Meyer.
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APPLICATION OF A VISTA CORP.
~NOTARY P IC in and for the State of
Washington, residing at Spokane.
á/a.,/to~ /Commission Expires:
Page 6 of6
Attachment A
BACKGROUND OF SETTLEMENT OF CLAIMS
DUANE and CAROL ANKNEY et aL v. A VISTA CORPORATION et aL
I. INTRODUCTION
A. The Colstrip Steam Electrical Station
The Colstrp Steam Electrical Station (CSES), a photograph of which is attached as
Exhibit A, is located in Colstrp, Montana (pop. 2,346), approximately 124 miles east of Bilings,
Montana. It consists of 4 plant units, with related facilities: Units 1 & 2, rated at 307 net
megawatts each; and Units 3 & 4, at 704 net megawatts each. Units 1 & 2 were constrcted in
the 1970's by Montana Power Corporation (MPC) and Puget Sound Power & Light, n/a Puget
Sound Energy (PSE). Approximately 4 years later, MPC, PSE, The Washington Water Power
Company, n/a Avista Corporation (Avista), PacifiCorp and Portland General Electric (pGE)
applied to the State of Montana to build Units 3 & 4. A vista is an owner of 15% of Colstrp
Units 3 & 4, which were placed into service in 1984 and 1986, respectively. A vista's share of the
net capacity of these two electric generating projects is 222 MW. Together, this important
source of low cost energy supplied approximately 18.8% of the total energy used by Avista's
electrc customers in the calendar year 2007.
The CSES is maintained and operated pursuant to two Ownership and Operation
Agreements, the first governng Units 1 & 2 and the second govering Units 3 & 4. Under both
Agreements, the owners of the Units are entitled to receive generated electrcity, and are
responsible for associated operation and maintenance costs, in proportion to their respective
ownership interests. With respect to day-to-day operations, the CSES is maintained and operated
by a single owner, originally MPC. The non-operating owners are provided reports and hold
periodic meetings concerning the facility, but do not playa role in day-to-day operations.
In 1999, MPC's interests in Units 1, 2 & 3 were sold to a subsidiar of Pennsylvania
Power & Light, now known as PPL Montana, LLC (PPL).l At that time, PPL assumed the role
of operating owner.
i MPC's interest in Unit 4 was sold to Northwestern Energy, LLC. Nortwestem Energy was a named Defendant
in the Ankney Litigation but, in light of its subsequent declaration of bankptcy, was later dismissed.
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Attachment A
B. The Geography of the CSES
The site of the CSES, including Units 1 & 2 and Units 3 & 4, is located to the immediate
southeast of the original Colstrip town site. Also southeast of the town, and to the southwest of
the principal site of the CSES, are two fly ash ponds, generally referred to as Ponds A & B.
To the northwest of the Colstrip town site is Castle Rock Lake, otherwise referred to as
the Surge Pond. The lake is man-made, and is maintained as par of the CSES. It also provides
the primar source of the city's drinking water.
To the north of Castle Rock Lake are the Stage I and Stage II fly ash ponds. These ponds
contain fly ash slury from scrubbers on Units 1 & 2 and, under extenuating circumstances, from
Units 3 & 4. The slury is transferred from the Units to the ponds via a pipeline. Upon arrval,
the slur moves through several pond cells, where the ash settles out of the water. The clean
water then moves to the clear well of the pond, where it is pumped back to the plant and reused.
A satellite view of Colstrp, including references to pertinent CSES facilities and areas
involved in the Ankney Litigation, is attached as Exhibit B.
II. NATURE OF THE LAWSUIT
There are three types of claims at issue in the Ankney litigation: differential settlement
claims, contamination claims, and emotional distress claims?
A. Differential Settlement Claims
The majority of the Plaintiffs (37 of the 55) allege cosmetic and/or structural damage to
their homes and buildings due to seepage from Castle Rock Lake. These Plaintiffs contend that
fresh water, originating from the Yellowstone River and stored in Castle Rock Lake, has caused
the soil to settle under their homes and commercial strctures. Plaintiffs also allege that this soil
settlement is not uniform (which would result in limited damage to a building or structure), but
rather is differential, or uneven, through the footprint of their respective structures. Although the
damage from differential settlement is typically cosmetic, it can impair the strctual integrty of
a home or building. In addition, some Plaintiffs claim to have mold damage related to
differential settlement, although none claim to have suffered adverse health affects.
2 Through a separate cause of action, Kelly and Karson Kluver and Douglas and Kim McRae, owners of ranch
propert in the Colstrip area, have asserted claims similar to those at issue in the Ankney litigation. These claims,
which pertain to slur ponds utilized by Units 3 & 4, are not par of the settlement in the Ankney litigation. The
Kluver litigation is curently in the discovery phase of proceedings and, as a consequence, the value of the claims is
not yet known.
