20100323Andrews Di Revised 04-13.pdf

DAVID J. MEYER
VICE PRESIDENT AN CHIEF COUNSEL OF
REGULATORY & GOVERNTAL AFFAIRS
AVISTA CORPORATION
P . 0 . BOX 3727
1411 EAST MISSION AVEE
SPOKA, WASHINGTON 99220-3727TELEPHONE: (509)" 495-4316FACSIMILE: [phone]
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zoia M~P 21~"d ,v M11l: 16
BBFORE TH XDABO PUBLIC UTILITIBS COMISSION
IN THE MATTER OF THE APPLICATION
OF AVISTA CORPORATION FOR THE
AUTHORITY TO INCREASE ITS RATES
AN CHAGES FOR ELECTRIC AN
NATU GAS SERVICE TO ELECTRIC
AN NATU GAS CUSTOMERS IN THE
STATE OF IDAHO
FOR AVISTA CORPORATION
CASE NO. AVU-E-10-01
CASE NO. AVU-G-10-01
DIRECT TESTIMONY
OF
ELIZABETH M. ANREWS
(ELECTRIC AN NATU GAS)
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CON'BNS
Section Paae
I Xntroduction 2
4II Comined Revenue Requiremnt SWIry
III Blectric Section 5
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Test Period & Pro Forma Period
Revenue Requirement
Standard Commission Basis & Restating Adjustments 13
Pro Forma Adjustments 35
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xv Natural Gas Section
Test Period & Pro Forma Period
Revenue Requirement
Standard Commission Basis Adjustments 50
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Pro Forma Adjustments
v Allocation Procedures
VI Other
17 Exibit No. 12:
18 Schedule 1 - Electric Revenue Requirement and
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(pgs 1-13)Resul ts of Operations
Schedule 2 - Natural Gas Revenue Requirement and
Results of Operations (pgs 1-9)
Andrews, Di 1
Avis taCorpora tion
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I . IN'RODUCTION
Q.please state your na, business addess, an
3 present position with Avista Corporation.
4 A.My name is Elizabeth M. Andrews.I am employed
5 by Avista Corporation as Manager of Revenue Requirements in
6 the State and Federal Regulation Department. My business
7 address is 1411 East Mission, Spokane, washington.
8 Q.Would you please describe your education an
9 business exerience?
10 A.I am a 1990 graduate of Eastern washington
11 University with a Bachelor of Arts Degree in Business
12 Administration, maj oring in Accounting. That same year, I
13 passed the November Certified Public Accountant exam,
14 earning my CPA License in Augus t 19911 .I worked for
15 Lemaster & Daniels, CPAs from 1990 to 1993, before joining
16 the Company in August 1993. I served in various positions
17 wi thin the sections of the Finance Department, including
18 General Ledger Accountant and Systems Support Analyst until
19 2000.In 2000, I was hired into the State and Federal
20 Regulation Department as a Regulatory Analyst until my
21 promotion to Manager of Revenue Requirements in early 2007.
22 i have also attended several utility accounting, ratemaking
23 and leadership courses.
i Currently I keep a CPA-Inactive status with regards to my CPA
license.
Andrews, Di 2
Avista Corporation
1 Q.AS Mager of Revenue Requiremts, what are your
2 responsibil~ties?
3 A.As Manager of Revenue Requirements, aside from
4 special proj ects, I am responsible for the preparation of
5 normlized revenue requirement and pro forma studies for
6 the various jurisdictions in which the Company provides
7 utili ty services. During the last nine and one-half years,
8 i have assisted or led the Company's electric and/or
9 natural gas general rate filings in Idaho, washington, and
10 Oregon.
11 Q.Wht is the scope of your testimny in this
12 proceeding?
13 A.My testimony and exhibits in this proceeding will
14 generally cover accounting and financial data in support of
15 the Company 1 s need for the proposed increase in rates.I
16 will explain pro formed operating results, including
17 expense and rate base adjustments made to actual operating
18 results and rate base.
19 I incorporate the Idaho share of the proposed
20 adjustments of other witnesses in this case.
21 Q.Are you sponsoring any exibits to be introduced
22 in this proceeding?
23 A.Yes. I am sponsoring Exhibit No. 12, Schedule 1
24 (Electric) and Schedule 2 (Natural Gas), which were
25 prepared under my direction.These exhibit schedules
Andrews, Di 3
Avista Corporation
1 consist of worksheets, which show actual 2009 operating
2 results (twelve-month period ending Decemer 31, 2009), pro
3 forma, and proposed electric and natural gas operating
4 results and rate base for the State of Idaho. The exhibits
5 also show calculation of the general revenue requirement,
6 the derivation of the overall proposed rate of return, the
7 derivation of the net-operating-income-to-gross revenue-
8 conversion factor, and the specific pro forma adjustments
9 proposed in this filing.
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12
II. COMINED RB REOUIRB SlY
Q.Would yo please sWIrize the results of the
13 Comany's pro form study for both the electric an natural
14 gas operating systems for the Idaho jurisdiction?
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16
A.Yes.After taking into account all standard
Commission Basis adjustments,as well as additional
17 restating, pro forma and normalizing adjustments, the pro
18 forma electric and natural gas rates of return (ROR) for
19 the Company's Idaho jurisdictional operations are 5.19% and
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21
6.93%, respectively.Both return levels are below the
Company's requested rate of return of 8.55%.The
22 incremental revenue requirement for base retail rates,
23 necessary to gi ve the Company an opportunity to earn its
24 requested ROR is $32,114,000 for the electric operations
25 and $2,575,000 for the natural gas operations. The overall
Andrews, Di 4
Avista Corporation
1 base electric increase associated with the Company's
2 request is 13.98%. The base natural gas increase is 3.64%.
3 Q.Wht is the Comany's rate of return that was
4 last authorized by this Comssion for it's electric an
5 natural gas operations in idao?
6 A.The Company's currently authorized rate of return
7 for its Idaho operations is 8.55%, effective August 1, 2009
8 for both our electric and natural gas systems.
9
10 XII. BLETRIC SBCTION
11 Test Period An Pro Form period
12 Q.on what test period an pro form period is the
13 Comany basing its need for additional electric revenue?
14 A.The test period being used by the Company is the
15 twelve-month period ending Decemer 31, 2009, presented on
16 a pro forma basis. Currently authorized rates were based
17 upon the twelve months ending Septemer 30, 2008 test year
18 utilized in Case No. AVU-E-09-01, adjusted on a pro forma
19 basis.
20 The pro forma period being used by the Company in this
21 proceeding is October 2010 through Septemer 30, 2011
22 (2010/2011) .
23 Q.By way of SWlry, could you please exlain the
24 different rates of return that you will be presenting in
25 your testimony?
Andrews, Di 5
Avista corporation
1 A.Yes. As shown in Illustration No.1 below, there
2 are three different rates of return that will be discussed.
3 The actual ROR earned by the Company during the test
4 period, the pro forma ROR determined in my Exhibit No. 12,
5 Schedule 1, and the regues ted ROR.
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Xllustration NO.1:
10.00%
8.00%
6.00%
4.00%
2.00%
0.00%
AvistaCorp
Rates ofRetum
Actual Pro Fomia Reueste
Q.Wht are the primary factors driving the
16 Comany's need for an electric increase?
17 A.Illustration No. 2 below, shows the primary
18 factors driving the electric revenue requirement in this
19 case.Additional details regarding these items are
20 provided later in my testimony.
21
Andrews, Di 6
Avista Corporation
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Illustration No.2:
Idaho
Priary Elecc Revenue Requirement Factors
Disution,
O&M&A&G
Expense
8%,
Producton &
Transmisin
Expense
80%
Increased NetPlat
Investment
12%1
Geertin Upgrdes
-Hydro & Theral
Transmision UpgdesDiution
Addition of Lancaster Powe
Puhase Agent
Terinatin of Low Cost
Power Puhases
Reduced Contrct Hydr
Incresed Loads
i Includes return on invesent, depreiation and taxes,
offset by the tax benefit of inter.
Q.Please briefly exlain each of the comnents or
15 segments show in Illustration No. 2 above.
16
17
A.The first segment, representing the increases in
Production and Transmission Expense,comprises
18 approximately 80% of the overall request. The next largest
19 segment is Increased Net Plant Investment. Net rate base
20 for the Idaho jurisdiction increased approximately $31.7
21 million, or 5.5%. The revenue requirement associated with
22 the increase in Net Plant Investment represents
23 approximately 12% of the overall Company request.
24 The remaining cost category, Distribution, O&M and A&G
25 Expense, which includes increases to all other operating
Andrews, Di 7
Avista Corporation
CASE NO. AVU-E-10-Ol
CASE NO. AVU-G-10-Ol
CORRECTED PAGE ( 8 )
TO ELIZABETH M. ANREWS DIRECT TESTIMONY
(Marked)
REVISED APRIL 12, 2010
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categories,such as distribution expenses,customer
service,and administrati ve and general,totals
3 approximately 8% of the overall request.
4 Q.Could you please provide additional details
5 related to the changes in Production and Transmssion
6 expense?
7 A.Yes.As discussed in Company witness Mr.
8 Johnson's testimony, the level of Idaho's share of power
9 supply expense has increased by approximately $17.Q million
10 ($50.2 million on a system basis) from the level currently
11 in base rates.
12 The primary expense increases are the addition of the
13 Lancaster plant, from which the Company began receiving
14 power on January 1, 2010, and the expiration of four low-
15 cost power supply contracts. The increase in pro forma net
16 expense related to the inclusion of the Lancaster plant is
17 approximately $21.3 million (system) or $7.5 million (Idaho
18 share). With regard to the power contracts, there are four
19 low-cost 25 aMW power purchases that end December 31, 2010.
20 The cost to replace these power purchase agreements
21 increases Idaho expense by $3.6 million.Mr. Johnson
22 discusses each of the increased expenses in detail in his
23 testimony.
Andrews, Di 8
Avista Corporation
1 Q.Could you please identify the main comonents of
2 the Distribution, O&M an A&G Exense segmnt shown in the
3 chart above?
4 A.Yes.A numer of expense items have increased
5 since the 2008 test year used in the last rate case. For
6 example, net employee benefits such as wages, pension and
7 medical insurance expenses have increased, as well as other
8 administrative and general exenses such as those related
9 to the Company's information services.
10 We are utilizing a 2009 test year, since that is the
11 most recent normalized financial information the Company
12 has available;however,new general electric rates
13 resul ting from this filing are not expected to go into
14 effect until late 2010.Accordingly, the Company has
15 included a numer of pro forma adjustments to capture some
16 of the measurable cost changes that the Company will
17 experience from the test year. In particular, the Company
18 pro formed in the increased costs associated with
19 increasing information services net costs as described by
20 Company witness Mr . Kensok ($1. 3 million). This increased
21 cost alone equates to approximately 51% of the distribution
22 and other expense category shown in Illustration 2.
23 Q.Wht were the maj or comonents of the Xncreased
24 Net plant Investment?
Andrews, Di 9
Avista Corporation
1 A.Looking at the changes to "gross" plant in
2 service shows that Idaho "gross" plant increased $63.0
3 million, as compared to what is currently included in
4 rates.To continue to meet the energy and reliability
5 needs of our customers, $25.6 million of this increase is
6 due to the Company's investment in thermal and hydro
7 generating facilities, as well as additional transmission
8 inves tment .Distribution "gross" plant increased $19.4
9 million above the current level included in rates, while
10 general and intangible "gross" plant increased $18.0
11 million.Adjusting for accumulated depreciation and
12 amortization, accumulated deferred income taxes, and the
13 production property adjustment, the net increase to rate
14 base from these items is $21.8 million.Lastly, the
15 Company included a working capital adjustment in this case,
16 which added $9.9 million to the Company's total adjusted
17 rate base.
18 The specific pro forma capital exenditures undertaken
19 by the Company to upgrade its generation, transmission and
20 distribution facilities and improve operating efficiency
21 and reliability, are discussed further by Company witness
22 Mr. Storro regarding production assets, and Company witness
23 Mr. Kinney regarding transmission and distribution assets.
24 In addition to discussing the actual pro forma adjustment
25 made regarding net plant investment, Company witness Mr.
Andrews, Di 10
Avista Corporation
1 DeFelice also describes the general plant additions
2 included in the Company's case.
3
4 Revenue Requirement
5 Q.Would you please explain what is sho in Exibit
6 No. 12, Schedule 1 ?
7 A.Yes . Exhibit No. 12, Schedule 1 shows actual and
8 pro forma electric operating results and rate base for the
9 test period for the State of Idaho. Colum (b) of page 1
10 of Exhibit No. 12, Schedule 1 shows 2009 (twelve-month
11 ending Decemer 31, 2009) operating results and components
12 of the average-of-monthly-average rate base as recorded;
13 colum (c) is the total of all adjustments to net operating
14 income and rate base; and colum (d) is pro forma results
15 of operations, all under existing rates. Colum (e) shows
16 the revenue increase required which would allow the Company
17 to earn an 8.55% rate of return. Colum (f) reflects pro
18 forma electric operating results with the requested
19 increase of $32,114,000.The restating adjustments shown
20 in colums c through ai, of pages 5 through 10 of Exhibit
21 No. 12, Schedule 1, are consistent with current regulatory
22 principles and the treatment reflected in the prior
23 Commission Order in Case No. AVU-E-09-01, with a few
24 proposed changes by the Company as described in my
25 testimony below.
Andrews, Di 11
Avista Corporation
1 Q.Would you please exlain page. 2 of Bxbi t No.
2 12, Schedule 1?
3 A.Yes.Page 2 shows the calculation of the
4 $32,114,000 revenue requirement at the requested 8.55% rate
5 of return.
6 Q.Wht does page 3 of Bxibi t No. 12, Schedule 1.
7 show?
8 A.Page 3 shows the proposed Cost of Capital and
9 Capital Structure utilized by the Company in this case, the
10 weighted average cost of capital of 8.55%. Company witness
11 Mr. Thies discusses the Company's proposed rate of return
12 and the pro forma capital structure utilized in this case,
13 while Company witness Dr. Avera provides additional
14 testimony related to the appropriate return on equity for
15 Avista.
16 Q.Would you now please exlain page 4 of Exibit
17 No. 12, Schedule 1?
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A.Yes.Page 4 shows the derivation of the net-
operating-income-to-gross-revenue conversion factor.The
20 conversion factor takes into account uncollectible accounts
21 receivable, Commission fees and Idaho State excise taxes.
22 Federal income taxes are reflected at 35%.
23 Q.Now turning to pages 5 through 13 of your Bxbi t
24 No. 12, Schedule 1, would you please exlain what those
25 pages show?
Andrews, Di 12
Avista Corporation
1 A.Yes. Page 5 begins with actual operating results
2 and rate base for the twelve-month period ending Decemer
3 31, 2009 test period in colum (b). Individual normalizing
4 and restating adjustments consistent with prior regulatory
5 treatment (standard Commission Basis adjustments) begin in
6 colum (c) on page 5 and continue through colum (ai) on
7 page 10. Individual pro forma adjustments begin in colum
8 (PF1) on page 11 and continue through colum (PF12) on page
-9 13.The final colum on page 13 is the total pro forma
10 operating results and rate base for the test period.
11 Additional details related to each adjustment described
12 below are provided in accompanying workpapers.
13
14 Stanard Comssion Basis an Restating Adjustmnts
15 Q.Would you please exiain each of these
16 adjustments, the reason for the adjustmnt an its effect
17 on test period State of Idah net operating incom and/or
18 rate base?
