20110706DeFelice Di.pdf

Rt
Q r. (' C" i,it: ~,." .,,,
DAVID J. MEYER
VICE PRESIDENT AND CHIEF COUNSEL FOR
REGULATORY & GOVERNMENTAL
AVISTA CORPORATION
P . 0 . BOX 3727
1411 EAST MISSION AVENUE
SPOKANE, WASHINGTON 99220-3727
TELEPHONE: [phone]
FACSIMILE: [phone]
DAVID .MEYER~AVISTACORP. COM
,.-~"..,,i /I: 1+5
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE APPLICATION
OF AVISTA CORPORATION FOR THE
AUTHORITY TO INCREASE ITS RATES
AND CHARGES FOR ELECTRIC AND
NATURAL GAS SERVICE TO ELECTRIC
AND NATURAL GAS CUSTOMERS IN THE
STATE OF IDAHO
CASE NO. AVU-E-11-01
CASE NO. AVU-G-11-01
DIRECT TESTIMONY
OF
DAVE B. DEFELICE
FOR AVISTA CORPORATION
(ELECTRIC AND NATURAL GAS)
..
1
2
I. INTRODUCTION
Q.Please state your name, employer and business
3 address.
4
5
A.My name is Dave B. DeFelice.I am employed by
Avista Corporation as a Senior Business Analyst.My
6 business address is 1411 East Mission, Spokane, Washington.
7 Q.Please briefly describe your educational
8 background and professional experience.
9 A.I graduated from Eastern Washington Uni versi ty in
10 June of 1983 with a Bachelor of Arts Degree in Business
11 Administration, majoring in Accounting. I have served in
12 various positions wi thin the Company, including Analyst
13 positions in the Finance Department (Rates Section and
14
15
Plant Accounting)and in the Marketing/Operations
Departments, as well.In 1999, I accepted the Senior
16 Business Analyst position that focuses on economic analysis
17 of various project proposals as well as evaluations and
18 recommendations pertaining to business policies and
19 practices.
20 Q.As a Senior Business Analyst, what are your
21 responsibilities?
22 A.As a Senior Business Analyst, I am involved in
23 financial analysis of numerous proj ects wi thin various
24 departments such as Engineering,Operations,
25 Marketing/Sales and Finance.
26 Q.What is the scope of your testimony?
DeFelice, Di 1
Avista Corporation
, '"
1 A.My testimony and schedules in this proceeding
2 will cover the Company's proposed pro forma adjustments for
3 capital investments in utility plant for the 2010 test
4 period.
5
6
Q.Are you sponsoring any exhibits?
A.Yes.I am sponsoring Exhibit 11, Schedules 1
7 through 3 which were prepared under my direction, and have
8 been included to provide supporting information for the pro
9 forma capital investment costs as described in this
10 testimony.
11
12
13
II. CAPITAL INVSTMNT RECOVERY
Q.What does the Company's request for rate relief
14 include regarding investment in utility plant to serve
15 customers?
16 A.As in prior rate cases, Avista started with rate
17 base for the historical test year, which for this case is
18 the average-of-monthly-averages (AMA) for the twelve months
19 ended December 31, 2010. Adjustments! were made to reflect
20 certain capital additions, as described in detail below:
21
22
23
24
25
(1. ) An adj ustment was made to record capital
at December 31,2010,together with the
associated accumulated depreciation and
deferred federal income taxes at a 2010 end-of-
period (EOP) basis.This adjustment includes
i Company witness Ms. Andrews incorporates the Idaho share of the adjustments in her revenue
requirement calculation.
DeFelice, Di 2
Avista Corporation
. I . ""
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
26
27
annualizing the associated depreciation expense
on the plant-in-service at December 31, 2010.
(2.) An adjustment was also made to reflect
all 2011 capital additions (excluding
distribution related capital expenditures made
that are associated with connecting new
customers to the Company's system) together
wi th the associated accumulated depreciation
and deferred federal income taxes at a 2011 EOP
basis.This adjustment included associated
expenses (depreciation expense and property
taxes) and offsets to expenses for the pro
forma additions.These specific capital
addi tions are identified later in my testimony.
In addition, the plant-in-service at December
31, 2010 was adjusted to a 2011 EOP basis.
(3.) An adjustment was also made to reflect
all 2012 capital additions (excluding
distribution related capital expenditures made
that are associated with connecting new
customers to the Company's system) together
with the associated accumulated depreciation
and deferred federal income taxes at a 2012 AMA
basis.This adjustment included associated
expenses (depreciation expense and property
taxes) and offsets to expenses for the pro
forma additions.These specific capital
DeFelice, Di 3
Avista Corporation
l L ...
1
2
addi tions are identified later in my testimony.
In addition, the plant-in-service at December
3 31, 2011 was adjusted to a 2012 AM basis.
4 The utility plant investment that we have included in
5 this filing represents utility plant that will be "used and
6 useful" in providing service to customers during the period
7 that new retail rates from this filing will be in effect.
8 In addition, the plant investment that was pro formed into
9 this case was matched with offsetting factors.Including
10 the costs associated with this investment in retail rates
11 provides a proper "matching" of revenues from customers,
12 with the costs associated with providing service to
13 customers (including the cost of utility plant to serve
14 those customers) .
15 In the Idaho PUC's Order No. 29602, for Case Nos. AVU-
16 E-04-1 and AVU-G-04-1,dated October 8,2004,the
17 Commission stated, at page 10, that:
18 Once a test year is selected, adjustments are19 made to test year accounts and rate base to
20 reflect known and measurable changes so that test21 year totals accurately reflect anticipated22 amounts for the future period when rates will be
23 in effect. The Idaho Supreme Court has described24 "rate base" as "the utility's capital investment25 amount." Industrial Customers of Idaho Power v.