2of9
Attachment A
Differential settlement claims have a long history in Colstrp. Since 1976, numerous
claims of differential settlement stemming from Castle Rock Lake and the CSES have been made
by Colstrip residents. In some instances, the Plaintiffs in the Ankney litigation have presented
second generation differential settlement claims, seeking damages for new or additional damage
to strctues for which claims were previously assered and resolved.
B. Contamiation Claims
The second type of claim is for trespass and/or potential well contamination due to water
seeping from the process ponds, principally the Stage I & II fly ash ponds. These claims are
principally focused in the B&R and Seward subdivisions, located north of the original township
site and approximately 1400 feet to the east of the Stage II pond, although some claims
pertaining to the A & B ponds and other Unit 3 & 4 process ponds have also been asserted.
Plaintiffs allege that the Stage I and II ponds, as well as the A & B ponds and other Unit 3 & 4
ponds, were negligently built, allowing contaminated water to seep into the groundwater and
impact Plaintiffs' wells and property. Plaintiffs seek emotional distress damages for the fear that
their wells could have been contaminated, but they do not claim to have been exposed to
contamination or otherwise suffered physical harm. Rather, the Plaintiffs seek damages for
contamination of the groundwater, and point to the fact that (a) the Stage I pond was unlined; and
(b) alternative designs were available with respect to the Stage II pond that would not have
involved the storage of fly ash slurr in ponds. Plaintiffs further allege that Defendants were
aware of seepage from the ponds and of the potential impact to Plaintiffs' property, but did not
act to correct the problem or protect the Plaintiffs' property from damage. Plaintiffs also allege
that Defendants failed to adequately notify them that seepage had gotten on to Plaintiffs' property
and threatened Plaintiffs' wells.
C. Emotional Distress Claims
The final type of claim, which is secondar to the first two claim types, is for emotional
distress damages due to fear of contamination of the City of Colstrp's drinking water. Under
this theory, Plaintiffs allege that seepage from the Stage I fly ash pond has contaminated and wil
continue to contaminate Castle Rock Lake, which supplies the City's drinkng water, and that
rumors of such contamination caused residents to suffer emotional distress damages.
30f9
Attachment A
III. POTENTIA EXPOSURE
Plaintiffs sought a wide range of damages, both compensatory and punitive in natue.
With respect to claims of groundwater contamination, Plaintiffs sought remediation damages
(abatement) of between $43 and $90 milion, together with $4 milion to remediate the Surge
Pond, a/a Castle Rock Lake, and $12 milion for costs associated with remediation of the CSES
plant site. In addition, Plaintiffs sought unjust enrchment damages, measured by the cost
savings to Defendants of using storage ponds for disposal of fly ash in lieu of alternative dry ash
disposal methods, in the range of approximately $95 milion. Finally, Plaintiffs sought
unspecified damages for trespass, unlawful occupation of land, and emotional distress due to the
fear of contamination, as well as between $15,000 and $37,500 per parcel of property for the
diminution in value of Plaintiffs' lands for a total up to $4 milion. Taken together, Plaintiffs
damage claims related to groundwater contamination are estimated to be in excess of $205
millon.
With respect to differential settlement claims, Plaintiffs sought damages for the cost of
repairing cosmetic and strctual damages to their home in excess of $2.8 milion. In addition,
Plaintiffs sought unspecified emotional distress damages. Taken together, Plaintiffs sought
differential settlement claims estimated to be in excess of $3 mion.
Finally, Plaintiffs sought punitive damages somewhere in the range of $5 milion per
Defendant, or $25-30 milion total, and possibly more.
3
Given these claims, Plaintiffs total claim for compensatory damages is estimated to be in
excess of $208 millon. Assuming that A vista would be found jointly and severally liable for
compensatory damages in an amount reflective of its proportionate ownership share, Avista's
potential exposure for such damages is estimated to be in excess of $31 millon. In addition,
assuming that A vista would also be found liable for punitive damages of at least $5 mion, its
total potential exposure in the Litigation is estimated to be well in excess of $36 milion.
IV. LITIGATION SUMMARY
Defendants have presented a joint defense to Plaintiffs' claims, and are, with the
exception of PGE,4 mutually represented by the Bilings, Montana law firm of Crowley,
3 Plaintiffs were not restrcted in the amount they could seek as puntive damages and, as such, ths figue may be
overly conservative. It was possible that, at tral, Plaintiffs would seek puntive damages in excess of $90 millon.