19 A.Yes, the first adjustment, colum (c) on page 5,
20 entitled Deferred FIT Rate Base, reflects the rate base
21 reduction for Idaho's portion of deferred taxes.The
22 adjustment reflects the deferred tax balances arising from
23 accelerated tax depreciation (Accelerated Cost Recovery
24 System, or ACRS, and Modified Accelerated Cost Recovery, or_
25 MACRS) , bond refinancing premiums, and contributions in aid
Andrews, Di 13
Avista Corporation
1
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of construction.These amounts are reflected on the
average-of-monthly-average balance basis.The effect on
3 Idaho rate base is a reduction of $94,533,000.
4 The adjustment in colum (d), Deferred Gain on Office
5 Building, reflects the rate base reduction for Idaho's
6 portion of the net of tax, unamortized gain on the sale of
7 the Company's general office facility.The facility was
8 sold in Decemer 1986 and leased back by the Company.
9 Although the Company repurchased the building in Novemer
10 2005, the Company opted to continue to amortize the
11 deferred gain over the remaining amortization period
12 scheduled to end in Decemer 2011.The effect on Idaho
13 rate base is a reduction of $109,000.
14
15
The adjustment in colum (e) , Colstrip 3 AF
Blimination,is a reallocation of rate base and
16 depreciation expense between jurisdictions. In Cause Nos.
17 U-81-15 and U-82-10,the washington Utilities and
18 Transportation Commission (WUC) allowed the Company a
19 return on a portion of Colstrip Unit 3 construction work in
20 progress (CWIP). A much smaller amount of Colstrip Unit 3
21 CWIP was allowed in rate base in Case U-1008-144 by the
22 IPUC. The Company eliminated the AFUD associated with the
23 portion of CWIP allowed in rate base in each jurisdiction.
24 Since production facilities are allocated on the
25 Production/Transmission formula, the allocation of AFUDC is
Andrews, Di 14
Avista Corporation
1 reversed and a direct assignent is made.The rate base
2 adjustment reflects the average-of-monthly-averages amount
3
4
for the test period.The effect on Idaho net operating
income is a decrease of $193,000.The effect of the
5 reallocation on Idaho rate base is an increase of
6 $1,700,000.
7 The adjustment in colum (f), Colstrip Comn AF,
8 is also associated with the Colstrip plants in Montana, and
9 increases rate base. Differing amounts of Colstrip common
10 facilities were excluded from rate base by this Commission
11 and the WUTC until Colstrip Unit 4 was placed in service.
12 The Company was allowed to accrue AFC on the Colstrip
13 common facilities during the time that they were excluded
14 from rate base.It is necessary to directly assign the
15 AFUDC because of the differing amounts of common facilities
16 excluded from rate base by this Commission and the WUC.
17 In Septemer 1988, an entry was made to comply with a
18 Federal Energy Regulatory Commission (FERC)Audit
19 Exception, which transferred Colstrip common AFUD from the
20 plant accounts to Account 186.These amounts reflect a
21 direct assignent of rate base for the appropriate average-
22 of-monthly-averages amounts of Colstrip common AFUD to the
23 washington and Idaho jurisdictions.Amortization expense
24 associated with the Colstrip common AFUD is charged
25 directly to the Washington and Idaho jurisdictions through
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Avista Corporation
1 Account 406 and is a component of the actual results of
2 operations. The rate base adjustment reflects the average-
3 of-monthly-averages amount for the test period. The effect
4 on Idaho rate base is an increase of $903,000.
5 The adjustment in colum (g), Kettle Falls Ii Boulder
6 Park Disallowances, decreases rate base.The amounts
7 reflect the Kettle Falls generating plant disallowance
8 ordered by this Commission in Case No. U-1008-185 and the
9 Boulder Park plant disallowance ordered by the IPUC in case
10 No. AVU-E-04-1.This Commission disallowed a rate of
11 return on $3,009,445 of investment in Kettle Falls, and
12 $2,600,000 million of investment in Boulder Park.The
13 disallowed investment and related accumulated depreciation
14 are removed.These amounts are a component of actual
15 results of operations. The effect on Idaho rate base ìs a
16 decrease of $2,034,000.
17 The adjustment in colum (h), customer Advances,
18 decreases rate base for moneys advanced by customers for
19 line extensions, as they will be recorded as contributions
20 in aid of construction at some future time. The effect on
21 Idaho rate base is a decrease of $898,000.
22 Q.Please turn to page 6 and exlain the adjustmnts
23 show there.
24 A.Page 6 starts with the adjustment in colum (i),
25 Weatherization and DSM investment, which includes in rate
Andrews, Di 16
Avista Corporation
1 base balances (net of amortization) of weatherization
2 grants, the model conservation program costs and electric
3 demand side management (DSM) program costs upon which AFUCE
4 is no longer being accrued and amortization was implemented
5
6
beginning August 1994.These amounts are a component of
actual results of operations.The effect on Idaho rate
7 base is an increase of $294,000.
8 Q.would you please exlain how energy efficiency-
9 related exenditures impact the revenue requirement in this
10 case?
11 A.Yes.The unamortized balance of energy
12 efficiency management investment incurred prior to 1995 is
13 included in the results of operations and is a rate base
14 item in the colum (i) adjustment just described.DSM
15 expenditures incurred after March 13, 1995 have been offset
16 by revenues from the Company's energy efficiency tariff
17 rider, Schedule 91, and are not included in the revenue
18 requirement.
19 As the Commission is aware, the Company's tariff rider
20 under Schedule 91 was the first non-bypassable distribution
21 charge in the United States to fund energy efficiency.
22 Company witness Mr. Folsom provides additional detail and
23 addresses the prudence of the expenditures under this
24 tariff.
Andrews, Di 1 7
Avista Corporation
1 Q.Please continue wi th your exlantion of the
2 adjustmnts on page 6.
3 The adjustment in colum ( j ) ,Restating CD
4 Settlement, adjusts the 2009 test period AM net asset and
5 DFIT balances related to the 2008/2009 CDA Tribe Settlement
6 payments (Past Storage/§10 (e)) and deferred costs to a
7 2010/2011 AM basis. In addition, this adjustment includes
8 the 2010/2011 AM net asset and DFIT balance for the 2010
9 Past Storage/§10e settlement payment of $4 million.The
10 expense portion of this adjustment includes the annual
11 amortization of the net total asset ($41.6 million (system)
12 of payments and deferred costs) and the anual $400,000
13 (system) future storage §10 (e) payment.
14 The agreed-upon settlement and payments included in
15 this adjustment were approved by the Commission in the
16 Company's 2009 electric general rate case proceeding, Case
17 No. AVU-E-09-01.As approved by the Commission's Order
18 (See Order No. 30856), in Case No. AVU-E-09-01, the Company
19 was allowed to defer the amortization of the settlement
20 payments, which included the system payments of $25.0
21 million in Decemer 2008, $10.0 million in 2009 and $4.0
22 million in 2010 for resolution of the past trespass and
23 §10 (e) charges, and the 2008/2009 future §10 (e) annual flat
24 payment, with a carrying charge on the deferrals and
25 unamortized balance, for future recovery.These deferred
Andrews, Di 18
Avista Corporation
1 payments, including a return on the balance, are being
2 amortized over the average remaining life of the Spokane
3 River - Post Falls Project, or 45 years. The future §10 (e)
4 system payment schedule of $400,000 flat anual payments
5 for the first 21 years of the new Spokane River license,
6 starting in Decemer 2008, and $700,000 flat anual
7 payments for the remaining years of the license, was also
8 approved.
9 During 2009, Idaho's share of the January through July
10 amortization of the assets associated with the 2008/2009
11 past storage and §LO (e) charges were deferred for future
12 recovery (see adjustment (k) "Restating CDA Settlement
13 Deferral" ). The effect on Idaho net operating income is a
14 decrease of $197,000. The effect on Idaho rate base is a
15 decrease of $17,000 from that in the test period.
16 The adjustment in colum (k), Restating CDA Settlement
17 Deferral, adjusts the 2009 test period net assets
18 associated with the 2008/2009 past storage and §10 (e)
19 charges deferred for future recovery to a 2010/2011 AM
20 basis, apd records the annual amortization expense based on
21 a three-year amortization.As noted above in adjustment
22 (k) "Restating CDA Settlement" the Company was allowed to
23 defer the amortization of the settlement payments ($35.8
24 million of 2008/2009 system total payments), with a
25 carrying charge on the deferrals and unamortized balance,
Andrews, Di 19
Avista Corporation
1 for future recovery. These deferred payments, including a
2 return on the balance, are being amortized over 45 years.
3 Idaho's share of the 2009 deferred amortization, plus
4 interest totaled approximately $317,318.The Company has
5 proposed a three-year amortization for recovery of this
6 amount, resulting in approximately $103,000 of anual
7 expense (rather than $7,000 annually over the remaining 44-
8 year life). The effect on Idaho net operating income is a
9 decrease of $65,000. The effect on Idaho rate base is an
10 increase of $168,000.
11 The adjustment in colum (1) , Restating CDA/SRR
12 (Spokane River Relicensing) CDR, adjusts the 2009 net
13 assets associated with the CDA Tribe settlement 4 (e)
14 Spokane River relicensing conditions to a 2010/2011 .A
15 basis. The expense portion of this adjustment includes the
16 annual amortization of the net total asset ($12 million
17 (system) of payments) and the annual $2 million (system) of
18 Coeur d' Alene Reservation Trust Restoration Fund (CDR)
19 payment exense. The effect on Idaho net operating income
20 is a decrease of $484,000. The effect on Idaho rate base is
21 an increase of $400,000.
22 The adjustment in colum (m), Restating Spokae River
23 Relicensing, adjusts the 2009 net asset and DFIT balances
24 related to the Spokane River relicensing costs to a
25 2010/2011.A basis, and records the annual amortization
Andrews, Di 20
Avista Corporation
1 expense based on a 50-year amortization.In June 2009,
2 Avista received its 50 year FERC-issued license for the
3 Spokane River Proj ect, at which time the costs of these
4 efforts were transferred to intangible plant.Costs
5 associated with this effort included actual life-to-date
6 expenditures from April 2001 through June 30, 2009.The
7 total of these costs were approved by the Commission in the
8 Company's 2009 electric general rate case proceeding, Case
9 No. AVU-E-09-01.The Company was allowed to defer the
10 amortization of the licensing costs and the costs
11 associated with the CDA Tribe settlement 4 (e) relicensing
12 condi tions, including a carrying charge on these amounts,
13 until rates went into effect August 1, 2009. The Company
14 was also allowed to defer 2010 (January through June)
15 associated Program,Enhancement & Mitigation (PM&E)
16 charges, including a carrying charge on these amounts,
17 until rates went into effect in the next general rate case.
18 The 2009 deferred payments, including a return on the
19 balance, were originally planned to be amortized over the
20 life of the license, or 50 years.During 2009, Idaho's
21 share of the amortization of the assets associated with the
22 licensing costs and 4 (e) payments for the period June
23 through July were deferred for future recovery (see
24 adjustment (n) "Restating Spokane River Deferral.The
25 Company also plans to spend approximately $467, 700 (Ida~o' s
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Avista Corporation
1 share) on PM&E costs in the first half of 2010; deferring
2 100% of Idaho's share, including interest, for future
3 recovery (see adjustment (0) "Restating Spokane River PM&E
4 Deferral" ) .The effect on Idaho net operating income is a
5 decrease of $75,000. The effect on Idaho rate base is a
6 decrease of $459,000 from that in the test period.
7 The adjustment in colum (n), Restating Spokane River
8 Deferral, adjusts the 2009 net asset and DFIT balances
9 related to the Spokane River deferred relicensing costs to
10 a 2010/2011 AM basis, and records the anual amortization
11 expense based on a three-year amortization. As noted above
12 in adjustment (m) "Restating Spokane River Relicensing,"
13 the Company was allowed to defer the amortization of the
14 licensing costs and costs associated with the CDA Tribe
15 settlement 4 (e)relicensing conditions,including a
16 carrying charge on these amounts, for future recovery.
17 Idaho's share of the 2009 deferred amortization, plus
18 interest for the period June through July totaled $59,335.
19 These deferred payments, including a return on the balance,
20 were originally planned to be amortized over the life of
21 the license, or 50 years.However, the Company has
22 included a three-year amortization for recovery of this
23 amount, resulting in approximately $19,000 of anual
24 expense (rather than $1,200 annually over the remaining 50-
25 year life). The effect on Idaho net operating income is a
Andrews, Di 22
Avista Corporation
1 decrease of $12,000. The effect on Idaho rate base is an
2 increase of $32,000.
3 Q.Please tur to page 7 an explain the adjustmnts
4 shown there.
5 A.Page 7 starts with the adjustment in colum (0),
6 Restating Spokane River PM&:B Deferral, records the net
7 asset and DFIT balances related to the planned 2010
8 (January through June) Spokane River deferred PM&E costs to
9 a 2010/2011 AM basis, and records the anual amortization
10 exense based on a three-year amortization. As noted above
11 in adjustment (m) "Restating Spokane River Relicensing, It
12 the Company was allowed to defer the Spokane River deferred
13 PM&E charges, including a carrying charge on these amounts,
14 for future recovery.Idaho's share of the 2010 deferred
15 PM&E costs (Jan through June), plus interest, total
16 approximately $467,700. The Company has included a three-
17 year amortization for recovery of this amount, resulting in
18 approximately $147,000 of annual expense. The effect on
19 Idaho net operating income is a decrease of $100,000. The
20 effect on Idaho rate base is an increase of $253,000.
21 The adjustment in colum (p), Restating Montana
22 Riverbed Lease, includes the costs associated with the
23 Montana Riverbed lease settlement. In this settlement, the
24 Company agreed to pay the State of Montana $4.0 million
25 annually beginning in 2007,with anual inflation
Andrews, Di 23
Avista Corporation
1 adjustments, for a 10-year period for leasing the riverbed
2 under the Noxon Rapids Project and the Montana portion of
3 the Cabinet Gorge Proj ect .The first two annual payments
4 were deferred by Avista as approved in Case No. AVU-E-07-
5 10.In Case No. AVU-E-08-01 (see Order No. 30647), the
6 Commission approved the Company's accounting treatment of
7 the deferred payments, including accrued interest, to be
8 amortized over the remaining eight years of the agreement
9 starting October 1, 2008.This adjustmept includes one-
10 eighth of the deferred balance amortization and the
11 adjustment to lease payment expense for the additional
12 annual inflation.This adjustment decreases Idaho net
13 operating income by $28,000 and increases rate base by
14 $1,289,000.
15 The next colum marked by a dash, entitled SUtotal
16 Actual represents actual operating results and rate base
17 plus standard rate base adjustments that are included in
18 Commission Basis reporting, plus additional restating
19 adjustments required to anualize previous approved rate
20 base items.
21 The adjustment in colum (q), Blimnate B & 0 Taxes,
22 eliminates the revenues and expenses associated with local
23 business and occupation (B & 0) taxes, which the Company is
24 passes through to its Idaho customers.The adjustment
25 eliminates any timing mismatch that exists between the
Andrews, Di 24
Avista Corporation
1 revenues and expenses by eliminating the revenues and
2 expenses in their entirety. B & 0 taxes are passed through
3 on a separate schedule, which is not part of this
4 proceeding. The effect of this adjustment is to decrease
5 Idaho net operating income by $7,000.
6 The adjustment in colum (r), Property Tax, restates
7 the test period accrued levels of property taxes to the'
8 most current information available and eliminates any
9 adjustments related to the prior year.This adjustment
10 also annualizes the increase in property taxes effective
11 July 1, 2009, related to the Company's Coyote Springs plant
12 located in Oregon. Prior to July 1, 2009, the Company had
13 been exempted from this property tax assessment for five
14 years under a tax abatement as a result of the plant being
15 located in the Columia River Enterprise Zone in Oregon.