26 Idaho PUC 134 Idaho 285, 291, 1 P.3d 786, 79227 (2000) . Adjustments to test year accounts28 generally fall into three categories: 1)
29 normalizing adjustments made for unusual30 occurrences, like one-time events or extreme31 weather conditions, so they do not unduly affect
32 the test year; 2) annualizing adjustments made33 for events that occurred at some point in the34 test year to average their effect as if they had35 been in existence during the entire year; and 3)
36 known and measurable adjustments made to include
DeFelice, Di 4
Avista Corporation
1 events that occur outside the test year but will
2 continue in the future to affect Company income3 and expenses.
4
5 If utility plant investment that is being used to
6 serve customers is not reflected in retail rates then the
7 retail rates will not be "just, fair, and reasonable,"
8 i. e., it would not be just or reasonable for customers to
9 recei ve the benefit provided by the utility investment
10 without paying for it, and the retail rates would not
11 provide revenues sufficient to provide recovery of the
12 costs associated with providing service to customers.
13 Q.Is the Company's application of these ratemking
14 principles in this filing consistent with prior general
15 rate cases?
16
17
A.Yes.In prior cases, the obj ecti ve has been the
same to include in retail rates the investment, or rate
18 base, that is providing service to customers, and ensure
19 that there is a proper matching of revenues and expenses
20 during the period that rates are in effect.
21 Q.How are we assured that the capital additions pro
22 formed in this case will actually occur for 2011 and 2012?
23 A.Many of the 2011 projects are already underway or
24 completed either through actual construction, contracts
25 signed, and lor materials ordered. In addition, the actual
26 and planned capital expenditures for the utility for the
27 years 2007 through 2010 are shown in Table 1 below.The
28 table shows that actual capital expenditures have been very
29 close to the planned expenditures on a consistent basis.
DeFelice, Di 5
Avista Corporation
1 During the last two years the actual expenditures have been
2 98% to 99% of the planned expenditures.I believe it is
3 fair to conclude that there is a high level of confidence
4 that the planned capital expenditures for 2011 and 2012,
5 which the Company has pro formed into this case, will occur
6 and it is reasonable for them to be included for recovery
7 in retail rates.
8 Table 1
9
10
11
12
13
14
15
Planned Actual Percentage of
Expendi tures Expendi tures Planned
($millions)($millions)(% )
2007 $183.6 $198.4 108%
2008 $194.2 $205.4 106%
2009 $202.0 $199.7 99%
2010 $210.0 $206.8 98%
Q.How does new investment in utility plant change
16 rate base over time for ratemaking purposes?
17 A.Historically (until roughly the last five years),
18 the annual dollars spent by the Company on new utility
19 plant was relatively close to the level of depreciation
20 expense, with the exception of years where the Company
21 invested in major new generating projects. 2 Net rate base
22 stayed at a relatively constant level and the use of the
23 rate base amount from a prior year, i. e., a historical test
24 year, would be adequate for setting rates for the upcoming
25 year, because there was little change in the net plant
26 investment used to serve customers.
2 Recognizing that a portion of the costs associated with certin capital additions are offset by additional
revenues.
DeFelice, Di 6
Avista Corporation
1 In more recent years, however, Avista's investment in
3
2 utili ty plant has significantly exceeded depreciation
Because of this, rate base in the rate year is
4 significantly greater than the historical test period AM
expense.
5 rate base. This is shown in Illustration 1 below.
6 Illustration 1
7
8
9
10
11
12
13
14
15
16
Idaho Electric Net Plant Rate Base
$700
$600IIcg $500
~ $400
$300
$200
$100
$-
$608
2005 **20102008200920062007
* * 2005 Excludes 10 share of $37.5 milion for second half of C52 and $8.5
milion for offce building purchase.
17 fair, and reasonable is for the utility plant investment
The only way to ensure that retail rates are just,
18 that is being used to serve customers be properly reflected
19 in retail rates, net of appropriate offsets. This makes it
20 necessary for the Company to pro form plant investment that
21 is in service after the historical test year, and will be
22 in service during the rate year so that rate base for the
24
23 pro forma rate year is representative of the level of
investment used to serve customers.The Company's pro
25 forma adjustments in this case properly reflect any
26 offsets, and include adjustments to ensure a proper
27 matching with test period loads.
DeFelice, Di 7
Avista Corporation
1 Q.What is the historical and projected level of
2 annual capital spending for Avista?
3 A.Avista's annual capital requirements have
4 steadily increased from approximately $130 million in 2005
5 to approximately $250 million in 2011.Capital
6 expenditures of approximately $482 million are planned for
7 2011-2012 for customer growth, investment in generation
8 upgrades and transmission and distribution facilities, as
9 well as necessary maintenance and replacements of our
10 natural gas utility systems.Capi tal expenditures of
11 approximately $1.2 billion are planned for the five year
12 period ending December 31, 2015.Schedule 1 of Exhibit 11
13 reflects this trend that Avista has experienced and what is
14 planned for in the near future.
15 Q.What is driving the significant investment in new
16 utility plant?
17 A.As Company witnesses Mr. Kinney and Mr. Lafferty,
18 in particular, explain in their testimony, the Company is
19 being required to add or upgrade new generation facilities,
20 expand transmission and distribution facilities due in part
21
22
to customer growth in our service area,reliabili ty
requirements, and needed capacity upgrades.Other issues
23 driving the need for capital investment include an aging
24 infrastructure,physical degradation,and municipal
25 compliance issues (e. g., street/highway relocations), etc.