4of9
Attachment A
Haughey, Hanson Toole & Dietrch, PLLP. The lawsuit was originally filed in May of 2003 in
Silverbow County, but was subsequently moved to the Montana Sixteenth Judicial Distrct
Cour, Rosebud County, where it has been presided over by Judge Joe L. HegeL. Trial of the case
was scheduled to begin in June of 2008.
In defense of the case, between 2006 and October 2007, Defendants filed several Motions
seeking summary judgment and other relief on various issues. These included motions to:
(1) Dismiss Plaintiffs' claims for remediation costs in light of the Montana Supreme
Cour's decision in Sunburst School Dist. NO.2 v. Texaco, 338 Mont. 259, 165
P.3d 1079 (2007);
(2) Dismiss Plaintiffs' assertion of tort-based claims based on Aricle II, Section III of
the Montana Constitution, which provides that all persons have a "right to a clean
and healthful environment," in light of the Montana Supreme Cour's decision in
Sunburst;
(3) Allow evidence of negotiations between the Defendants and the Montana
Deparent of Environmental Quality (DEQ) regarding remediation of the site;
(4) Preclude Plaintiffs from seeking attorneys' fees based on the private attorney
general doctrine;
(5) Bifurcate trial proceedings between differential settlement and groundwater
contamination claims;
(6) Dismiss any claims for abatement on the grounds that DEQ has exclusive
jursdiction over such issues;
(7) Preclude claims of differential settlement to the extent that the damage claimed
occurred more than three years prior to commencement of the lawsuit and is,
therefore, bared by the statute of limitations;
(8) Dismiss the claims of groundwater contamination Plaintiffs who previously
settled their claims with the Defendants;
(9) Dismiss Plaintiffs' claims for emotional distress damages;
(10) Dismiss Plaintiffs' claim that they are entitled, on a theory of unjust enrichment,
to all money allegedly saved by the Defendants by using the Stage II pond for
slur storage rather than the alternative of dry ash disposal; and
4 PGE has retained independent counsel, Shane Coleman of the law firm Holland and Har, LLP, to represent its
interests in the litigation.
5of9
Attachment A
(11) Dismiss the claims of differential settlement claimants who have previously
entered into settlements and releases with the Defendants.
In addition, on February 15, 2008, Plaintiffs submitted supplemental expert disclosures which,
among other things, supported new remediation claims raising the total abatement amount sought
by Plaintiffs from $12 milion to $106 milion and named new expert witnesses. In response,
Dfendants filed a motion to strke these disclosures.
With tral approaching, the Cour issued Orders on some, but not all, of these outstanding
motions. On February 22, 2008, the Court deterined that Plaintiffs could maintain claims for
abatement, despite DEQ's jurisdiction to address and resolve such issues. Likewise, on April 9,
2008, the Cour denied Defendants' request to dismiss Plaintiffs' claims for unjust enrchment,
and determined that Plaintiffs would be allowed to seek damages measured by, among other
things, the cost savings to Defendants of using fly ash ponds rather than alternative dry ash
disposal systems. Although other motions remained pending before the cour, the cumulative
effect of these and other rulings, and the trend evidenced thereby, is that Plaintiffs would be
allowed to argue most, if not all, of the theories they had advanced for recovery, and to seek the
full extent of damages claimed, including claims for unjust enrchment, abatement, remediation
costs and punitive damages. As such, the impact of these decisions on Defendants' potential
exposure in the litigation was significant, and was a material factor leading to Defendants'
decision to settle Plaintiffs' claims prior to tral.
V. TERMS OF SETTLEMENT
On April 25, 2008, the Defendants jointly offered to settle all claims in the Ankney
litigation under the terms and conditions outlined below. This offer was subsequently accepted
by all Plaintiffs, and the paries are in the process of reducing the settlement terms into a formal
settlement agreement. The target date for funding and execution of the formal settlement
agreement is May 23,2008.
1. Compensation of Plaintiff
For puroses of settlement, Avista, PSE, PPL, PacifiCorp, and PGE have agreed to pay
the Plaintiffs the total sum of $25 milion, which wil be divided among the Plaintiffs or placed
6of9
Attachment A
in trust for other puroses as the Plaintiffs deem appropriate. This amount reflected the bottom-
line settlement figue that Plaintiffs were wiling to accept to resolve their claims prior to tral. 5
As among the respective Defendants, this payment is broken down as follows:
Payment Payment, Net ofAmount Potential Insurance
$10,707,986 $8,624,396
$8,507,570 $7,157,552
$2,500,000 $1,540,072
$2,084,443 $1,350,408
$1,200,000 $691,857
$25,000,000
Defendant
PSE
PPL
PGE
Avista
PacifiCorp
Total
The Defendants are in the process of seeking recovery of a portion of these amounts from
applicable insurance cariers. The outcome of that endeavor is, at this point, unown. In the
event that Avista is able to fully recover from said carrers, it wil recover approximately
$734,035 of its $2,084,443 settlement payment, reducing its final out-of-pocket expense of
settlement to $1,350,408.