16 The effect of this particular adjustment is to decrease
17 Idaho net operating income by $617,000.
18 The adjustment in colum (s), Uncollectible BKense,
19 restates the accrued expense to the actual level of net
20 write-offs for the test period.The effect of this
21 adjustment is to decrease Idaho net operating income by
22 $110,000.
23 Q.Please turn to page 8 and exlain the adjustments
24 show there.
Andrews, Di 25
Avista Corporation
1 A.The adjustment in colum (t), Regulatory Exense,
2 restates recorded 2009 regulatory expense to reflect the
3 IPUC assessment rates applied to expected revenues for the
4 2009 period and the actual levels of FERC fees paid during
5 the test period.The effect of this adjustment is to
6 decrease Idaho net operating income by $27,000.
7 The adjustment in colum (u), injuries an Damges, is
8 a restating adjustment that replaces the accrual with the
9 six-year rolling average of actual injuries and damges
10 payments not covered by insurance.A six-year rolling
11 average and the reserve method of accounting for injuries
12 and damages, net of insurance proceeds, is a practical
13 methodology to deal with these normal utility operating
14 expenses that happen to occur on an irregular basis and
15 differ markedly in materiality.This methodology was
16 accepted by the Idaho Commission in Case No. WWP-E-98-11.
17 The effect of this adjustment is to increase Idaho net
18 operating income by $47,000.
19 The adjustment in colum (v), FIT, adjusts the FIT
20 calculated at 35% within Results of Operations by removing
21 the effect of certain Schedule M items, matching the
22 jurisdictional allocation of other Schedule M items to
23 related Results of Operations allocations and adjusts the
24 appropriate level of production tax credits and income tax
25 credits on qualified generation.The net FIT and
Andrews, Di 26
Avista Corporation
1 production tax credit adjustments decrease Idao net
2 operating income by $514,000. Adjusting for the proper
3 level of deferred tax expense for the test period decreases
4 Idaho net operating income by $3,000. This adjustment also
5 reflects the proper level of amortized income tax credit
6 for the test period increasing Idaho net operating income
7 by an additional $15,000.Therefore, the net effect of
8 this adjustment, all based upon a Federal tax rate of 35%,
9 is to decrease Idaho net operating income by $502,000.
10 The adjustment in colum (w), Idaho PCA, removes the
11 effects of the financial accounting for the Power Cost
12 Adjustment (PCA).The PCA normalizes and defers certain
13 power supply costs on an ongoing basis between general rate
14 filings. Certain differences in actual power supply costs,
15 compared to those included in base retail rates are
16 deferred and then surcharged or rebated to customers in a
17 future period. Revenue adjustments due to the PCA and the
18 power cost deferrals affect actual results of operations
19 and need to be eliminated to produce a normal period.
20 Actual revenues and power supply costs are normalized in
21 adjustments in colum (w) and colum (PF1) , respectively.
22 The effect of this adjustment is to decrease Idaho net
23 operating income by $11,690,000.
24 The adjustment in colum (x), Nez Perce Settlemt
25 Adjustment, reflects a decrease in production operating
Andrews, Di 27
Avista Corporation
1 expenses.An agreement was entered into between the
2 Company and the Nez Perce Tribe to settle certain issues
3
4
regarding earlier owned and operated hydroelectric
generating facilities of the Company.This adjustment
5 directly assigns the Nez Perce Settlement expenses to the
6 washington and Idaho jurisdictions. This is necessary due
7 to differing regulatory treatment in Idaho Case No. WWP-E-
8 98-11 and Washington Docket No. UE-991606.The effect of
9 this adjustment is to increase Idaho net operating income
10 by $10,000.
11 The adjustment in colum (y), Bliminate AIR Exenses,
12 removes expenses associated with the sale of customer
13 accounts receivable.The effect of this adjustment is to
14 increase Idaho net operating income by $104,000.
15 Q.Please continue on page 10 with your exlanation
16 of the adjustments.
17 A.The first adjustment on page 10 in colum (z),
18 Revenue Normlization Adjustmt, is an adjustment taking
19 into account known and measurable changes that include
20 revenue repricing (including the current authorized rates
21 approved in Case No. AVU-E-09-01), weather normlization
22 and a recalculation of unilled revenue.Schedule 91
23 Tariff Rider and Schedule 59 Residential Exchange are
24
25
excluded from pro forma revenues,and the related
amortization expense is eliminated as well.Company
Andrews, Di 28
Avista Corporation
1 witness Ms. Knox is sponsoring this adjustment. The effect
2 of this particular adjustment is to increase Idaho net
3 operating income by $3,620,000.
4 The adjustment in colum (aa) , Miscellaneous Restating
5 Adjustmnts, removes a numer of non-operating or non-
6 utility expenses associated with advertising, dues and
7 donations included in error in the test period actual
8 results.The effect of this adjustment is to increase
9 Idaho net operating income by $38,000.
10 The adjustment in colum (ab) , Colstrip Mercury
11 Bmssion O&:M, includes Idaho's share of the annual O&M
12 expense of approximately $.5 million ($1.4 million system)
13 associated with the mercury control project at Colstrip
14 planned during the 2010/2011 rate year. This adjustment is
15 consistent with the determination of the Commission
16 approved annual level of expense in Case No. AVU-E-09-01.
17 This adjustment decreases Idaho net operating income by
18 $308,000.
19 The adjustment in colum (ac), Restating CS2 Levelized
20 Adjustment, adjusts the deferred return amounts related to
21 Coyote Springs 2 (CS2) to the amounts that will be recorded
22 during the rate year.In the Company i s electric general
23 rate case, Case No. AVU-E-04-1, Order No. 29602, dated
24 October 8, 2004, the Commission approved the deferral of
25 return on CS2 investment in early years for recovery in
Andrews, Di 29
Avista Corporation
1 later years in order to levelize the revenue requirement on
2 CS2 plant investment for the first ten years of operation
3 of the plant. The ten-year period runs from Septemer 1,
4 2004 through August 31, 2014. This adjustment restates the
5 test period amount of amortization expense, inclusive of
6 the carrying charge on the deferred return, to the amount
7 that will be recorded in the rate year.The change in
8 deferred income tax expense from the test period to the
9 rate period is also reflected. This adjustment reduces net
10 operating income by $144,000.
11 The adjustment in colum (ad), Restating Wartsila
12 Amrtization, reflects a five-year amortization of the
13 estimated unrecovered investment in two 4 MW reciprocating
14 engine generators originally planned to be installed at
15 Boulder Park,a small natural gas-fired generating
16 facility. During the period Decemer 2004 through February
17 2005 Avista and Commission Staff discussed possible
18 accounting treatment related to the planned sale of the
19 wartsila units.In February 2005 the Staff indicated by
20 letter that it would support a five-year amortization of
21 the unrecovered costs, with no return on the unamortized
22 balance, and that the inclusion of the amortization expense
23 in rates would be addressed in a future proceeding.
24 In 2008 a buyer agreed to purchase the units for net
25 proceeds to the Company of $1 million, as compared to the
Andrews, Di 30
Avista Corporation
1 book value of $3.65 million. However, the buyer defaulted
2 and only one uni t was del i vered wi th net proceeds to the
3 Company of $670,000.The second uni t remains unsold and
4 the five-year amortization amount in the adjustment assumes
5 that the second unit will be sold for the $330,000.
6 In Case No. AVU-E-09-01 the Idaho Commission approved
7 the accounting treatment of the five-year amortization
8 starting in August 1, 2009 through July 31, 2014. This
9 adjustment restates the test period expense amount (5
10 months) to an annual or 12 month level of amortization
11 expense amount. This adjustment decreases Idaho net
12 operating income by $69,000.
13 Q.Please continue on page 10 with your exlantion
14 of the adjustmnts.
15 A.The adjustment in colum (ae), Restating Colstrip
16 Lawsuit Settlemt, reflects a two-year amortization of the
17 Company's share of the lawsuit settlement amount. On May
18 22, 2008, the Company filed an application seeking an
19 accounting order to defer the settlement payment.On
20 Septemer 12, 2008, the Commission authorized deferred
21 accounting treatment in Order No. 30638, Case No. AVU-E-08-
22 03. In Case No. AVU-E-09-01 the Idaho Commission approved
23 the two-year amortization treatment proposed by the Company
24 starting in August 1, 2009 through July 31, 2011. This
25 adjustment restates the test period expense amount (5
Andrews, Di 31
Avista Corporation
1 months) to the remaining 2010/2011 rate period amount (10
2 months remaining through July 31, 2011) of amortization
3 expense amount.This adjustment decreases Idaho net
4 operating income by $99,000.
5 The adjustment in colum (af), Restating Chicago
6 Climate Exchage, removes the effect in the test period of
7 amortization revenue included related to the expiration of
8 the two-year amortization of the Chicago Climate Exchange
9 approved in AVU-08-01.In AVU-08-01 the IPUC approved a
10 two-year amortization of the other revenue included in
11 Idaho's share of the revenues, net of expenses, from the
12 sales of Carbon Financial Instruments (CFIs) on the Chicago
13 Climate Exchange.In Order No. 30647 (Case No. AVU-E-08-
14 01), the Commission approved the amortization of the net
15 revenues over a two-year period beginning in October 2008
16 through Septemer 2010.This adjustment decreases Idaho
17 net operating income by $272,000.
18 The adjustment in colum (ag), Operation &: Maintence
19 (O&:M) Savings, includes a reduction to expense for
20 anticipated operation and maintenance savings expected
21 during the pro forma period, as compared to the 2009 test
22 period.These O&M savings include reductions related to
23 certain additional generation, transmission, distribution
24 and general plant investment included in the 2009 and 2010
25 capital additions adjustments,and other operation
Andrews, Di 32
Avista Corporation
1 efficiencies that were identified. (These savings are in
2 addition to the offset included as a result of the
3 production/ transmiss ion property adjustment described
4 below). The savings related to capital projects have been
5 discussed further within Mr.Storro's (generation
6 projects), Mr. Kinney's (distribution and transmission
7 proj ects) , and Mr. DeFelice \ s (general plant) direct
8 testimony.Additional detail can be found within my
9 workpapers included with the Company's filing. This
10 adjustment increases Idaho net operating income by
11 $124,000.
12 The adjustment in colum (ah) , Working Capital,
13 increases total rate base for the Company's working capital
14 adjustment.The Company has calculated cash working
15 capital in this proceeding on the basis of the n 1/8 of O&M"
16 formula (also known as the Federal Energy Regulatory
17 Commission's "one-eighth" formula or "45 day" method).
18 This methodology divides Idaho total O&M expenses (less
19 fuel: accounts 501 and 547; and purchased power expenses:
20 account 555) by eight, the approximate numer of 45 day
21 periods within a year. FERC's use of 45 days represents an
22 estimate of days that elapse between payments for operating
23 expenses associated with providing service to customers and
24 receiving payment from customers.Since investors supply
25 the funds to finance operations during this lag period, it
Andrews, Di . 33
Avista Corporation
1 is appropria ted to provide a return on those working
2 capital funds. The Company believes that this methodology,
3 given the complexities of a multi-state, multi service
4 utility such as Avista is a reasonable approach for
5 calculating an individual state and service working capital
6 adjustment.The effect on Idaho rate base is an increase
7 of $9,863,000.
8 The adjustment in the colum (ai) Restate Det
9 xnterest, restates debt interest using the Company's pro
10 forma weighted average cost of debt, as outlined in the
11 testimony and exhibits of Mr. Theis, and applied to Idaho's
12
13
pro forma level of rate base.This produces a pro forma
level of tax deductible interest expense.The Federal
14 income tax effect of the restated level of interest for the
15 test period decreases Idaho net operating income by
16 $65,000.
17 The colum entitled Restated Total, subtotals all the
18 preceding colums (b) through colum (ai), excluding the
19 subtotal colum.These totals represent actual operating
20 resul ts and rate base plus the standard normlizing
21 adjustments that the Company includes in its Commission
22 Basis adjustments except power supply2.
23
2 The restated total also includes an increase in expense necessary to
annualize certain 2009 exenses included in the test period, (Le.
Colstrip mercury emssion expense, Montana riverbed lease, Spokane
River and CDA Tribe Settlement exense.)
Andrews, Di 34
Avista Corporation
1 Pro Form Adjustments
2 Q.Please explain the significance of the 12 colums
3 subsequent to the colum entitled Restated Total that
4 begins at page 11 in yor Exibit No. 12, Schedule 1.
5 A.The adjustments subsequent to the Restated Total
6 colum are pro forma adjustments that recognize the
7 jurisdictional impacts of items that will impact the pro
8 forma operating period levels for known and measurable
9 changes. They encompass revenue and exense items as well
10 as additional capital proj ects .These adjustments bring
11 the operating results and rate base to the final pro forma
12 level for the test year.
13 Q.Please continue with your exlanation of the
14 adjustmts starting on page 11, subsequent to the Restated
15 Total colum.
16 A.The adjustment in colum (PF1) , Pro Form Power
17 SUpply, was made under the direction of Mr. Johnson and is
18 explained in detail in his testimony.This adjustment
19 includes pro forma power supply related revenue and
20 expenses to reflect the twelve-month period October 1, 2010
21 through Septemer 30, 2011.Mr. Johnson's testimony
22 outlines the system level of pro forma power supply details
23 that are included in this adjustment.This adjustment
24 calculates the Idaho jurisdictional share of th9se figures
25 included in the base Results of Operations. The net effect
Andrews, Di 35
Avista Corporation
1 of the power supply adjustments decreases Idaho net
2 operating income by $6,612,000.
3 The adjustment in colum (PF2) , Pro Form production
4 Property Adjustment, adjusts pro formed production and
5 transmission revenues, expenses, and rate base by a factor
6 that reflects the percentage increase of the pro forma
7 period Idaho retail load above the 2009 Idaho test year
8 retail load.Capi tal addi tions have been pro formed to
9 December 2010 whereas the remainder of the pro forma
10 adjustments reflect costs for the twelve months ended
11 Septemer 2011 level.Therefore a factor reflecting 2010
12 calendar Idaho retail load was used to determine the factor
13 for pro formed capital costs and the 2010/2011 rate year
14 Idaho retail load was used to determine the factor for all
15 other pro formed production and transmission costs.The
16 adjustment is made to avoid the over-recovery of pro formed
17 production and transmission costs, since the revenue
18 requirement associated with those costs is being spread to
19 test year retail load.The use of a production property
20 adjustment, in conjunction with pro forma rate year loads
21 for power supply, results in a better matching of revenues
22 and expenses during the period that new retail rates from
23 the case will be in effect. The effect of this adjustment
24 on Idaho net operating income is an increase of $2,391,000.
25 The effect on Idaho rate base is a decrease of $4,853,000.
Andrews, Di 36
Avista Corporation
1 The adjustment in colum (PF3) , Pro Form Lar-Non-
2 Exec, reflects known and measurable changes to test period
3 union and non-union wages and salaries, excluding executive
4 salaries, which are handled separately in adjustment PF4.
5 For non-union employees, test period wages and salaries are
6 restated to include the March 2010 overall actual increase
7 of 2.8%, and seven months of the planned March 2011
8 increase of 2.4%.The Company's Board is scheduled to
9 address the 2011 planned increase at the Board of
10 Director's meeting in May 2010.
11 Also included in this adjustment are the 2010 and 2011
12 (seven months) union contract increases currently being
13 negotiated. The Company anticipates a final union contract
14 agreement will be completed by the end of second quarter of
15 2010. The methodology behind this adjustment is consistent
16 with that used in Case No. AVU-E-09-01. The effect of this
17 adjustment on Idaho net operating income is a decrease of
18 $549,000.