26 While the price escalation experienced in recent years
27 for the cost of materials (concrete, copper, steel, etc.)
DeFelice, Di 8
Avista Corporation
1 has subsided, the cost of materials and equipment is still
2 orders of magnitude higher than what they were even a few
3 years ago, causing the cost of these new facilities to be
4 significantly higher than in the past.Accordingly, the
5 annual costs associated with the new facilities will be
6 significantly higher than the annual costs of the Company's
7 facili ties that are being replaced or upgraded.
8 Q.What data is available that depicts the
9 significant increase in the cost of utility plant assets
10 that have been added in recent years as compared to the
11 cost of the facilities being replaced?
12 A.Using the Handy-Whi tman Index Manuai3,the
13 Company analyzed several maj or categories of plant.
14 Schedule 2 of Exhibit 11 depicts the increases in costs of
15 transmission substations,transmission equipment,
16 distribution substations, and distribution equipment that
17 the utility industry has experienced over the past fifty
18
19
years.These charts show what these categories of plant
have cost historically on a relative scale.For example,
20 on Page 4 of Schedule 2, and also shown in Illustration 2
21 below, distribution poles fifty years ago would have a cost
22 of only 9%of the current replacement cost.
3 "The Handy-Whitman Index of Public Utility Constrction Costs", published by Whitman, Requardt and
Associates, Baltimore, Maryland. The Handy-Whitman Indexes of Public Utility Constrction Costs
show the level of costs for different tyes of utility construction. Separate indices are maintained for
general items of construction, such as reinforced concrete, and specific items of material or equipment,
such as pipe or tubo-generators. Handy-Whitman Index numbers are used to trend earlier valuations and
original cost at prices prevailng at a certain date.
DeFelice, Di 9
Avista Corporation
1 Illustration 2
2
3 $100.00
Handy Whitman Cost Index
Distribution E ui ment-Accts 364 365 & 368
.p .p .p
.p' .p' .p'~ ~ ~
4
5 $80.00
6
7 $60.00
8
9 $40.00 f
10
11 $20.00
12
13 $0.00
1959 1969 1979 1989 1999 2009
14 Aut 364.Poles . Aut 365.0H ConduClor II Aut 3680H Line Ttansformers
15
16 The chart above, and those on Schedule 2, show that
17 the cost of the same equipment and facilities that are
18 being added today are multiple times more expensive than
19 those facilities installed in the past.Our retail rates
20 are "cost-based" and reflect the low cost of the old
21 equipment serving customers,when the equipment is
22 replaced, it requires an increase in rates to reflect the
23 much higher cost of the new equipment.
24 Q.With respect to Avista's proposed pro form
25 capi tal addi tions , would there be some opera tion and
26 maintenance (O&M) savings associated with the replacement
27 of some of the aging equipment with new equipment?
DeFelice, Di 10
Avista Corporation
1 A.Not when you look at the total utility as a
2 whole, which is how ratemaking is done. 4
3 On a net basis, we will continue to experience O&M
4 costs to maintain a system that continues to age. Our O&M
5 costs are continuing to go up over time, not down, as shown
6 in Illustration 3 below.
7
8 Illustration 3
9
10
10 Electric O&M Costs Excluding Fuel
$35.8$34.5
12
13
14
15
16
17
18
19
$40.0
$35.0
$30.0
II $25.0c
~ $20.0
~ $15.0
$10.0
$5.0
$-
II Distribution
11
Transmission
II Generation
2007 2008 2009 2010
At some point our facilities approach the end of their
20 useful lives and need to be replaced before they fail. Our
21 general practice is to attempt to replace our aging
22 equipment before it fails, because it is not only less
23 costly to replace this equipment on a structured, planned
24 basis, but it also results in more reliable service to
25
4 As described below, all of the capital that was pro formed was reviewed for any offsets and any specific
offset that was identified was included in the filing as a separate restating adjustment (O&M Savings
Adjustment) as a reduction to O&M costs.
DeFelice, Di 11
Avista Corporation
1 customers, which is expected by all utility stakeholders.
2 If our practice were to avoid replacing utility equipment
3 until it failed, the reliability of our system would
4 suffer.
5 Therefore, it is imperative that we continue every
6 year to reinvest and upgrade a portion of our utility
7 system, in addition to the investments to meet mandatory
8 reliability requirements, so that our system will continue
9 to provide reliable service.
10 The reinvestment and upgrades actually serve, to a
11 large extent, to allow the Company to avoid additional
12 costs in the future associated with maintenance - not to
13 reduce the overall level of existing O&M costs. Mr. Kinney
14 provides additional testimony in this area.
15
16
17
III. DESCRIPTION OF CAPITAL PROJECTS
Q.Please provide a listing of the 2011 capital
18 projects that were pro formed in this filing.
19 A.Exhibi t No. 11, Schedule 3, Page 1, details the
20 capital projects that will be transferred to plant in
21 service in 2011 and included in this filing.A listing
22 and/or description of the capital proj ects and their system
23 costs that will transfer to plant in service in 2011 and
24 that are included in this filing follows:
2526 Generation ($25.280 million - system):
2728 The electric generation projects that will transfer to29 plant in service are described in detail in Mr.
DeFelice, Di 12
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
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
41
42
43
44
45
46
47
48
49
50
51
52
Lafferty's direct testimony.proj ects follows:A listing of these
Thermal - Kettle Falls Capital Projects - $731,000
Thermal - Colstrip Capital Projects - $6,926,000
Thermal - Other Small Capital Projects - $156,000
Hydro - Cabinet Gorge Upgrade - $800,000
Hydro - Noxon Capital Projects - $1,000,000
Hydro - 2011 Noxon Unit #2 Upgrade - $9,110,000
Hydro - Clark Fork PME Agreements - $1,468,000
Hydro - Spokane PME Agreements - $2,243,000
Hydro - Other Small Capital Projects - $1,874,000
Other - CS2 Capital Projects - $630,000
Other - Other Small Generation Projects - $342,000
Electric Transmission ($26.959 million - system):
The electric transmission projects that will transfer
to plant in service are described in detail in Mr.