2. Release and Dismissal
Plaintiffs have agreed to execute a broad, general release, releasing to the fullest extent
possible, all past and futue claims they have, may have or ever can have against the Defendants,
their successors and assigns. Likewise, the litigation wil be dismissed with prejudice, and
without costs to any pary.
3. Rights of First Refusal Regarding Plaintiffs' Properties
Plaintiffs have agreed to execute a right of first refusal, in favor of Defendants or their
designees, with respect to their properties in Colstrp. Furher, in an effort to minimize the
potential for recurrent differential settlement claims by the same Plaintiffs, Defendants have been
granted the right to document the existing state of all alleged damage to Plaintiffs' properties,
including photo and video documentation and detailed elevation measurements.
4. Facilitation of Remediation Efforts
The final aspect of the settlement pertains to Defendants' ongoing efforts to reach and
enter an Administrative Order on Consent (AOC) with the Montana Deparent of
5 Durg settlement discussions, Plaintiffs indicated that they would not accept less than $25 milion in ful and final
settlement of their claims. Thereafter, on or about April 21, 2008, the Cour issued an adverse ruling tht included
sanctions against certin Defendats regarding various discovery issues. Defendats imediately filed a Motion for
Reconsideration of the Order, briging evidence to the Cour's attention which it had not previously considered. The
Order, although favorable to Plaintiffs, did not impact their bottom-line settlement position.
7of9
Attachment A
Environmental Quality, or DEQ, regarding remediation efforts at the CSES. At the present time,
the AOC, as amended, is under consideration with the DEQ, but has not been formally approved.
In order to facilitate DEQ's approval of the same, Plaintiffs, without impairing their right to take
par in the public paricipation process as work on remediation moves forward, have agreed not
to oppose Defendants' efforts to obtain DEQ approval of the AOC. Ths wil help facilitate
Defendants' discussions with DEQ, and help ensure that Defendants' remediation efforts are not
unduly hindered going forward.
VI. FAVORALE ASPECTS OF SETTLEMENT
The negotiated terms of the paries' settlement presents a favorable resolution to A vista of
contested matters, particularly taking into account the following:
1) The settlement presents a full and final resolution of the claims of 55 Plaintiffs
relating to the current and historical operation of the CSES. As such, the settlement resolves
disputed issues covering more than three decades of operation of the CSES, and brings finality to
more than five years of litigation proceedings;
2) The settlement reflects a substantial reduction of the Plaintiffs' litigation position,
signifcantly limits Avista's potential exposure for excessive compensatory and punitive
damages totalig well in excess of $36 millon, and provides increased certainty to A vista and
its customers;
3) The settlement facilitates Avista and the other Defendants' ongoing efforts to
negotiate and implement appropriate remediation efforts with DEQ;
4) The settlement helps limit future claims of differential settlement by providing
Defendants with valuable rights of first refusal with respect to Plaintiffs' properies. Likewise, it
wil enable Defendants to document existing damage to Plaintiffs' properties, helping to
minimize both the recurence and extent of futue claims of property damage resulting from the
operation ofthe CSES;
The settlement does not give any party all the outcomes that might be obtained or desired
under varous scenaros, including the possibility of successful litigation in Montana State Court,
or successful appeals therefrom. However, this must be weighed against the possibility of
unfavorable outcomes at the trial court and appellate levels, the likelihood that formal litigation
could continue for decades, and the risk that A vista could be subjected to excessive
compensatory and punitive damages. Therefore, considering the risks of litigation, together with
8of9
Attachment A
the potential exposure and other considerations involved, the settlement reflects a reasonable
compromise, and a fair accommodation, to the interests of A vista and its customers.
90f9
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CERTIFICATE OF SERVICE
I HEREBY CERTIFY that I have served Avista Corporation's Application for an Order
Authorizing Deferral of Colstrip Lawsuit Settlement Payment by mailing a copy thereof,
postage prepaid to the following:
Ms. Jean D. Jewell
Commission Secretary
Idaho Public Utilities Commission
472 W. Washington
Boise, ID 83720-5983
Scott Woodbury
Deputy Attorney
Idaho Public Utilties Commission
472 W. Washington
Boise, ID 83702-0074
Pamela Mull
Vice President & General Counsel
Potlatch Corporation
601 Riverside Ave., Suite 1100
Spokane, WA 99201
Dated at Spokane, Washington this 21st day of May 2008.
paUy~
Rates Coordinator