19
20
The adjustment in colum (PF4) , Pro Form Lar-
Executive,reflects known and measurable changes to
21 executive compensation, restating executive compensation
22 test period salary expense to actual salary levels at 2010.
23 This adjustment takes into account changes in compensation
24 for the executive team in 2010 only. Although the officers
25 did not receive a 2009 pay increase, this adjustment does
Andrews, Di 37
Avista Corporation
1 reflect an annual increase for the actual overall 2010
2 officer increase of 2.86%. Compensation costs for non-
3 utility operations are excluded, as executives routinely
4 charge a portion of their time to non-utility operations,
5 commensurate with the amount of time spent on such
6 activities, based on a survey of each executive.The
7 methodology behind this adjustment is consistent with that
8 used in the last general case, Case No. AVU-E-09-01.The
9 impact of this adjustment on Idaho net operating income is
10 a decrease of $55,000.
11 The adjustment in colum (PF5) , Pro For. Transmssion
12 Rev/Bx, was made under the direction of Mr. Kinney and is
13 explained in detail in his testimony.This adjustment
14 includes pro forma transmission-related revenues and
15 expenses to reflect the twelve-month period October 31,
16 2010 through September 30, 2011.As described by Mr.
17 Kinney, this adjustment includes, among other things, the
18 increase in revenue as a result of the recently-concluded
19 FERC transmission rate case. The net effect of the
20 transmission revenue and expense adjustments increases
21 Idaho net operating income by $604,000.
22 The adjustment in colum (PF6), Pro Form Capital
23 Additions 2009, pro forms in the capital cost and expen$es
24 associated with adjusting the twelve-month ending Decemer
2S 2009 average-monthly-average plant related balances to end-
Andrews, Di 38
Avista Corporation
1 of-period balances for plant in service at Decemer 31,
2 2009.The capital costs have been included for the
3 Decemer 31, 2009 pro forma period with the associated
4 depreciation expense and property tax, as well as the
5 appropriate accumulated depreciation and deferred income
6 tax rate base offsets. This adjustment was made under the
7 direction of Mr. DeFelice and is described further in his
8 testimony.This adjustment is also consistent with that
9 approved in the most recent Idaho general rate case
10 proceeding, Case No. AVU-E-09-01, which approved the
11 Company's expected net rate base balance as of Decemer 31,
12 2009.The Production Property Adjustment is also applied
13 to the production and transmission components of these
14 addi tions as discussed further above.This adjustment
15 decreases Idaho net operating income by $881,000 and
16 increases rate base by $16,402,000.
17 Q.Please turn to page 12 and exlain the
18 adjustmnts show there.
19 A.The adjustment in colum (PF7) , Pro Form Capital
20 Additions 2010, pro forms in the capital cost and expenses
21 associated with capital expenditures for 2010.This
22 adjustment includes projects expected to be completed and
23 transferred to plant-in-service by Decemer 31, 2010, and
24 thus were normalized to reflect anual amounts.The
25 capital costs have been included for the appropriate pro
Andrews, Di 39
Avista Corporation
1 forma period with the associated depreciation expense and
2 property tax, as well as the appropriate accumulated
3 depreciation and deferred income tax rate base offsets.
4 This adjustment also reduces the 2009 vintage plant net
5 rate base (including accumulated depreciation and deferred
6 FIT) to an end of period Decemer 31, 2010 adjusted
7 balance. This adjustment was also made under the direction
8 of Mr. DeFelice and is described further in his testimony.
9 The Production Property Adjustment is also applied to the
10 production and transmission components of these additions
11 as discussed further by above.This adjustment decreases
12 Idaho net operating income by $1,598,000 and increases rate
13 base by $8,310,000.
14 The adjustment in colum (PF8) , Pro Form Noxon
15 Generation 2010 & 2011, pro forms in the Noxon capital
16 projects planned for completion in April 2010 and April
17 2011 . As explained further by Mr. Storro, Noxon Uni t #3 is
18 scheduled to have a new turbine and complete mechanical
19 overhaul between August 2009 and April 2010.These unit
20 upgrades are planned to increase unit efficiency and boost
21 unit ratings.The additional generation from the Noxon
22 Unit #2 completion planned for April of 2011 has also been
23 included in the Aurora Dispatch Model for the rate year, as
24 discussed by Company witness Mr. Kalich.Including the
25 addi tional genera tion from this Noxon upgrade in the
Andrews, Di 40
Avista Corporation
1 Dispatch Model, ultimately reducing power supply expenses
2 for customers in the 2010/2011 rate year, and including
3 this proj ect in rate base for the rate period provides a
4 proper match in revenues with expenses for this project.
5 The Noxon Unit #2 project was included in rate base and
6 wi thin the Aurora model at 50% of the cost and generation
7 (equivalent to 6 months.due to an April 1, 2011 effective
8 date) .This adjustment decreases Idaho net operating
9 income by $97,000 and increases rate base by $4,362,000.
10 The adjustment in colum (PF9) , Pro For. Infor.tion
11 Services, pro forms in the administrative and general (A&G)
12 expenses associated with incremental changes for
13 information services costs planned for 2010 and 2011 above
14 test period levels.As explained by Mr. Kensok, these
15 incremental costs include increases in expenses for
16 supporting applications utilized by the Company, additional
17 required security and compliance requirements,and
18 additional dollars required for hosting fees, application
19 fees, software maintenance and license fees.This
20 adjustment decreases Idaho net operating income by
21 $831,000.
22 The adjustment in colum (PF10), Pro Form Emloyee
23 Benefits, adjusts for changes in both the Company's pension
24 and medical insurance expense and increases Idaho net
25 operating income by $206,000.
Andrews, Di 41
Avista Corporation
1 Q.Please describe the pension exense portion of
2 the Emloye Benefits adjustmnt an Idao'S share of this
3 exense.
4 A.The Company's pension expense portion of this
5 adjustment is determined in accordance with Financial
6 Accounting Standard 87 (FAS-87), and has decreased on a
7 system basis from $24.2 million for the actual test year
8 costs for the twelve months ended Decemer 31, 2009, to
9 $19.7 million for 2010. At this time the amounts included
10 in this case are estimated with the most current available
11 data.Preliminary Pension expense is determined by an
12 outside actuarial firm, in accordance with FAS-87, and
13 provided to the Company late in the first quarter of each
14 year.These calculations and assumptions are reviewed by
15 the Company's outside accounting firm annually for
16 reasonableness and comparability to other companies.Due
17 to the timing of this report, additional information may
18 become known during the course of these proceedings that
19 may require a modification to this adjustment.
20 The decrease in pension exense is due primarily to
21 the investment performance of plan assets during the past
22 year.In addition, the Pension Protection Act (PPA) of
23 2006 requires companies to annually increase the funding
24 level of their pension plans in order to eventually achieve
Andrews, Di 42
Avista Corporation
1 a fully-funded plan, which also impacts the plan asset
2 balance and level of expense.
3 Q.Please now describe the medical insurance expense
4 portion of the Emloye Benefits adjustmnt and Idaho's
5 share of this exense.
6 A.The Company's medical insurance expense portion
7 of this adjustment adjusts for the medical insurance costs
8 planned for 2010 above the test period. Medical insurance
9 expense has increased on a system basis from $16.9 million
10 for the actual test year costs for the twelve months ended
11 Decemer 31, 2009, to $19.1 million for 2010.This
12 increased cost is mainly due to increased large claims
13 activity driven by various diagnostic categories such as
14 cancer and heart disease, and an increase in the average
15 age of our memership.
16 Avista has taken measures to directly decrease its
17 self-funded plan costs. These measures include increasing
18 the stop loss insurance reimbursement level,which
19 decreases the premium expense with Avista' s third party
20 administrator. Avista also negotiated a new contract with
21 its prescription benefit administrator and its third party
22 administrator (TPA) to pass through the drug manufacturer
23 rebates (in the past these rebates were left with the TPA.)
24 The Company also converted the Dental plan to a Preferred
25 Provider Organization (PPO) program that provides savings
Andrews, Di 43
Avista Corporation
1 to the participant similar to medical plans with a PPO
2 program. In addition to these measures, over the past five
3 years the Company made changes to co-pay levels and out of
4 pocket maximums to help reduce plan costs.The Benef i ts
5 Planning and Administrative Committee constantly seek
6 opportunities for benefit program changes that will reduce
7 costs.
8 The net impact of the decrease in pension and the
9 increase in medical costs is a net decrease in expense of
10 $317,000.
11 Q.Please continue your explanation of the
12 adjustment colums on page 12.
13 A.The adjustment in Colum (PF11) , Pro Porm
14 Insurance, adjusts the test period insurance expense for
15 general liability, directors and officers (D&O) liability,
16 and property to the actual cost of insurance policies that
17 are in effect for 2010.Costs of system-wide insurance
18 policies for 2010 were slightly above costs for policies in
19
20
2009,due to increased costs in general liability
insurance.Insurance costs that are properly charged to
21 non-utility operations have been excluded from this
22 adjustment. This adjustment decreases Idaho net operating
23 income by $47,000.
24 Q.Please turn to page 13 an explain the
25 adjustments show there.
Andrews, Di 44
Avista Corporation
1 A.The adjustment in colum (PF12), Pro For. Clark
2 Fork/Spokae River Relicensing PM&B, adjusts the level of
3 exense included in the test period for the Clark Fork and
4 Spokane River Protection, Mitigation, and Enhancement
5 (PM&E) expenses, to the Company's planed expendi tures for
6 2010 required by the Company's licensing of those dams.
7 Mr. Storro discusses the additional level of planed PM&E
8 expenditures further. The effect of this adjustment is to
9 decrease Idaho net operating income by $698,000.
10 The last colum, Pro Form Total, reflects total pro
11 forma results of operations and rate base consisting of
12 test period actual results (twelve-months ending Decemer
13 31, 2009) and the total of all adjustments.
14 Q.Referring back to page 1, line 42, of Exibit No.
15 12, Schedule 1, what was the actual and pro for. electric
16 rate of return realized by the Comany during the test
17 period?
18 A.For the State of Idaho, the actual test period
19 rate of return was 7.62%. The pro forma rate of return is
20 5 . 19 % under pres en t rates. Thus, the Company does not, on
21 a pro forma basis for the test period, realize the 8.55%
22 rate of return requested by the Company in this case.
23 Q.How much additional net operating incom would be
24 required for the State of Idaho electric operations to
Andrews, Di 45
Avista Corporation
1 allow the Com an opportunity to earn its proposed 8.55%
2 rate of return on a pro form basis?
3 A.The net operating income deficiency amounts to
4 $20,449,000, as shown on line 5, page 2 of Exhibit No. 12,
5 Schedule 1. The resulting revenue requirement is shown on
6 line 7 and amounts to $32,114,000, or an increase of 13.98%
7 over pro form general business revenues.
8
9 iv. NA'l GAS SBCTION
10 Test Period An Pro Form Period
11 Q.On what test period and pro form period is the
12 Comany basing its need for additional natural gas revenue?
13 A.The test period being used by the Company is the
14 twelve-month period ending Decemer 31, 2009, presented on
15 a pro forma basis.Currently authorized rates are based
16 upon the twelve-months ended Septemer 30, 2008 test year
17 utilized in case No. AVU-G-09-01, as adjusted on a pro
18 forma basis.
19 The pro forma period being used by the Company in this
20 proceeding is October 2010 through September 30, 2011
21 (2010/2011) .
22 Q.Could you please explain the different rates of
23 return show in your natural gas results presented in your
24 testimony?
Andrews, Di 46
Avista Corporation
1 A.Yes.As discussed previously in the Electric
2 Section, there are three different rates of return
3 calculated.The actual ROR earned by the Company during
4 the test period, the Pro Forma ROR determined in my Exhibit
5 No. 12, Schedule 2, and the requested ROR.For ease of
6 comparison, please refer to Illustration No. 3 below
7 depicting these results for the Natural Gas Section:
8 Xllustration No.3:
9
11
12
13
14
15
10.00%
8.00%
6.00%
4.00%
2.00%
0.00%
AvistaCorp
Rates ofRet
10
Actal ProForma Request
Q~Wht are the primary factors driving the
16 Comany's need for additional natural gas revenues?
17 A.The Company's natural gas request is driven by
18 changes in various operating cost components, mainly
19 distribution operation and maintenance and administrative
20 and general expendi tures .In addition, over 19% of the
21 overall increase in the requested revenue requirement is
22 due to the transfer of a portion of the Jackson Prairie
23 storage facility, from Avista Energy to Avista Utilities on
24 May 1,2011. . Company witness Mr. Christie discusses the
Andrews, Di 47
Avista Corporation
1 details of this project, and the plans to move it to the
2 Utility.
3 The total of the increased operating cost components
4 requested in this case causes an increase in the fixed
5 costs of providing gas service to customers.I describe
6 the pro forma adjustments included in this case later in my
7 testimony.
8
9 Revenue Requirement
10 Q.Would you please exlain what is show in Exibit
11 No. 12, Schedule 2?
12 A.Yes. Exhibit No. 12, Schedule 2 shows actual and
13 pro forma gas operating results and rate base for the test
14 period for the State of Idaho.Colum (b) of page 1 of
15 Exhibit No. 12, Schedule 2 shows test period operating
16 results (twelve-months ended Decemer 31, 2009) and
17 components of the average-monthly-average rate base as
18 recorded; colum (c) is the total of all adjustments to net
19 operating income and rate base; and colum (d) is pro forma
20 results of operations, all under existing rates.Colum
21 (e) shows the revenue increase required which would allow
22 the Company to earn an 8.55% rate of return.Colum (f)
23 reflects pro forma gas operating results with the requested
24 increase of $2,575,000.
Andrews, Di 48
Avista Corporation
1 Q.Would you please explain page 2 of Bxibi t No.
2 12, Schedule 2?
3 A.Yes.Page 2 shows the calculation of the
4 $2,575,000 revenue requirement at the requested 8.55% rate
5 of return.
6 Q.Wht does page 3 of Exibit No. 12, Schedule 2
7 show?
8 A.Page 3 shows the proposed Cost of Capital and
9 Capital Structure utilized by the Company in this case,
10 showing the weighted average cost of capital calculation of
11 8.55%. Mr. Thies discusses the Company's proposed rate of
12 return and the pro forma capital structure utilized in this
13 case, while Company witness Dr. Avera provides additional
14 testimony related to the appropriate return on equity for
15 Avista.
16 Q.Would you now please explain page 4i of Exibit
17 No. 12, Schedule 2?
18
19
A.Yes.Page 4 shows the derivation of the net-
operating-income-to-gross-revenue conversion factor.The
20 conversion factor takes into account uncollectible accounts
21 receivable, Commission fees and Idaho State excise taxes.
22 Federal income taxes are reflected at 35%.
23 Q.Now turning to pages 5 through 9 of yor Exibit
24 No. 12, Schedule 2, would you please exlain what those
25 pages show?
Andrews, Di 49
Avista Corporation
1 A.Yes. Page 5 begins with actual operating results
2 and rate base for the test period (twelve-months ending
3 Decemer 31, 2009) in colum (b).Individual normlizing
4 adjustments consistent with prior regulatory treatment
5 (standard Commission Basis adjustments) begin in colum (c)
6 on page 5 and continue through colum (s) on page 7.