Kinney's direct testimony. A listing of these
projects and system costs follows:
Reliabili ty Compliance Proj ects:
Spokane-CDA 115 kV Line Relay Upgrades - $1,000,000
SCADA Replacement - $625,000
System-Replace/Install Capacitor Banks - $400,000
Moscow Sub Rebuild - $400,000
Bronx Cabinet 115 kV Substation Rebuild - $2,000,000
West Plains Transmission Reinforcement - $2,300,000
Environmental Regulation Project:
Beacon Storage Yard Oil Containment - $1,020,000
Contractual Required Projects:
Colstrip Transmission - $533,000
Tribal Permits - $325,000
Reliabili ty Improvement Proj ects:
Idaho Road Substation - $1,750,000
Hatwai - N. Lewiston 230 kV Re-Insulate - $250,000
12F2 & PVW 241 Feeder Tie - $265,000
Replacement Transmission Proj ects:
Power Transformer Transmission - $3,250,000
Transmission Minor Rebuilds - $2,750,000
Power Circuit Breakers - $1,600,000
Otis Orchards 115 kV Breaker and Line Relay
Replacement - $730,000
Noxon Rapids B Bank GSU Replacements - $5,874,000
Transmission Asset Management Projects - $1,887,000
DeFelice, Di 13
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
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
41
42
43
44
45
46
47
48
49
50
51
Electric Distribution ($65.757 million - system):
The Idaho specific electric distribution projects
totaling $9.465 million that will transfer to plant in
service are described in detail in Mr. Kinney's direct
testimony. A listing of these projects follows:
Power Transformer Distribution - $350,000
Appleway Substation Rebuild - $4,200,000
Deary Substation Rebuild - $1,615,000
System-Dist Reliability-Improve Feeders - $925,000
12F2 & PVW 241 Feeder Tie Distribution - $360,000
CDA East & North - Pullman & Lewis Clark - $1,025,000
Replace High Resistance Conductor - $615,000
PCB Related Distribution Rebuilds - $375,000
The electric distribution projects totaling $24.1
million (system) that will transfer to plant in
service are described in detail in Mr. Kinney's direct
testimony. A listing of these projects follows:
Electric Distribution Minor Blanket - $8,000,000
Wood Pole Replacement Program & Capital Distribution
Feeder Repair - $8,900,000
Electric Underground Replacement - $3,500,000
Distribution Line Relocation - $1,700,000
Failed Electric Plant - $2,000,000
The following electric distribution projects included
on Exhibit No. 11, Schedule 3, are specific to the
Washington jurisdiction and are not included in the
Idaho electric revenue requirement in this case.
Power Transformer Distribution - $1,000,000
Replace High Resistance Conductor - $1,876,000
PCB Related Distribution Rebuilds - $2,125,000
Distribution Projects in Washington - $8,700,000
Washington Smart Grid Distribution - $18,461,000
General ($18.003 million - system):
Security Initiative - $374,000
Various security measures including cameras and access
controls for the office and branch facilities.
Structures and Improvements - $3,500,000
This is a group of capital maintenance projects that
Facilities Management coordinates at the Spokane
Central Operating Facilities and Avista branch
facilities - offices and service centers. For 2011,
planned proj ects include: roof replacements, HVAC
DeFelice, Di 14
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
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
41
42
43
44
45
46
47
48
49
50
51
52
53
system replacement at some branch offices, energyefficiency window and lighting proj ects, security
projects, asphalt overlays and replacement, as well as
some capital repair projects in existing buildings.
Stores Equipment - $402,000
Equipment utilized in warehouses and/orrecovery operations throughout the service
This includes equipment such as forklifts,
shelving, cutting/binding machines, etc.
investmentterri tory.
man lifts,
Tools, Lab & Shop Equipment - $1,300,000
Expendi tures in this category include all large tools
and instruments used throughout the Company for gas
and/or electric construction and maintenance work,
distribution, transmission, or generation operations,telecommunications, and some fleet equipment (hoists,
winch, etc) not permanently attached to the vehicle.
HVAC Renovation Project - $5,541,000
The heating, ventilating, and air conditioning systemsthroughout the Spokane Central Operating Facilities
are approximately fifty years old and are in need of
replacement. In 2007, the Company initiated a multi-
year HVAC renovation project that involves replacing
central air handling units and distribution systems in
three buildings the Spokane Service Center, the
general office building, and the cafeteria auditorium
building. The building envelope of the general office
building was also renovated with high efficiency glass
and insulation. The proj ect will also achieve
asbestos abatement and life safety (fire sprinkler)
additions. New controls will also be installed which
will enable energy conservation. Present estimates
indicate cost savings of approximately $430,000 per
year in energy use, a 36% reduction in energy costs
once all phases have been completed, currently planned
to be completed in 2013. The 2011 project pro formed
into this case will produce approximately $31,000 per
year (system) in reduced energy costs, which have been
pro formed as a reduction to O&M costs. The Company
has included an additional $31,000 in O&M savings
related to the 2010 portion of this capital project
that was completed in late-2010.