7 Individual pro forma and additional normalizing adjustments
8 begin in colum (PF1) on page 8 and continue through colum
9 (PF8) on page 9. The final colum on page 9 is the total
10 pro forma operating results and rate base for the test
11 period.Additional details related to each adjustment
12 described below are provided in accompanying work papers.
13
14 Stanard Comssion Basis Adjustmnts
15 Q.Would you please exlain each of these
16 adjustmnts, the reason for the adjustment an its effect
17 on test period State of Idao Det operating incom an/or
18 rate base?
19 A.Yes, the restating adjustments shown in colums
20 (c) through (s) are consistent with methodologies employed
21 in our prior cases and current regulatory principles.
22 The first adjustment, colum (c) on page 5, entitled
23 Deferred FIT Rate Base, reflects the rate base reduction
24 for Idaho's portion of deferred taxes.The adj ustment
25 reflects the deferred tax balances arising from accelerated
Andrews, Di 50
Avista Corporation
1 tax depreciation (Accelerated Cost Recovery System, or
2 ACRS, and Modified Accelerated Cost Recovery, or MACRS) ,
3 bond refinancing premiums, and contributions in aid of
4 construction.These amounts are reflected on the average
5 of monthly average balance basis. The effect on Idaho rate
6 base is a reduction of $17,318,000.
7 The adjustment in colum (d), Deferred Gain on Office
8 Building, reflects the rate base reduction for Idaho's
9 portion of the net of tax, unamortized gain on the sale of
10 the Company's general office facility.The facility was
11 sold in Decemer 1986 and leased back by the Company.
12 Al though the Company repurchased the building in Novemer
13 2005, the Company opted to continue to amortize the
14 deferred gain over the remaining amortization period
15 scheduled to end in 2011. The effect on Idaho rate base is
16 a reduction of $36,000. .
17 The adjustment in colum (e), Gas Inventory, reflects
18 the adjustment to rate base for the average-of-monthly-
19 average value of gas stored at the Company
1 s Jackson
20 Prairie underground storage facility through the test
21 period.The effect on Idaho rate base is an increase of
22 $ 3 , 62 6 , 000 .
23 The adjustment in colum (f), Weatherization and DSM
24 Investment, includes in rate base the balance (net of
25 amortization) of company investments in natural gas demand
Andrews, Di 51
Avista Corporation
1
2
side management (DSM) program costs.These amounts are a
component of actual results of operations.The effect of
3 this adjustment is to increase Idaho rate base by $152,000.
4 The adjustment in colum (g) , entitled CUstomr
5 Advances, decreases rate base for funds advanced by
6 customers for line extensions, as they are generally
7 recorded as contributions in aid of construction at some
8 future time.The effect of this adjustment on Idaho rate
9 base is a decrease of $74,000.
10 Q.Please turn to page 6 an exlain the first
11 colum shown there.
12 A.The colum labeled Subtotal Actual, is a subtotal
13 of colums (b) through (g) and reflects the standard rate
14 base adjustments.
15 The first adjustment starting on page 6 in colum (h),
16 entitled Revenue Nor.lization & Gas Cost Adjustmt, is an
17 adjustment taking into account known and measurable changes
18 that include revenue normalization (including the current
19 authorized rates approved in Case No. AVU-G-09-01), which
20 reprices customer usage under presently effective rates, as
21 well as weather normalization and an unilled revenue
22 calculation.Associated gas costs are replaced with gas
23 costs computed using normalized volumes at the currently
24 effective weighted-average-cost-of-gas, or WACOG rates.
25 Revenues associated with the temporary Gas Rate Adjustment
Andrews, Di 52
Avista Corporation
1 Schedule 155 and Schedule 191 Tariff Rider are excluded
2 from pro forma revenues, and the related amortization
3 expenses are eliminated as well.Ms. Knox is sponsoring
4 this adjustment. The effect of this particular adjustment
5 is to decrease Idaho net operating income by $547,000.
6 The adjustment in colum (i), Bliminate B &: 0 Taxes,
7 eliminates the revenues and expenses associated with local
8 business and occupation taxes, which the Company passes
9 through to customers. The adjustment eliminates any timing
10 mismatch that exists between the revenues and expenses by
11 eliminating the revenues and expenses in their entirety.
12 B & 0 Taxes are passed through on a separate schedule,
13 which is not part of this proceeding. The effect of this
14 adjustment is zero to Idaho net operating income.
15 The adjustment in colum (j), property Tax, restates
16 the test period accrued levels of property taxes to the
17 most current information available and eliminates any
18 adjustments related to the prior year. The effect of this
19 particular adjustment is to decrease Idaho net operating
20 income by $64,000.
21 The adjustment in colum (k), uncollectible Exense,
22 restates the accrued expense to the actual level of net
23 write-offs for the test period.The effect of this
24 adjustment is to increase Idaho net operating income by
25 $12 i , 000 .
Andrews, Di 53
Avista Corporation
1 The adjustment in colum (1), entitled Regulatory
2 Exense Adjustmnt, restates recorded 2009 regulatory
3 expense to reflect the IPUC assessment rates applied to
4 revenues for the test period.The effect of this
5 adjustment is to increase Idaho net operating income by
6 $10,000.
7 The adjustment in colum (m), entitled injuries an
8 Dages, is a restating adjustment that replaces the
9 accrual with the six-year rolling average of actual
10 injuries and damages payments not covered by insurance.
11 This methodology was accepted by the Idaho Commission in
12 Case No. WWP-E-98-11. The effect of this adjustment is to
13 increase Idaho net operating income by $38,000.
14 Q.Please turn to page 7 an exlain the adjustments
15 shown there.
16 A.The first adjustment on page 7 in colum (n),
17 entitled FIT, adjusts the FIT calculated at 35% within
18 Results of Operations by removing the effect of certain
19 Schedule M items and matches the jurisdictional allocation
20 of other Schedule M items to related Results of Operations
21
22
allocations.This adjustment also reflects the proper
level of deferred tax expense for the test period.The
23 effect of this adjustment, all based upon a Federal tax
24 rate of 35%, is to increase Idaho net operating income by
25 $8,000.
Andrews, Di 54
Avista Corporation
1 The adjustment in colum (0), Bliminate AIR Exenses,
2 removes expenses associated with the sale of customer
3 accounts receivable.The effect of this adjustment is to
4 increase Idaho net operating income by $18,000.
5 The adjustment in colum (p), Miscellaneous Restating
6 Adjustmt, removes a numer of non-operating or non-
7 utility expenses associated with advertising, dues and
8 donations included in error in the test period actual
9 results.The effect of this adjustment is to increase
10 Idaho net operating income by $12,000.
11 The adjustment in colum (q), Operation &: Maintenace
12 (oa) Savings,includes a reduction to expense for
13 anticipated operation and maintenance savings exected
14 during the pro form period, as compared to the 2009 test
15 period.These O&M savings include reductions related to
16 certain additional general plant investment included in the
17 capital additions adjustments, as well as other operation
18 efficiencies that were identified. Mr. DeFelice describes
19 the general plant savings within his direct testimony.
20 Additional detail can be found within my workpapers
21 inc 1 uded wi th the Company's f i 1 ing . This adj us tmen t
22 increases Idaho net operating income by $12,000.
23 The adjustment in colum (r) ,working Capital
24 increases total rate base for the Company's working capital
25 adjustment.The Company has calculated cash working
Andrews, Di 55
Avista Corporation
1 capital in this proceeding on the basis of the "1/8 of O&M"
2 formula (also known as the Federal Energy Regulatory
3 Commission's "one-eighth" formula or "45 day" method).
4 This methodology divides Idaho total O&M expenses (less
5 purchased gas: accounts 804, 805 and 808) by eight, the
6 approximate numer of 45 day periods within a year. FERC' s
7 use of 45 days represents an estimate of days that elapse
8 between payments for operating expenses associated with
9 providing service to customers and receiving payment from
10 customers.Since investors supply the funds to finance
11 operations during this lag period, it is appropriated to
12
13
provide a return on those working capital funds.The
Company believes that this methodology ,given the
14 complexities of a multi-state, multi-service utility such
15 as Avista is a reasonable approach for calculating an.
16 individual state and service working capital adjustment.
17 The effect on Idaho rate base is an increase of $1,692,000.
18 The adjustment in colum (s), Restate Det Interest,
19 restates debt interest using the Company's pro forma
20 weighted average cost of debt, as outlined in the testimony
21 and exhibits of Mr. Thies. As applied to Idaho's pro forma
22 level of rate base, produces a pro forma level of tax
23 deductible interest expense. The federal income tax effect
24 of the restated level of interest for the test period
25 decreases Idaho net operating income by $44,000.
Andrews, Di 56
Avista Corporation
1
2
3
4
5
6
7
8
---_.__...._._....-9
~.--":"'''.,-~--~ .--10----_..-
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
The last colum on page 7, entitled Restated Total,
subtotals all the preceding colums (b) through colum (s),
excluding the subtotal colum.These totals represent
actual operating results and rate base plus the standard
normalizing and restating adjustments.
Pro Form Adjustmnts
Q. Please explain the significance of the 8 colu:s
subsequent to the Restated Total colum on pages 8 through
9 of your Exibit No. 12, Schedule 2.
A. The adjustments starting on page 8 are pro form
adjustments to reflect known and measurable changes between
the test period and the pro forma period. In this case,
they encompass revenue and expense items, and natural gas
capi tal proj ects .These adjustments bring the operating
results and rate base to the final pro forma level for the
test year.
Q. Please continue with your exlanation of the
adjustments on page 8.
A. The first adjustment on page 8 in colum (PF1) ,
Pro Form Lar-Non-Bxec, reflects known and measurable
changes to test period union and non-union wages and
salaries, excluding executive salaries, which are handled
separately in adjustment PF2.For non-union employees,
test period wages and salaries are restated to include the
Andrews, Di 57
Avista Corporation
1 March 2010 overall actual increase of 2.8%, and seven
2 months of the planned March 2011 increase of 2.4%.The
3 Company's Board is scheduled to address the 2011 planed
4 increase at the Board of Director's meeting in May 2010.
5 Also included in this adjustment are the 2010 and 2011
6 (seven months) union contract increases currently being
7 negotiated. The Company anticipates a final union contract
8 agreement will be completed by the end of second quarter of
9 2010. The methodology behind this adjustment is consistent
10 with that used in Case No. AVU-G-09-1. The effect of this
11 adjustment on Idaho net operating income is a decrease of
12 $140,000.
13
14
The adjustment in colum (PF2) is Pro Form Lar-
Executive,reflects known and measurable changes to
15 executive compensation, restating executive compensation
16 test period salary expense to actual salary levels at 2010.
17 This adjustment takes into account changes in compensation
18 for the executive team in 2010 only. Although the officers
19 did not receive a 2009 pay increase, this adjustment does
20 reflect an annual increase for the actual overall 2010
21 officer increase of 2.86%. Compensation costs for non-
22 utility operations are excluded, as executives routinely
23 charge a portion of their time to non-utility operations,
24 commensurate with the amount of time spent on such
25 activities, based on a survey of each executive.The
Andrews, Di 58
Avista Corporation
1 methodology behind this adjustment is consistent with that
2 used in the last general case, Case No. AVU-G-09-01. The
3 impact of this adjustment on Idaho net operating income is
4 a decrease of $14,000.
5 The adjustment in colum (PF3), Pro Form Bmloyee
6 Benefits, adjusts for changes in both the Company's pension
7 and medical insurance expense planned for 2009 as further
8 explained in the Electric Section above. This adjustment
9 increases Idaho net operating income by $53,000
10 The adjustment in colum (PF4) , Pro Form Insurance,
11 adjusts the test period insurance expense for general
12 liability, directors and officers (D&O) liability, and
13 property to the actual cost of insurance policies that are
14 in effect for 2010.Costs of system-wide insurance
15 policies for 2010 were slightly above costs for policies in
16 2009, due to increased costs in general liability
17 insurance.Insurance costs that are properly charged to
18 non-utility operations have been excluded from this
19 adjustment. This adjustment decreases Idaho net operating
20 income by $12,000.
21 The adjustment in colum (PF5) , entitled Pro Form
22 Informtion Services, pro forms in the administrative and
23 general (A&G) expenses associated with incremental changes
24 for information services costs planned for 2010 and 2011
25 above test period levels, as further explained in the
Andrews, Di 59
Avista Corporation
1 Electric Section. The impact of this adjustment on Idaho
2 net operating income is a decrease of $201,000.
3 The adjustment in colum (PF6) , Pro Form Capital
4 Additions 2009, pro forms in the capital cost and expenses
5 associated with adjusting the test period average-monthly-
6 average plant related balances at Decemer 31, 2009, to
7 actual end-of-period balances for plant in service at
8 Decemer 31, 2009.The capital costs have been included
9 for Decemer 31, 2009 with the associated depreciation
10 expense and property tax, as well as the appropriate
11 accumulated depreciation and deferred income tax rate base
12 offsets. This adjustment was made under the direction of
13 Mr. DeFelice and is described further in his testimony.
14 This adjustment decreases Idaho net operating income by
15 $116,000 and decreases rate base by $625,000.
16 Q.Please turn to page 9 an exlain the adjustmts
17 show there.
18 A.The first adjustment on page 9 in colum (PF7) ,
19 Pro Form Capital Additions 2010, pro forms in the capital
20 cost and expenses associated with pro forming in" capital
21 expenditures for 2010.This adjustment includes projects
22 completed during 2010, and thus were normalized to reflect
23 annual amounts, and projects exected to be completed and
24 transferred to plant-in-service by Decemer 31, 2010. The
25 capi tal costs have been included for their appropriate pro
Andrews, Di 60
Avista Corporation
1 forma period with the associated depreciation expense and
2 property tax, as well as the appropriate accumulated
3 depreciation and deferred income tax rate base offsets.
4 This adjustment also reduces the 2009 'vintage plant net
5 rate base (including accumulated depreciation and deferred
6 FIT) to an end of period December 31, 2010 adjusted
7 balance. This adjustment was also made under the direction
8 of Mr. DeFelice and is described further in his testimony.
9 This adjustment decreases Idaho net operating income by
10 $235,000 and decreases rate base by $1,886,000.
11 The adjustment in colum (PF8) , Pro Form JP Storage,
12 pro forms revenues, exenses, capital investment and
13 inventory for the increased storage capacity and
14 deliverability associated with the transfer on May 1, 2011
15 of a portion of the Jackson Prairie (JP) Storage facility
16 to the Utility that was previously utilized by Avista
17 Energy.Assets with a net book value of approximately
18 $11.6 million will transfer from Avista Energy to Avista
19 Utili ties, which is comprised of approximately $5.9 million
20 of cushion gas and approximately $5.7 million of fixed
21 assets.Mr. Christie discusses the details of this
22 transfer.
23 Idaho's share of these assets on a 2010/2011 average-
24 of-monthly-average basis increases net rate base by
25 $1,081,000.The adjustment also includes a rate base
Andrews, Di 61
Avista Corporation
1 increase of $2,396,000 for the working gas associated with
2
3
the additional storage.In addition, underground storage
expense increased for the additional operating,
4 depreciation and property taxes expense by approximately
5 $35,000. The details of the proposed accounting treatment
6 of this adjustment is provided with my workpapers.The
7 impact of this adjustment decreases Idaho net operating
8 income by $23,000 and increases rate base by $3,449,000.
9 The last colum on page 9, Pro For. Total, reflects
10 total pro forma results of operations and rate base
11 consisting of twelve-months ended December 31, 2009 actual
12 results and the total of all normalizing and pro forma
13 adjustments.
14 Q.Referring back to page 1, line 43, of Exibit No.
15 12, Schedule 2, what was the actual an pro for. gas rate
16 of return realized by the Coman during the test period?
17 A.For the State of Idaho, the actual test period
18 rate of return was 7.27%. The pro forma rate of return is
19 6.93% under present råtes. Thus, the Company does not, on
20 a pro forma basis for the test period, realize the 8.55%
21 rate of return requested by the Company in this case.
22 Q.Bow much additional net operating incom would be
23 required for the State of Idao gas operations to allow the
24 Comany an opportunity to earn its proposed 8.55% rate of
25 return on a pro for. basis?
Andrews, Di 62
Avista Corporation
1 A.The net operating income deficiency amounts to
2 $1,640,000, as shown on line 5, page 2 of Exhibit No. 12,
3 Schedule 2. The resul ting revenue requirement is shown on
4 line 7 and amounts to $2,575,000, or an increase of 3.64%
5 over pro forma general business and transportation
6 revenues.
7
8
9
V. ALTION PROBDUS
Q.Have there been an changes to the Comany's
10 system an jurisdictional procedures since the Comany's
11 last general electric an natural gas cases, Case Nos. AVU-
12 B-09-01 and AVU-G-09-01?
13 A.No.For ra temaking purposes,the Company
14 allocates revenues, expenses and rate base between electric
15 and gas services and between washington, Idaho, and Oregon
16 jurisdictions where electric and/or gas service is
17 provided. The current methodology was implemented in 1994
18 and has not changed. The allocation factors used in this
19 case have been provided with my workpapers.
20
21
22
VI. OTR
Q.Please address the filing requiremnts as
23 required in Order No. 29962.
24 A.In Order No. 29962 (Case Nos. AVU-E-05-9 and AVU-
25 G-05-3), the Commission directed the Company to record
Andrews, Di 63
Avista Corporation
1 regulatory assets or liabilities associated with the
2 implementation of Statement of Financial Accounting
3 Standards (SF AS) 143 .As a result of the Order, the
4 Company is required to file annually, and as part of any
5 rate case filing, all journal entries made under the
6 requirements of SFAS 143. These ARO transactions have been
7 removed from the test year (twelve months ended Decemer
8 31, 2009) Results of Operations and have no impact on the
9 Company's earnings or rate request in this case.The
10 journal entries for the calendar year 2009 have been filed
11 with the Commission in our annual compliance filing.
12 Q.Does that conclude your pre-filed direct
13 testimony?
14 A.Yes, it does.
Andrews, Di 64
Avista Corporation
DAVID J. MEYER
VICE PRESIDEN AN CHIEF COUNSEL OF
REGULATORY & GOVERNAL AFFAIRS
AVISTA CORPORATION
P . O. BOX 3727
1411 EAST MISSION AVEE
SPOKA, WASHINGTON 99220-3727
TELEPHONE: [phone]
FACSIMILE: [phone]
DAVID. MEYER&AVISTACORP . COM
BBFORE 'l IDAHO PUBLIC UTILITIBS COMMISSION
IN THE MATTER OF THE APPLICATION ) CASE NO. AVU-E-10-01
OF AVISTA CORPORATION FOR THE ) CASE NO. AVU-G-10-01
AUTHORITY TO INCREASE ITS RATES )
AN CHAGES FOR ELECTRIC AN )
NATUR GAS SERVICE TO ELECTRIC ) EXHIBIT NO. 12
AN NATU GAS CUSTOMERS IN THE )STATE OF IDAHO ) ELIZABETH M. ANREWS
)
FOR AVISTA CORPORATION
(ELECTRIC AN NATURA GAS)
AVI UI
EIC RETS OF OPEON
IDAHO PRO FORMRETS
'IVE MONI ENED DBC 31. 2009
(OOO'S OF DOlLS)
wr PRESE RATES wrPROPOSE RATES
AdalPer Propoed ProFor
Line Resu1 Tota ProFor Re..es&'Propo
No.DESCRTION Reort Adlutiita Tot ReiteE:m Tot
aRE
I Tota Geer Bues
2 Jnterepta Sales
3 Sales for Rese
4 Tota Sales ofEleccily
5 Oter Reue
6 Tota Elecc Revue
EXENES
Prction and Trsmon
7 Oplig Expe
8 Puas Pow
9 Depiation and Amorizaon
10 Taxes
11 Tota Prducton &. Trsmssion
Distrbution
12 Oping Expei
13 Depation
14 Taxes
15 Tota Distbution
16 Cutomer Aicolig
17 Custer Serce &. Infoition
18 Sales Expees
Adislriv &. Geer
19 Oping Expese
20 Deaton
21 Taes
22 Tot Ad. &. Geer
23 Tota Electrc Expen
24 OPERllG INCOME BEORE FI
FEERINCOME TA
25 Cut Aial
26 Defer Jncoe Taes
27 Amize Inveent Tax Crt
SEIEXCHGEPOWE
28 NEOPEG INCOME
RABA
PL IN SEVICE
29 Intagible
30 Prion
31 Trsson
32 Distbution
33 Geer
34 Tota Plant in Serce35 ACCU DBPON
36 ACCU PROVION FOR AMORTlnDN
37 Total Aicu Depaton &. Amor.
38 GA ON SAl OF BU1ING
39 WOIUG CAPAL40 DEF TA
41 lOALRAmBASE
42 RAm OF RE
b dc
$246,714 $ (17,221)$229,493
205 205
69,739 (50,033)19,706
316,658 (67,2)249,404
16,578 (10,712)5,866
333,236 (77,966)255,270
70,555 15,367 85,922
119,313 (66,501)52,812
10,811 3,767 14,578
4,666 903 5,59
205,345 (46,464)158,881
8,564 63 8,627
9,731 807 10,538
5,063 (2,678)2,385
23,358 (1,808)21,550
4,299 (12)4,287
5,935 (4,631)1,304
251 (8)243
21,276 1,573 22,849
4,563 1,990 6,553
145 145
25,839 3,708 29,57
265,027 (49,215)215,812
68,209 (28,751)39,458
2,841 (9,179)(6,338)
14,564 (237)14,327
(16)(47)(63)
SSO,82O ($19,28)$31,532
e
$32,114
32,114
32,114
455
455
144
53
652'
f
$261,607
205
19,706
281,518
5,866
287,384
o
85,922
52,812
14,578
5,569
158,881
8,627
10,538
2,840
22005
4,431
1,304
243
53 2202
6,553
145
29,600
216,464
31,462
11,012
70,920
4,674
14,327
(63)
$20,450 SSI,981
$30,259 $17,04 $47,303 $47,303
367,474 14,217 381,691 381,691
163,053 9,347 172,400 172,400
384,274 25,272 409,56 40,56
58,812 11,705 70,517 70,517
1,003,872 77,585 1,081,457 0 1,081,457
332,016 41,016 373,032 373,032
4,967 253 5,20 5,2
336,983 41,29 378,22 0 378,22
(168)(168)(168)
9,863 9,863 9,863
(104,938)(104,938)(104,98)
$666,889 ($68,790)$607,962 so $607,962
7.62%5.19%8.55%EicibltNo.12
Cas No. Avu-10-1 and AVU-G10-1
E. Anrew, Avisla
Schedle 1, p. 1 of 13
A VISTA UTTIS
Calculation of General Revenue Requirement
IDAHO - Electrc Sysm
TWLVE MONmS ENED DECEMBER 31,2009
Line
No.Deription
Pro For Rate Base
2 Propose Rate ofRetu
3 Net Optig Income Requement
4 Pro Form Net Operatig Income
5 Net Operatig Inme Deficiency
6 Converion Factor
7 Reue Reement
8 Tota Geeral Business Reveues
9 Pertage Reue Increa
(OO'sof
Dollars)
$607,962
8.55%
$51,981
$31,532
$20,449
0.63676
~$32,114
$229,698
13.98%
Exhibit No. 12
Case No. AVU-E-1Q-01 and AVU-G-1Q-1
E. Andrews, Avista
Schedule 1, p. 2 of 13
A VISTA UTTIS
Calculation of General Revenue Reuirement
Idaho - Electric
Pro Forma Cost of Capital
(OOO's OF DOLLA)
Pro Forma Cost of Capital
Idaho Capital Weighte Excludes STD
Component Strcture Cost Cost
Long-Ter Debt 50.00%6.200%3.10%IDWtdDebt
3.10%
PrefTr 0.00%0.000%0.00%
Common 50.00%10.90%5.45%
Tota 100.00%8.55%
Exhibit No. 12
Case No. AVU-E-10-1 and AVU-G-1O-01
E. Andrews, Avista
Schedule 1, p. 3 of 13
A VITA UTITS
CALCULTION OF CONVRSION FACTOR: IDAHO ELECTRC
TWLVE MONTS ENED DECEMBER 31,2009
Revenue:1.000000
Expene:
Uncollecbles (I)0.004498
Commsion Fee (2)0.001662
Idaho Income Tax (3)0.014203
0.020363Total Expene
Net Operatg Income Before FIT 0.979637
Federal Incon 0.35 0.342873
0.63676RE CONVRSION FACTOR
Exhibit No. 12
Case No. AVU-E-1o-01 and AVU-G-1O-01
E. Andrews, Avista
Schedule 1, p. 4 of 13
AVITA um
BLC RETS OF OPEONIDAHO REAl RETS
lWVEMONl ENED DEC 31, 2009
(000'8 OF DOlL)
Kete Fal &I
Boulde Pii
DESCRON DlIw.
a c e &RE
I Tota Geen Bues S24,714
2 Inteenta Salcs 205
3 Salcs for Ree 69,739
4 Tot Salcs ofEleccity 316,658 0 0 0 0 0 0
5 OterR=ue 16,578
6 Tota Elecc R=ue 333,236 0 0 0 0 0 0
EXSE
Prction and Trsmsson
7 Optig Exse 70,555
8 Puas Powe 119,313
9 Deiation and Amorzation 10.811 193
10 Taxcs 4,66
11 Tota Prction & Trsmsson 205,35 0 0 193 0 0 0
Dibution
12 Opg Expencs 8,564
13 Depiaton 9,731
14 Taxcs 5,063
15 Tot Distrbution 23,358 0 0 0 0 0 0
16 Cuom Actig 4,29
17 Custer Sercc & Inforon 5,935
18 Salcs Expese 251
Adis & Geen
19 Optig Exse 21,276
20 Depiation 4,563
21 Taxcs
22 Tot Ad. & Geer 25,839 0 0 0 0 0 0
23 Tota Elecc Expescs 265,027 0 0 193 0 0 0
24 OPE1IO lNCOME BEORE FI 68,209 0 0 (193)0 0 0
FEERlNCOME TA
25 Cut Acal 2,841
26 Deer Incoe Taxcs 14,564
27 Amorze rr . Noxon (16)
28 Nl OPEO lNCOME SSO,82 SO SO (SI93)SO SO SO
RABASE
PL IN SEVICE
29 Intagible S30,29
30 Prcton 367,474 7,390 903 (5,609)
31 Trsson 163,053
32 Distbution 384,274 (898)
33 Geer 58,812
34 Tota Plant in Sercc 1,003,872 0 0 7,390 903 (5,609)(898)
35 ACCU'I DEP11N 332,016 5,690 (2,29)
36 ACCU. PROVIION FOR AMOR1ITION 4,967
37 Tota Ac. Deiaton & Amor.336,983 0 0 5,690 0 (2,29)0
38 OA ON SAL OF BURlNO (168)
39 WORKO CAPAL
40 DEF TAX (94,533)59 64
41 TOAL RA BA $666,889 (S94,533)(SI09)Sl,700 S903 (S2,034)(S898)
42 RAm OF RE 7.62%
Eicibit No. 12
Cas No. AVU-E-10-1 an AVU-G10-1
E. Andre, Avista
Schule 1. p. 5 of 13
AVJTA U1Eæ RETS OF OPETIN
IDAHO RETA'I RETS
lWVE MON ENED DEC 31, 2009
(000'8 OF DOll)
Restii Rel
CDASet_t Spe Ri
DESCRON De De
a k .IlRE
1 Tota Geer Buines
2 Interarta Sales
3 Sales for Resale
4 Tot Sales ofElceciiy 0 0 0 0 0 0
5 Oter R_ue
6 Tota Elecc Reue 0 0 0 0 0 0
EXSEPrcton and Tnon
7 Opg Eipeise 81 703
8 Puas Pow
9 Deation and Amizaion 226 101 53 118 19
10 Taxes
11 Tot Prction &; Trsmsson 0 307 101 756 118 19
Disbution
12 Opg Eipese
13 Depation
14 Taxes (4)(1)(11)(2)
15 Tot Distbution 0 (4)(1)(11)(2)0
16 Cuer Acuntig
17 Customer Serce &; Infomon
18 Sales Eipese
Ad &; Geer
19 Optig Bise
20 Deiaton
21 Taxes
22 Tota Ad &; Geer 0 0 0 0 0 0
23 Tota Elecc Eipese 0 303 100 745 116 19
24 OPEG lNCOME BEORE FI 0 (303)(100)(745)(116)(19)
FEERlNCOMB TAX
25 Cut Accral (106)(35)(261)(41)(7)
26 Defer Inco Taxes
27 Amorze rr - Noxon
28 NE OPEG lNCOME SO ($197)(565)(5484)($75)($12)
RAlEBAE
PulN SEVICE
29 Intagible $(23)$317 $703 560
30 Pructon 294
31 Trasmssion
32 Distrbution
33 Geer
34 Tot Plant in Serce 294 (23)317 703 0 60
35 AC'I DEPREON 369 59 88 11
36 ACct PROVJIONFOR AMORTITION 253
37 Tota Ac Deation &; ~oi.0 369 59 88 253 11
38 GA ON SAL OF BUllNG
39 WORKG CAPAL
40 DEF TAX 375 (90)(215)(206)(17)
41 TORAlEBAS $294 ($17)5168 5400 (5459)532
42 RA OF RE
Exhibit No. 12
Cas No. AVU-E.1()1 and AVU-G1()1