WSDOT Highway Preservation/Maintenance
Ways - $350,000
In order to operate our electric
highway rights of way, the
preserve/maintain right of ways.
ways have expired and Avista must
with the State or risk penalties
the State.
of Right of
system within State
Company needs to
Existing right of
seek new agreements
or non -approval by
DeFelice, Di 15
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
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
41
42
43
44
45
46
47
48
49
50
51
52
Colville Service Center - $5,400,000
The construction of a new service center was specific
to the Washington jurisdiction and has not been
included in the Idaho electric revenue requirement in
this case.
Other Small Projects - $1,136,000
These projects include office furniture additions and
replacements, communication and security initiatives,
radio equipment, telephone systems, office and other
general facility upgrades.
Transportation ($9.468 million - system):
Transportation Equipment - $9,468,000
Expendi tures are for the scheduled replacement of
trucks, off-road construction equipment and trailers
that meet the Company's guidelines for replacementincluding age, mileage, hours of use and overall
condi tion. This also includes additions to the fleet
for new positions or crews working to support the
maintenance and construction of our electric and
natural gas operations.
Technology ($24.073 million - system):
Information Technology Refresh Blanket - $8,995,000
A program to replace obsolete technology according to
Avista's refresh cycles that are generally driven by
hardware/software manufacturer and industry trends tomaintain business operations.
Information Technology Expansion Blanket - $1,180,000
A program to deliver technology associated with
expansion of existing solutions.
Avista Facility Management (AFM) Product Development
Program - $640,000
Deliver enhancements to the electric and natural gas
Facili ty Management technology system.
Nucleus Product Development Program - $480,000
Deliver enhancements to the Nucleus energy resource
management technology system.
Web Product Development Program - $ 960,000
A program to deliver enhancements to the Customer
based Web technology system.
Business Application Refresh Program - $1,188,000
DeFelice, Di 16
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
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
41
42
43
44
45
46
47
48
49
50
51
52
53
This item is a program to upgrade critical business
application that support small systems that are
integral for the delivery of reliable electric and gas
services to the customer. Examples of items in this
program are upgrade to obsolete Itron PP4 meter
reading system to Itron MVRS meter reading system,
upgrade Microsoft BizTalk integration software to the
current version, and upgrade of the SharePoint
services Intranet to the current version.
Moducom Replacement - $1,000,000
This proj ect is to replace the critical crew
communication system that facilitates the coordination
of Avista's crews for the restoration, operations and
installation of electric and gas services to ourcustomers.
Microwave Replacement Project - $2,813,000
The project is designed to replace the aging and no
longer supported microwave equipment with a supported
technology. These systems support the communicationfor protection and relaying of the electrical
transmission systems that allow the reliable delivery
of electricity throughout our service terri tory.
Oracle R12 Upgrade - $1,300,000
This proj ect will provide the Company with a
supportable financial application system which is
integral for the operation of financially viable
stable business this in turn allows us to continue to
provide reliable electric and gas services to our
customers.
AFM.net Upgrade - $2,904,000
The Avista Facilities Management system, or AFM,
provides electronic representation of all of the
components of the gas and electric systems required
for the safe and reliable deli very of electricity and
natural gas to our customers. This system represents
meters, poles, transformers and many other components
in a geospatial representation. Our Distribution
Engineering and Operations areas depend upon the
information in this system for the management of
outage restoration, maintenance and operations of the
electrical and gas distributions systems. This
project provides critical updates to the underlying
technology of the system.
Other Small Technology Proj ects and Technology Minor
Blankets - $2,613,000
This item is intended to be used for small technology
projects. These projects are small items that provide
for improvements in how Avista provides services to
DeFelice, Di 17
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
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
41
42
43
44
45
46
47
48
49
50
51
our customers. Examples of project approved under this
program are adding new features and functions to the
Claims system, adding an additional module to the Rate
Case Software product, and adding additional features
to the Contract Management system.
Jackson Prairie Storage ($0.581 million - system):
Jackson Prairie Storage Project - $581,000
These projects include various capital improvements
that Avista and its partners will complete at Jackson
Prairie facility in 2011.
Natural Gas Distribution ($15.312 million - system):
Replace Deteriorated Pipe - $1,052,000
This annual project will replace sections of existing
natural gas piping that are suspect for failure or
have deteriorated within the natural gas system. This
project will address the replacement of sections ofnatural gas main that no longer operate reliably
and/or safely. Sections of the natural gas systemrequire replacement due to many factors including
material failures, environmental impact, increase leak
frequency, or coating problems. This project will
identify and replace sections of main to improve
public safety and system reliability.
Natural Gas Replacement Street/Highways - $1,850,000
This annual project will replace sections of existing
natural gas piping that require replacement due to
relocation or improvement of streets or highways in
areas where natural gas piping is installed. Avista
installs many of its facilities in public right-of-wayunder established franchise agreements. Avista is
required under the franchise agreements, in most
cases, to relocate its facilities when they are in
conflict with road or highway improvements.
Natural Gas Non-Revenue Blanket - $2,900,000
This annual project will replace sections of existing
natural gas piping that require replacement to improve
the operation of the natural gas system but are not
linked to new revenue. The project includes relocation
of main related to overbuilds, improvement in
equipment and/or technology to improve system
operation and/or maintenance, replacement of obsolete
facili ties, replacement of main to improve cathodic
performance, and proj ects to improve public safety
and/ or improve system reliability.
DeFelice, Di 18
Avista Corporation
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
Roseburg, OR Reinforcement Project - $3,700,000
This Oregon natural gas distribution project is not
included in this filing.
North Clarkston, WA HP Reinforcement Proj ect
$2,200,000
This Washington natural gas distribution project is
not included in this filing.