E. Andre, Avlsta
Schedule 1, p. 6 of 13
AVITA umELC:RTS OF OPEN
IDAHO RE'I:RTSlWVEMON ENED DEC 31. 2009
(OOO'S OF DOlL)
Restig
Splie Ri
DESCRTION PM& De
a 0 p q rRE
I Tot Geer Buses S246,714 S(2,66)
2 Inteepenta Sates 205
3 Sales fo Rese 69,739
4 Tota Sales of Eleccity 0 0 316,658 (2,966)0 0
5 Oter RCMue 16,578
6 Tota Elecc Reue 0 0 333,26 (2,66)0 0
EXEN
Proon and Trasmsson
7 Opg Expees 44 71.383
8 Pias Pow 119,313
9 Deation and Amortion 156 11,677
10 Taxes 4,666 776
11 Tota Pructon el Tion 156 44 207,039 0 776 0
Distbution
12 Opg Expees 8,564
13 Deation 9.731
14 Taxes (2)(1)5.042 (2,55)170 (2)
15 Tota Disbution (2)(1)23,337 (2,55)170 (2)
16 Custer Acunting 4,29 172
17 Customer Serce el Infoimion 5,935
18 Sales Expees 251
Adisve el Geer
19 Optig Expase 21,276
20 Deon 4,563
21 Taxes 4
22 Tota Ad. el Geer 0 0 25,839 0 4 0
23 Tot Elecc Expe 154 43 26,700 (2,955)950 170
24 OPETIG JNCOME BEORE FI (154)(43)66,536 (11)(950)(170)
FEERJNCOME TAX
25 Cit Accnal (54)(15)2,22 (4)(333)(60)
26 Defem Incoe Taxes 14,564
27 Amorize Il . Noxon (16)
28 NE OPERTIG JNCOME (SI00)(S28)$49,666 (S7)($617)(S110)
RAlEBAE
PLJN SEVICE
29 Intagible $468 $31.784
30 Prcton 1,983 372,435
31 1ìssion 163,053
32 Distbution 383,376
33 Geer 58,812
34 Tot Plant in Serce 468 1,983 1,009,460 0 0 0
35 AC'I DEPRE0N 78 335,382
36 ACCU PROVIN FOR AMOR1lON 5,2
37 Total Ac Deaton el Amor.78 0 340,602 0 0 0
38 GA ON SAl OF BunJNG (168)
39 WORKG CAPAL
40 DEF TAX (137)(694)(94,812)
41 TOALRABASE S253 SI,289 S573,878 SO SO SO
42 RAlE OF RB 8.5%
Exhibit No. 12
Ca No. AVU-E-1O-1 and AVU-G1O-1
E. Andrø, Avista
Schedule 1, p. 7 of 13
AVITA U1
BLC lUULTS OF OPEON
IDAHO lU RETS
lWVE MON ENED DEC 31, 2009
(OOO'S OF DOlLS)
DESCRTION
.u v w X YRE
I Tot Geer Buines S(17,604)
2 Interenta Sales
3 Sales for Ree
4 Tota Sales ofEleçcity 0 0 0 (17,604)0 0
5 Oter Revue
6 Tota Eleçc Revue 0 0 0 (17,604)0 0
EXSEPrion and Tton
7 Opg Expe 465 (15)
8 Puased Powe
9 Deation and Amorization
10 Taxes
11 Tota Prcton '" Trsson 0 0 0 465 (15)0
Disbution
12 Opg Expe
13 Deation
14 Taxes (I)S2
15 Tota Disbution (1)0 0 0 2
16 Cu Actig (40)S(162)
17 Custer Serce '" Infonon
18 Sales Expeses
Adve '" Geer
19 Oping Expese 43 (73)(44)
20 Deaton
21 Taxes
22 Total Ad. '" Geer 43 (73)0 (44)0 0
23 Total Eleçc Expees 42 (72)0 381 (15)(160)
24 OPE11G INCOME BEFORE FI (42)72 0 (17,985)15 160
FEER INCOME TAX
2S Cut Acal (15)2S 514 (6.132)5 S56
26 Deer Incoe Taxes 3 (163)
27 Am rr - Noxon (15)
28 NEOPE11G INCOME ($27)$47 (5502)($11,690)S10 SI04
RAlEBAE
Pl IN SERVICE
29 Intagible
30 Prcton
31 Trsmsson
32 Dibution
33 Geer
34 Tot Plant in Serce 0 0 0 0 0 0
35 ACCU DEPN
36 AC PROV1NFORAMORllTION
37 Tota Ai Deaton '" Amor.0 0 0 0 0 0
38 GA ON SAL OF BURING
39 WORKG CAPAL
40 DEF TA
41 TOALRAlEBA SO SO SO SO SO SO
42 iu OF RE
Exhibit No. 12
Cas No. AVU-E-1Q-1 and AVU-G1Q-1
E. Andre, Avlta
Schedule 1, p. 8 of 13
AVlTA um
EL REULTS OF OPEON
IDAHO RETAlE RETS
lWVE MONI ENED DEC 31,2009
(000'S OF DOlL)
Cola Ma Reai
E..O&M War
DESCRTION Aiorttia
a Z aa ab Be adRE
1 Tota Geer Busines $3,349
2 Interenta Sales
3 Sales for Resale
4 Tota Sales of Eleccity 3,39 0 0 0 0
5 Oter Revue 92
6 Tota Elecc Revue 3,441 0 0 0 0
EXENSESPrctci and Thci
7 Opg Bises 490 481
8 Pued Pow
9 Deatci and Amorizaci 1,910 221 108
10 Taxes
11 Tota Prctci & Tnssci 2,400 0 481 221 108
Disbulici
12 Opg Expe
13 Deialici
14 Taxes 80 (7)(2)
15 Tota Disbibulici 80 (7)0 (2)
16 Cuomer Acuntig 16
17 Customer Serce & Infoiici (4,630)(2)
18 Sales Expe (9)
AdistM & Geei
19 Opg Ex 6 (48)
20 Deiatci
21 Taxes
22 Tot Ad. & Geer 6 (48)0 0 0
23 Tota Elecc Expenses (2,128)(58)474 221 106
24 OPE'IG INCOME BEORE FI 5,569 58 (474)(221)(106)
FEERINCOMETAX
2S Cit .A 1,949 20 (166)(37)
26 Defl2 Incoe Taxes (77
27 Amze rr - Noxci
28 NE OPEG INCOME $3,620 $38 ($308)($144)($69)
RABA
PUIN SERVICE
29 Intagible
30 Prctci
31 Tnsmssici
32 Dibutici
33 Geer
34 Tota Plant in Serce 0 0 0 0 0
35 ACCU DEP
36 ACC PR0V10N FORAMOR1ION
37 Tota Accu Dealici & Am.0 0 0 0 0
38 GA ON SAL OF BUlING
39 WORKG CAPAL
40 DEF TA
41 lORABAB $0 $0 $0 $0 $0
42 RAm OF RB
Exhibit No. 12
Cas No. AVl-10-1 an AVU-G10-1
E. Anrø, Avisla
Schedle 1, p. 9 of 13
Exhibi No. 12
Cas No. Avu-1~1 and AVU-G1~1
E. Andl'. Avlsta
Schedule 1. p. 10 of 13
AVITA uiELCRETS OF OPETINIDAHO RElE RETS
1WVE MON ENED DEC 31, 2009
(000'S OF DOlLS)
DESCTION
a PFI PF PF PF4RE
1 Total Geer Buines
2 Interaielta Sales
3 Sales for Rese (49,400)(633)
4 Tota Sales of Eleccity (49,400)(633)0 0 0 0
5 Oter Rewue (11,699)(141)1,036
6 Total Elecc Reue (61,099)(774)0 0 1,036 0
EXSESPrction aid Trsson
7 Oping Expeuses 13,999 (2,399)324 94
8 Puas Pow (64,779)(1,722)
9 Deiaton aid Amorzaon (22)130
10 Taxes (161)
11 Tota Prcton &; Tron (50,780)(4.505)324 94 130
Distrbution
12 Operg Expese 227
13 Depiation 356
14 Taxes (147)53 (12)(1)13 (20)
15 Tota Disbution (147)53 215 (1)13 336
16 Cutoer Actig 74
17 Customer Serce &; Inforon 5
18 Sales Expeuse 5
Adistrve &; Geer
19 Oping Expese 22 84
20 Depon 889
21 Taxes
22 Tota Ad. &; Geer 0 0 22 84 0 889
23 Total Elecc Expese (50,927)(4,452)845 84 107 1,355
24 OPETIG INCOME BEFORE FI (10,172)3,678 (845)(84)929 (1,355)
FEER INCOME TAX
25 Cwt Ac (3.560)1,2 (296)(29)325 (474)
26 Defer Inco Taes
27 Amorze rr - Noxon
28 NE OPERTIG INCOME ($6,612)$291 ($59)(555)$604 (S881)
RA'IBA
PL IN SEVICE
29 Intagible Sl1,58
30 Prction (8,770)4,740
31 Trsmsson 2,659
32 Dislbution 10,035
33 Geer 6,22
34 Tota Plait in Serce 0 (8,770)0 0 0 35,2
35 AClE DEPN (2,20)11,22
36 ACCU PROVIN FOR AMORTITIN
37 Tota Ac Deaton &; Am 0 (2,920)0 0 0 11,22
38 GA ON SAL OF BUlING
39 WORKG CAP
40 DEF TA 997 (7,630)
41 TORA'I BAE SO ($4,853)SO SO SO S16,402
42 RAOFRE
Eidibit No. 12
Cas No. AVl.1G-1 and AV\1G-1
E. Andre, Avista
Schedle 1, p. 11 of 13
AVITA umBUC RETS OF OPEN
IDAH RETA1E REULTS
lWVEMONl ENED DEC 31, 2009
(OOO'S OF DOlL)
ProForm ProForm ProForm ProFor
NoXO Ge JiformtlD Emplo Iiaice
DESCRON iflO & ifll Se Bmef
a PF8 PF9 PF10 ULLRE
1 Tota Geer Buiness
2 Inleta Sales
3 Sales for Rese
4 Total Saes ofEleccily 0 0 0 0 0
5 Oter Reue
6 Tot Elecc Revue 0 0 0 0 0
EXENSE
Pretiim and Tiiim
7 Opg Eipase 141 2 (204)
8 Puhas Pow
9 Depatiim and Amorzatiim 330
10 Taxes :u 60
11 Tot Prctim & Trasmim 558 201 2 (20)0
Distbutiim
12 Opti8 Expaes 10 (146)
13 Depialim 451
14 Taxes 1.7 (3)(18)5 (I)
15 Tota Dibutiim 658 (3)(8)(141)(1)
16 Cutomer Acting (14)(58)
17 Cutoer Serce & Infomion (4)
18 Sales Eipase (4)
Adis & Geer
19 Opg Exense 1,29 94 73
1.Depalim 1,101
21 Taxes 141:i Tota Ad. & Geer 1,22 0 1,29 94 73
23 Tota Elecc Expaes 2,458 198 1,279 (317)72
24 OPEG INCOME BEORE Fl (2,458)(198)(1,279)317 (72)
FEER INCOME TA
25 Cut Acal (860)(69)(448)11 (25)
26 Defer Inco Taxes
27 Amorze IT . Noxim (32)
28 NE OPEG INCOME (S1,598)(S97)(S831)S20 ($47)
RA'IBA
PIIN SERVICE
29 Intagible S3,951
30 Pretiim 8,52 4,744
31 Trsmssim 6,688
32 Distbution 16,135
33 Geer 5,473
34 Tota Plant in Serce 40,789 4,744 0 0 0
35 ACCU1E DEPON 29,28 100
36 AC PROVIION FOR AMORllTION
37 Tot Ac Deiaion & Amor 29,28 100 0 0 0
38 GA ON SAL OF BUlING
39 WO:RGCAPAL
40 DEF TAX (3,211)(282)
41 lORA'IBASE $8,310 $4,362 SO SO SO
42 RA OF RE
Eidibit No. 12
cae No. AYU-1Q-1 and AVU-G1Q-1
E. Anre, Avista
Schedule 1, p. 12 of 13
AVI um
EUC REULTS OF OPEON
IDAH REATE REULTS
'lVE MONl ENED DBC 31, 2009
(000'8 OF DOl.)
PreForCla ForpoJie
DESCRTION RelPM&
.PFiiRE
1 Tota Geci Buses 522,493
2 JnterClta Sales 205
3 Sales for Rese 19,706
4 Tota Sales of Eleccity °2A9.04
5 Oter Ree 5,866
6 Tota Elecc Reue °255,270
EXSEPrducton and 1hon
7 Operg Expcse 51,089 85,922
8 Puas Powe 52,812
9 Deation and Amoron 14,578
10 Taxes 5,569
11 Total Pructon & Ttsson 1,089 158.881
Distbution
12 Operg Expense 8,627
13 Depiaton 10,538
14 Taxes $ (15)2,385
15 Total Disbution (15)21,550
16 Cuomer Acouting 4,287
17 Cuomer Serce & Jnfonion 1,304
18 Sales Expcscs 2A3
Adistiv & Geci
19 Opg Expen 22,849
20 Deiation 6,553
21 Taxes 145
22 Tota Ad. & Geci °29,57
23 Total Elecc Expcscs 1,074 215,812
2A OPETIG lNCOME BEORE FI (1,074)39,458
FEERlNCOME TA
25 Cut Acal 5 (376)(6,338)
26 Deer Jncoe Taes 14,327
27 Amorze Il - Noxon (63)
28 NE OPEG lNCOME ($98)$31,532
RAlEBA
PLlN SEVICE
29 Jnlagible 547,303
30 Prction 381,691
31 Thsmsson 172,400
32 Distbution 409,56
33 Geci 70,517
34 Tota Plant in Serce °1,081,457
35 ACCU DEPlIN 373,032
36 ACCU PROVIION FOR AMORTITION 5,220
37 Tot Ai Deiaton & Amot.°378,252
38 GA ON SAL OF BUlNG (168)
39 WORKG CAPAL 9,863
40 DEF TAX (104,938)
°
41 lOTALRAlE BAS $0 $607,962
42 RAlE OF RE 5.19%
Eicibit No. 12
Case No. AVU-E.1~1 and AVU-G1~1
E. Anre, Avista
Schedule 1, p. 13 of 13
A VISTA UT
GA REULTS OF OPERTION
IDAHO PRO FORM REULTS
TWVE MONT ENED DECER 31, 200
(OO'S OF DOLL)
ProFor
DESCON Tota
a c dRE
1 Tot Gener Busess $83,09 $ (12,797)$70,299 $2,575 $72,874
2 Tota Traon 491 (95)396 396
3 0l Reue 38,263 (38,128)135 135
4 Tot Ga Reue 121,850 (51,020)70,830 2,575 73,405
EXENSES
Exloron an DcopenPreion
6 Ci Ga Puas 86,275 (42,945)43,330 43,330
7 Pu Ga Ex 401 8 40 409
8 Net Nat Ga Storae Tia 3,614 (3,614)0
9 Tota Prueion 90,290 (46,551)43,739 0 43,739
Undewi Stora
10 Op Exse 17 45 218 218
II Deati 169 (6)163 163
12 Tax 59 5 64 64
13 Tot Undwi Sto 401 44 445 0 445
Dibuton
14 Op Ex 3,726 41 3,767 3,767
15 Deaton 3,328 129 3,457 3,457
16 Taxes 2.329 (1,447)882 37 919
17 Tot Distbuton 9,383 (1,277 8,106 37 8,143
18 Cume Acun 2,40 (22)2,147 12 2,159
19 Cu Sece It Inoion 2,36 (1,994)242 242
20 Sales Expe 195 (5)190 190
Advc It Ge
21 Op Ex 4,737 34 5,083 4 5,087
22 Deaton 957 356 1,313 1,313
23 Taxes 9 34 43 43
24 Tota Ad. It Ge 5,703 736 6,439 4 6,443
25 Tot Ga Ex 110,617 (49.309)61,308 53 61,361
26 OPERTIG INCOME BEFRE AT 11,233 (1,71 I)9,522 2,522 12,04
FEER INCOME TAX
27 Cut Ac 1,561 (555)1,006 883 1,889
28 DeemAT 1,516 (8)1,508 1,508
29 AmorlT (19)0 (19)(19)
0
30 NET OPERTIG INCOME 8,175 ($1,148)7,027 $1,639 $8,66
RATE BASE: PLA IN SERVICE
31 Undeimd Stge 9,364 (352)9,012 9,012
32 Disiiibuon Plant 143,028 2,952 145,980 145,980
33 Geer Plat 13,432 3,484 16,916 16,916
34 Tota Plan in Serce 165,824 6,084 171,908 0 171,908
ACCTE DEPRETION
35 Unded Stoe 3,354 168 3,522 3,522
36 Di1ion Plan 46,085 4,263 50,348 50,348
37 Geer Plan 3,996 1,66 5,656 5,656
38 Tota Ac Deon 53,435 6,091 59,526 0 59,526
39 DEF AT 0 (20.27)(20,027)(20.27)
40 GAS INRY 0 7,377 7,377 7,377
41 WORKG CAITAL 0 1,692 1,692 1,692
42 GA ON SAL OF BUILDING 0 (5S)(5S)(5S)
43 TOAL RATE BASE 112,389 ($11,020)101,369 $0 101,369
44 RATE OF RE 7.27%6.93%8.55%
Exibit No. 12
Case No. AVU.E.1o-1 and AVU-G.10-o1E. Andre, Avlst
Scedul 2, p. 1 of 9
A VISTA UTITS
Calculation of Genera Revenue Requireent
Idaho-Gas
TWLVE MONTS ENDED DECEMBER 31,2009
(000'5 OF DOLLAR)
Exhibit No. 12
Case No. AVU-E-10-Q1 and AVU-G-10-01
E. Andrews, Avista
Schedule 2, p. 2 of 9
A VITA UTIT
Calculation of Geera Revenue Requirement
Idaho- Gas
Pro Forma Cost of Capital
(OOO's OF DOLLAR)
I Pro Form Cos of Capital I
Idaho Capital Weighted Exeludes STD
Component Stnc:re Cost Cost
Long-Ter Debt 50.00%6.200%3.10%ID Wtd Debt
3.10%
PrTrust 0.00%0.000%0.00%
PrefStock 0.00%
Common 50.00%10.90%5.45%
Tota 100.00%8.55%
Exhibit No. 12
Case No. AVU-E-10-o1 and AVU-G-10-o1
E. Andrews, Avista
Schedule 2, p. 3 of 9
A VITA UTITIES
CALCULATION OF CONVRSION FACTOR: IDAHO GAS
TWELVE MONT ENDED DECEMBER 31, 2009
Revenues 1.000000
Expene:
Uncollectibles (1)0.0098
Commsion Fees (2)0.001662
Idao Income Tax (3)0.014203
Tota Expense 0.020363
Net Operatig Income Before FIT 0.979637
Federal Inc 35.00%0.342873
REVE CONVION FACTOR 0.636764
Exhibit No. 12
Case No. AVU-E-10-o1 and AVU-G-10-o1
E. Andrew, Avista
Schedule 2, p. 4 of 9
Per Deferr Defer Gain Weatrlon
Line Ru FI onOft Ga iuDSM Cuer
No.DESCPTON a-rt RiBue BuI-InVM Invent Advaes
AVISTA UTES
GAS REULTS OF OPERTION
IDAHO RETATE REULTS
TW VB MONTHS ENDED DECEMER 3 1,2009
(OOS OF DOll)
aRE
I Total Genl Busines
2 Tota Trarttion
3 Ot Re
4 Tota Gas Reven
EXENSES
S Exloration an DelopmPrtin
6 City Gate Puha
7 Puha Gas Exe
8 Net Nat Ga Storage Tra
9 Total Proucon
Uiiun Storage
10 Opti Ex
11 Dereiation
12 Taxes
13 Tota Uiiun StraDition
14 Optig Expees
IS Dereiation
16 Taxes
17 Total Distribution
18 Custo Acunti
19 Cume Sece & Inormtin
20 Sales ExAdmtrti & Gel
21 Opti Ex
22 Deian
23 Tax
24 Total Adm & Ge
2S Total Ga Ex
26 OPERTIG INCOME BEFRE FI
FEER INCOME TAX
27 Cut Acc
28 Defe FIT
29 AmrtlT
30 NET OPERTIG INCOME
RATE BASE: PLA IN SERVICE
31 Und Storage
32 Ditribution Plan
33 Ge Pla
34 Tota Plat in Se
ACCUMTE DEPREIA nON
3S Unun Storage
36 Ditn'btion Plat
37 Genl Plat
38 Total Acc Deiation
39 DEF FI
40 GAS INENORY
41 WORKG CAPITAL
42 GAIN ON SALE OF BUIlDING
43 TOTAL RATE BASE
44 RATE OF RE
b d f Iee
$83,096
491
38,263
121,8S0 0 0 0 0 0
0
86,27S
401
3,614
90,290 0 0 0 0 0
173
169
S9
401 0 0 0 0 0
3,726
3,328
2,329
9,383 0 0 0 0 0
2,40 0 0 0 0
2,236
19S
4,737
9S7
9
S,703 0 0 0 0 0
110,617 0 0 0 0 0
11,23 0 0 0 0 0
I,S61
I,SI6
(19)
$8,17S SO SO SO SO SO
9.364
143,028 IS2 (74)
13,432
(74)16S,824 0 0 0 IS2
3,354
46,08S
3,99
S3,43S 0 0 0 0 0
0 (17,318)19
0 3,626
0
0 (SS)
$112.389 ($17,318)($36)$3,626 $IS2 ($74)
Exhibit No. 12
Case No. AVU.E-10.Q1 and AVU-G.1Q-01
E. Andre, Avista
Scule 2, p. 5 of 9
A VISTA UTUTIES.
GAS REULTS OF OPERTION
IDAHO REATE REULTS
TWVE MONnlS ENED DECEMER 3 I, 200
(OOS OF DOll
Revenu EUmlii Reatry lojures
Line Subttal NonnaloD 8&0 Prpert Uøcble Ea-iu
No.DESPTON Actual Tues Tu E_AdlusDt Ib..
a b k m
REUE
I Total Ge Buins 583,09 $ (11,260)$ (1.537)
2 Tota Trarttin 491 (87)(8)
3 Ot Rev 38,263 (38,128)
4 Total Gas Rcveies 121,850 (49,475)(1,545)0 0 0 0
EXENSES
5 Exloration an Deelop 0
Protin
6 City Gate Puhaes 86,275 (42,945)
7 Puhaed Gas Ex 401
8 Net Nat Ga Stge Tra 3,614 (3,614)
9 Tota Pron 90,290 (46,559)0 0 0 0 0
Undun Stoge
10 Opti Ex 173
11 Deiation 169
12 Taxes 59 7
13 Tota Unun Stra 401 0 0 7 0 0 0
Distrbution
14 Opti Ex 3,726
15 Deiati 3,328
16 Taxes 2,329 (12)(l,s4S)91 3
17 Tota Ditribution 9,383 (12)(1,545)91 3 0
18 Cutome ACÇtÎg 2,40 (51)0 (189)0
19 Cutome Se & Inormtion 2,236 (1,994)
20 Saes Ex 195Adtrtive" Gcn
21 Opti Ex 4,737 (18)(15)(60)
22 Deiatin 957
23 Taxes 9 i
24 Total Adm " Gel 5,703 (18)0 i 0 (is)(60)
25 Total Ga Expe 110,617 (48,634)(I,54S)99 (186)(IS)(59)
26 OPERTIG INCOME BEFRE FI 11,233 (841)0 (99)186 IS 59
FEER INCOME TAX
27 Currt Accrul 1,561 (294)(35)65 5 21
28 Deer FI 1,516
29 AmitlTC (19)
30 NET OPERTIG INCOME 58,175 ($547)$0 ($6)$121 $10 $38
RATE BASE: PLA IN SERVICE
31 Und Storage 9,364
32 Ditribution Pla 143,106
33 Ge Plat 13,432
34 Total Plat in Seicc 165,902 0 0 0 0 0 0
ACCUMTE DEPIATION
35 Und Storage 3,354
36 Ditribuon Pla 46,085
37 Genl Plat 3,996
38 Tota Accum Deiaon 53,435 0 0 0 0 0 0
39 DEF FIT (17,299)
40 GAS INRY 3,626
41 WORKG CAPITAL 0
42 GAI ON SALE OF BUILDING (55)
43 TOTAL RATE BASE $98,739 $0 $0 $0 $0 $0 $0
44 RATE OF RE 8.28%
Exibit No. 12
case No. AVU.E.10.01 and AVU-G1Q-01
E. Anrew, Avista
Schedule 2, p. 6 of 9
A VISTA UT
GAS RESULTS OF OPERTION
IDAHO REATE REULTS
TWVE MONTHS ENED DECEMER 31,200
(OOS OF OOUA)
EUiu Mi.O&M Workl Re
Line AI Reng SaYlii CapIta Debt Re
No.DESCPTON FIT Ex_Mis Int Tot
aRE
1 Tota Ge Busss
2 Tota Trartn
3 Oth Reenue
4 Total Ga Reue
EXENSES
5 Exloration and DelopmePrction
6 City Gate Puhaes
7 Puicba Gas Expee
8 Net Nat Gas Storage Tra
9 Total Prtion
Undrg Storage
10 Optig Ex
II Deiation
12 Tax
13 Tota Undun Storage
Ditrtion
14 Op Exes
15 Deiation
16 Tax
17 Total Distributon
18 Cutome Accuntig
19 Cutome Sece & Inonntin
20 Sales ExpeAdtrtive & Ge
21 Opti Ex
22 Deiation
23 Taxes
24 Tota Ad & Gel
25 Total Gas Ex
26 OPERTING INCOME BEFRE FIT
FEERL INCOME TAX
27 Ci Acrul
28 Dceim
29 AmrtlTC
30 NET OPERTIG INCOME
RATE BASE: PLAT IN SERVICE
31 Undun Storage
32 Ditrbution Plat
33 Ge Plat
34 Tota Plat in Servce
ACCTE DEPREIA nON
35 Undun Storage
36 Ditrn Plat
37 Ge Plat
38 Tota Accum Deiation
39 DEF FIT
40 GAS INRY
41 WORKG CAPITAL
42 GAI ON SA OF BUIlDING
43 TOTAL RATE BASE
44 RATE OF RE
n 0 p q r
$70,299
396
135
0 0 0 0 0 0 70,830
0
43,330
401
0
0 0 0 0 0 0 43,731
173
169
66
0 0 0 0 0 0 40
3,726
3,328
867
0 0 0 0 0 0 7,921
(27)2,142
(i)241
(5)190
(13)19 4,650
957
10
0 0 (13)19 0 0 5,617
0 (27)(19)19 0 0 60,250
0 27 19 (19)0 0 10,580
9 7 (7)44 1,376
(8)1,508
(19)
$8 $18 $12 ($12)$0 ($4)$7,715
9,364
143.106
13,432
0 0 0 0 0 0 165,90
3,354
46,085
3,99
0 0 0 0 0 0 53,435
(17,299)
3,626
1,692 1,692
(55)
$0 $0 $0 $0 $1,692 $0 $100:31
7.68%
Exibit No. 12
Case No. AVU.E-1Q-1 and AVU.G-1Q-1
E. Andrews, Avlsta
Schedule 2, p. 7 of 9
PrForma ProForma PrForma ProForma PrForma PrForma
Line Labr Lar Employ liiiu IDformatoD Ci Ad
No.DESCRIPTON No..Exec Exec Befits Servce 100
A VISTA lIUnES
GAS REULTS OF OPER nON
IDAHO REATE REULTS
TWVE MONTS ENED DECEMER 3 I, 200
(OO'S OF DOll)
aRE
I Tota Gci Busin
2 Total Traporttin
3 Ot Revenues
4 Total Gas Reenes
EXENSES
S Exploran an DeloptPrtion
6 City Gate Puli
7 Puha Gas Expe
8 Net Nat Gas Storage Tra
9 Total Protion
Unun Storage
10 Optig Ex
11 Deiatin
12 Taxes
13 Tota Undeun StorageDibutin
14 Optig Exnses
iS Deiatin
16 Taxes
17 Tota Dilnbution
18 Cutomer Accunti
19 Custome Se & Informtin
20 Sales Expe
Adtrtie & Genl
21 Opti Ex
22 Dereiation
23 Tax
24 Total Ad & Genl
2S Total Gas Ex
26 OPERTING INCOME BEFRE FI
FEER INCOME TAX
27 Cut Accni
28 Defe FIT
29 AmITC
30 NET OPERTIG INCOME
RATE BASE: PLA IN SERVICE
31 Underun Storage
32 Distrtion Plat
33 Geral Plat
34 Tota Pla in Sece
ACCUMTE DEPREIA nON
3S Undun Storage
36 Di1ition Plat
37 Gci Plat
38 Tota Acc. Deiation
39 DEF FIT
40 GAS INVEORY
41 WORKG CAPITAL
42 GAI ON SA OF BUlING
43 TOTAL RATE BASE
44 RATE OF RE
PFI PFl PF3 PF4 PFS PF6
o o o o o o
10 (2)
10 0 (2)0 0 0
(3)
0 0 0 0 0 (3)
11 (72)86
(3 I $ (4)(3)
110 0 (71)0 (4)83
41 (33)$(3)
3 (2)
3 (3)
48 21 29 18 $317
99
48 21 29 18 317 99
21S 21 (82)18 310 179
(2 IS) (21)82 (18)(310)(179)
(7S)(7)29 (6)$ (109)(63)
($140)($14)$S3 ($12)($201)($116)
$ (18S)
926
1,280
0 0 0 0 0 2,021
(2)
922
SOB
0 0 0 0 0 1,428
(1,218)
$0 $0 $0 $0 $0 ($62S)
Exibit No. 12
case No. AVU.E.1Q.1 and AVU-G.1Q.1
E. Andre, Avlsta
Schedule 2, p. 8 of 9
PrF_a ProF_a
Line Captal Add 2011 JP PrForma
No.DESRIPTON 2010 Stono Total
AVISTA unUTIFS
GAS RETS OF OPERTION
IDAHO RETATED RETS
TWVE MONTIS ENDED DECEMER 3 1.200
(OOS OF DOll)
aRE
I Total Gel Buins
2 Total Traporttion
3 Ot Reenues
4 Total Gas Revenues
EXENSFS
5 Exploration an DeelopPrctin
6 City Gate Puha
7 Puha Gas Exe
8 Net Nat Ga Stra Tra
9 Tota PrtionUndgr Stora
10 Opti Ex
11 Detion
12 Taxes
13 Total Undun Storage
Ditrbution
14 Op Expe
15 Detion
16 Tax
17 Total Ditron
18 Custome Accunti
19 Custome Sece & inimtion
20 Sale Ex
Admti & Gel
21 Opti Expe
22 Deiatin
23 Taxes
24 Tota Adm & Gener
25 Total Gas Ex
26 OPERTIG INCOME BEFRE m
FEER INCOME TAX
27 Cut Accnil
28 Defem
29 AmrtITC
30 NE OPERTIG INCOME
RATE BASE: Pu.T IN SERVICE
31 Undun Storage
32 Dittibution Pla
33 Gel Plat
34 Total Plat in Sece
ACCUMTE DEPREIATION
35 Und Strage
36 DisttibutionPlat
37 Genl Plat
38 Total Accum Dereiation
39 DEFm
40 GAS INRY
41 WORKG CAPITAL
42 GAI ON SA OF BUIlDING
43 TOTAL RATE BASE
44 RATE OF RE
PF7 pn
$70,299
396
135
0 0 70.830
0
43,330
40
0
0 0 43.739
45 218
3 (6)163
2 (4)64
5 35 445
3.767
43 3.457
24 882
67 0 8.106
2.147
242
190
5.083
257 1.313
33 43
290 0 6.439
362 35 61,308
(362)(35)9.522
(127 (12)1.00
1,50
(19)
($235)($23)$7.027
$107 $ (274)9,012
1,948 145.980
2,204 16,916
4,259 (274)171.908
168 2 3,522
3.341 50,348
1.152 5.656
4.661 2 59,56
(1.484)(26)(20,027)
3.751 7,377
1.692
(55)
($1.886)$3.449 $101.69
6.93%
Exibit No. 12
Case No. AVU-E-10-o1 and AVU.G.1Q-01
E. Andre. Avist
Scheule 2, p. 9 of 9