Other Small Projects - $3,610,000
Please refer to my workpapers for detailed listing ofprojects.
Q.What are the 2012 capital projects that are pro
16 formed in this filing?
17 A.Exhibi t No. 11, Schedule 3, Page 2, details the
18 capi tal proj ects that will be transferred to plant in
19 service in 2012 and included in this filing.A listing
20 and/or description of the capital proj ects and their system
21 costs that will transfer to plant in service in 2012 and
22 that are included in this filing follows:
2324 Generation ($34.362 million - system):
2526 The electric generation projects that will transfer to27 plant in service are described in detail in Mr.28 Lafferty's direct testimony. A listing of these29 projects follows:
3031 Thermal - Kettle Falls Capital Projects - $1,000,00032 Thermal - Colstrip Capital Projects - $4,963,00033 Thermal - Other Small Capital Projects - $160,00034 Hydro - Little Falls Capital Proj ects - $2,300,00035 Hydro - Post Falls Capital Projects - $2,500,000
36 Hydro - 2012 Noxon Unit #4 Upgrade - $8,757,000
37 Hydro - Clark Fork PME Agreements - $1,437,000
38 Hydro - Spokane PME Agreements - $1,105,00039 Hydro - Other Small Capital Projects - $952,00040 Other - CS2 Capital Projects - $10,400,00041 Other - Other Small Generation Projects - $788,000
42
43
44
DeFelice, Di 19
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
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
41
42
43
44
45
46
47
48
49
50
51
Electric Transmission ($22.407 million - system):
The electric transmission projects that will transfer
to plant in service are described in detail in Mr.
Kinney's direct testimony. A listing of these
projects and system costs follows:
Reliabili ty Compliance Projects:
Spokane-CDA 115 kV Line Relay Upgrades - $1,250,000
SCADA Replacement - $450,000
System-Replace/Install Capacitor Banks - $1,200,000
Moscow Sub Rebuild - $3,870,000
Irvin - Millwood 115 kV Rebuild - $1,150,000
Thornton Substation - $4,900,000
Bronx Cabinet 115 kV Rebuild/Reconductor - $1,500,000
Contractual Required Proj ects:
Colstrip Transmission - $195,000
Tribal Permits - $325,000
Replacement Transmission Projects:
Power Transformer Transmission - $2,665,000
Transmission Minor Rebuilds - $1,500,000
Power Circuit Breakers - $1,200,000
Transmission Asset Management Proj ects - $2,202,000
Electric Distribution ($58.003 million - system):
The Idaho specific electric distribution projects
totaling $7.940 million that will transfer to plant in
service are described in detail in Mr. Kinney's directtestimony. A listing of these proj ects follows:
Power Transformer Distribution - $350,000
Big Creek Substation - $1,515,000
Blue Creek Substation - $1,500,000
System-Dist Reliability-Improve Feeders - $1,075,000
CDA East & North - Pullman & Lewis Clark - $1,325,000
Pullman & Lewis Clark Distribution - $600,000
Replace High Resistance Conductor - $905,000
PCB Related Distribution Rebuilds - $420,000th $10 & Stewart - 250,000
The electric distribution projects totaling $24.943
million (system) that will transfer to plant in
service are described in detail in Mr. Kinney's direct
testimony. A listing of these proj ects follows:
Electric Distribution Minor Blanket - $8,000,000
DeFelice, Di 20
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
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
41
42
43
44
45
46
47
48
49
50
51
Wood Pole Replacement Program & Capital Distribution
Feeder Repair - $9,468,000
Electric Underground Replacement - $3,675,000
Distribution Line Relocation - $1,700,000
Failed Electric Plant - $2,100,000
The following electric distribution projects included
on Exhibit No. 11, Schedule 3, are specific to the
Washington jurisdiction and are not included in the
Idaho electric revenue requirement in this case.
Power Transformer Distribution - $1,100,000
Replace High Resistance Conductor - $2,112,000
PCB Related Distribution Rebuilds - $2,400,000
Distribution Projects in Washington - $11,104,000
Washington Smart Grid Distribution - $8,404,000
General ($11.217 million - system):
Security Initiative - $392,000
Various security measures including cameras and access
controls for the office and branch facilities.
Structures and Improvements - $3,032,000
This is a group of capital maintenance projects that
Facili ties Management coordinates at the Spokane
Central Operating Facilities and Avista branch
facili ties - offices and service centers. For 2012,
planned proj ects include: roof replacements, land
acquisi tion for facility expansion, energy efficiency
projects, security enhancement projects, asphalt
overlays and replacement, construction of new storagebuildings, as well as some capital repair proj ects in
existing buildings.
Stores Equipment - $450,000
Equipment utilized in warehouses and/orrecovery operations throughout the service
This includes equipment such as forklifts,
shelving, cutting/binding machines, etc.
investmentterri tory.
man lifts,
Tools, Lab & Shop Equipment - $1,292,000
Expenditures in this category include all large tools
and instruments used throughout the Company for gas
and/or electric construction and maintenance work,
distribution, transmission, or generation operations,telecommunications, and some fleet equipment (hoists,
winch, etc) not permanently attached to the vehicle.
HVAC Renovation Project - $5,000,000
The heating, ventilating, and air conditioning systemsthroughout the Spokane Central Operating Facilities
DeFelice, Di 21
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
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
41
42
43
44
45
46
47
48
49
50
51
are approximately fifty years old and are in need of
replacement. In 2007, the Company initiated a multi-
year HVAC renovation project that involves replacing
central air handling units and distribution systems in
three buildings the Spokane Service Center, the
general office building, and the cafeteria auditorium
building. The building envelope of the general office
building was also renovated with high efficiency glass
and insulation. The proj ect will also achieve
asbestos abatement and life safety (fire sprinkler)
addi tions. New controls will also be installed which
will enable energy conservation. Present estimates
indicate cost savings of approximately $430,000 per
year in energy use, a 36% reduction in energy costs
once all phases have been completed, currently planned
to be completed in 2013. The 2012 project pro formed
into this case will produce approximately $31,000 per
year (system) in reduced energy costs, which have been
pro formed as a reduction to O&M costs.
WSDOT Highway Preservation/Maintenance
Ways - $500,000
In order to operate our electric
highway rights of way, the
preserve/maintain right of ways.
ways have expired and Avista must
wi th the State or risk penal ties
the State.
of Right of
system wi thin State
Company needs to
Existing right of
seek new agreements
or non-approval by
Other Small Proj ects - $551,000
These projects include office furniture additions andreplacements, communication and security ini tiati ves,
radio equipment, telephone systems, office and other
general facility upgrades.
Transportation ($6.672 million - system):
Transportation Equipment - $9,468,000
Expendi tures are for the scheduled replacement of
trucks, off-road construction equipment and trailers
that meet the Company's guidelines for replacementincluding age, mileage, hours of use and overall
condi tion. This also includes additions to the fleet
for new positions or crews working to support the
maintenance and construction of our electric and
natural gas operations.
Technology ($32. 682 million - system):
Information Technology Refresh Blanket - $6,254,000
DeFelice, Di 22
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
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
41
42
43
44
45
46
47
48
49
50
51
52
53
A program to replace obsolete technology according to
Avista's refresh cycles that are generally driven by
hardware/software manufacturer and industry trends tomaintain business operations.
Information Technology Expansion Blanket - $1,140,000
A program to deliver technology associated with
expansion of existing solutions.
AFM Product Development Program - $500,000
Deliver enhancements to the electric and natural gas
Facili ty Management technology system.
Nucleus Product Development Program - $480,000
Deliver enhancements to the Nucleus energy resource
management technology system.
Web Product Development Program - $650,000
A program to deliver enhancements to the Customerbased Web technology system.
Business Application Refresh Program - $500,000
This item is a program to upgrade critical business
application that support small systems that are
integral for the delivery of reliable electric and gas
services to the customer. An example of this would be
an upgrade of Human Resource system.
Moducom Replacement - $500,000
This proj ect is to replace the critical crew
communication system that facilitates the coordination
of Avista's crews for the restoration, operations and
installation of electric and gas services to ourcustomers.
Next Generation Radio Project - $18,657,000
This project is refreshing Avista's 20 year old Land
Mobile Radio (LMR) system that is used for critical
crew communications during outage restoration and
daily operations of maintaining the electric and gas
distribution and transmission systems. Avista
continues to maintain a private Land Mobile Radio
system because the offerings available from public
providers cannot provide communication throughout ourrural service terri tory and as a portion of our
nation's critical infrastructure it is imperative that
Avista have a communication system that will operate
in the event of a disaster to help safeguard thegeneral public.
CIS Replacement - $3,000,000
This project will enhance the integration capability
supporting expanded service oriented architecture in
DeFelice, Di 23
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
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
41
42
43
44
45
46
47
48
49
50
51
commercial off the shelf software. This is part of a
larger effort to reduce the costs of custom written
application solutions which will improve our ability
to provide customer more information about theirenergy usage and reduce our costs of delivering
services to Avista's customers.
Other Small Technology Proj ects and Technology Minor
Blankets - $1,001,000
This item is intended to be used for small technology
proj ects. These proj ects are small items that provide
for improvements in how Avista provides services to
our customers. The specific projects will be defined
during the annual budgeting cycle.
Jackson Prairie Storage ($0.604 million - system):
Jackson Prairie Storage Project - $604,000
These projects include various capital improvements
that Avista and its partners will complete at Jackson
Prairie facility in 2012.
Natural Gas Distribution ($20.285 million - system):
Replace Deteriorated Pipe - $3,000,000
This annual project will replace sections of existing
natural gas piping that are suspect for failure or
have deteriorated wi thin the natural gas system.
Sections of the natural gas system require replacementdue to many factors including material failures,
environmental impact, increase leak frequency, or
coating problems. This project will identify and
replace sections of main to improve public safety and
system reliability.
Natural Gas Replacement Street/Highways - $2,060,000
This annual project will replace sections of existing
natural gas piping that require replacement due to
relocation or improvement of streets or highways in
areas where natural gas piping is installed. Avista
installs many of its facilities in public right-of-wayunder established franchise agreements. Avista is
required under the franchise agreements, in most
cases, to relocate its facilities when they are in
conflict with road or highway improvements.
Natural Gas Non-Revenue Blanket - $3,664,000
This annual project will replace sections of existing
natural gas piping that require replacement to improve
the operation of the natural gas system but are not
directly linked to new revenue. The project includes
DeFelice, Di 24
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
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
41
42
43
44
45
46
47
48
49
50
51
52
53
relocation of main related to overbuilds, improvement
in equipment and/or technology to improve system
operation and/or maintenance, replacement of obsolete
facilities, replacement of main to improve cathodic
performance, and projects to improve public safety
and/ or improve system reliability.
Highway 95 Relocation Project - $1,250,000
This project will replace approximately 33,000 feet of
existing 3 inch diameter intermediate pressure
polyethylene (PE) main by installing a new 6 inch
diameter intermediate pressure PE main along Highway
95 from Chilco Road, ending in Athol, Idaho. Avista
has been notified by ITD (Idaho Transportation
Department) that the existing natural gas main is in
conflict with the construction and widening of Hwy 95.
The existing main is installed in the Hwy 95 road
right of way. Relocation of the Avista natural gas
main is required in order for ITD to make the road
improvements. The existing 3 inch main will be
replaced with 6 inch PE main to also accommodate
future growth along the pipe route and improve
reliability by looping the distribution system.
Old Highway 95 Relocation Project - $3,000,000
This project will relocate approximately 15,000 feet
of existing steel HP main and approximately 8,300 feet
of existing PE main by installing a new 6 inch HP main
and new 6 inch PE main along Old Highway 95 from thevicini ty of Highway 53 to Chilco Rd. Existingregulator stations No. 604 and No. 226 will be tied
into the new piping. The Idaho Transportation
Department will be rebuilding Old Highway 95 from
Highway 53 to Chilco Rd. The relocation of the
existing HP and PE facilities will be required to
accommodate the new roadway. The existing facilities
are located within the Lakes Highway District right-of-way.
Klamath Falls, OR Lateral Project - $2,500,000
This Oregon natural gas distribution project is not
included in this filing.
Isolated Steel Replacement Project - $1,125,000The Company is implementing a special cathodic
protection program for the purpose of finding and
addressing isolated steel in its natural gas piping
systems. This program is described further by Companywi tness Mr. Kopczynski in his testimony.
Other Small Projects - $3,686,000
Please refer to my workpapers for detailed listing ofprojects.
DeFelice, Di 25
Avista Corporation
1 iV. SUMY OF ADJUSTMNTS
2 Q.What was the net impact to eleetric rate base for
3 the capital adjustments pro formed in this case?
4 A.Electric net rate base for capital investment
5 increased $25,827,000, from $594,111,000 to $619,938,000.
6 Table 2 below summarizes the adjustments included in the
7 case.
8 Table 2
9
($O's)..
2011
Adjust Capital Adjust 2011 2012
12/31/10 Additions 12/31/10 Capital Capital Noxon 2011
Rate Base Vintage to to Vintage Additions Additions and 2012 Pro Formed
Rate Base Adjust 2010 12/31/10 12/31/11 12/31/11 to 2012 to 2012 to 2012 Upgrades Rate Base
2010AMA to EOP Basis EOP EOP EOP AMA AMA AMA 2012AMA 2012AMA
Plant $1,054,173 $21,656 $1,0S,829 $-$ 46,00 $$.$ 16,80 $5,081 $1,143,726
A/D (356,580)(6,873)(36,453)(29,495)(1,128)(14,747)(1,17)(431)(121)(410,547)
DFIT (103,482)(3,140)(106,622)(3,06)(745)(1,522)(605)(374)(310)(113,241)
Rate Base $594,111 $11,643 $60,754 $ (32,558) $ 44,135 $(16,269) $ (1,77 $ 16,00 $4,650 $619,938
10
11
12
13
14
15 Q.Wha t was the net impact to natural gas rate base
16 for the capital adjustments pro formed in this case?
17 A.Natural gas net rate base for capital investment
18 decreased $3,480,000,from $96,276,000 to $92,796,000.
19 Table 3 below summarizes the adjustments included in the
20 case.
21
22
23
24
25
26
DeFelice, Di 26
Avista Corporation
1 Table 3
($oo's)--
2011
Adjust Capital Adjust 2011 2012
12/31/10 Additions 12/31/10 Capital Capital Pro
Adjust 2010 Rate Base Vintage to to Vintage Additions Additions Formed
Rate Base to EOP 12/31/10 12/31/11 12/31/11 to 2012 to 2012 to 2012 Rate Base
2010AMA Basis EOP EOP EOP AMA AMA AMA 2012AMA
Plant $172,698 $1,859 $174,557 $$4,476 $$$2,798 $181,831
A/O (56,749)(1,059)(57,80)(4,9æ)(216)(2,454)(204)(84)(65,675)
OFI (19,673)(1,297)(20,970)(1,512)(136)(54)(103)(91)(23,360)
Rate Base $ 96,276 $(497)$95,779 $(6,421)$4,124 $ (3,002) $(307)$2,623 $ 92,796
2
3
4
5
6
7
8 A.The Company used the same general approach that
9
10
5was used in the two previous general rate cases. Company
following fourwi tness Ms.Andrews includes the
11 adjustments:
12 2010 Capital Adjustment - Adjusts the 2010 test period
13 rate base stated on an AMA basis to an EOP basis.The
14 revenue-producing distribution plant for the 2010 capital
15 additions was not adjusted to EOP, to maintain the matching
16 of revenues and costs associated with these assets.
17 2011 Capital Adjustment - First, the plant that was in
18 service at December 31, 2010, was depreciated through 2011,
19 adjusting accumulated depreciation and DFIT to a December
20 Second, 2011 capital additions,31, 2011 EOP basis.
21 excluding the revenue-producing distribution plant and the
22 2011 Noxon Unit #2 upgrade, discussed below, was pro formed
23 on a December 31, 2011 EOP basis.
5 In previous year's cases, the Company's case pro formed capital to an end-of period basis for one year
subsequent to the test year. For the curent case, the Company pro formed capital to an average-of-
monthly averages basis for the rate year.
DeFelice, Di 27
Avista Corporation
1 2012 Capital Adjustment - First, the plant that was in
2 service at December 31, 2010, was depreciated through 2012,
3 adjusting accumulated depreciation and DFIT to a 2012 AMA
4 basis. Second, the 2011 pro formed capital additions were
depreciated through 2012,adjusting accumulated5
6
7
depreciation and DFIT to a 2012 AMA basis.Third, 2012
capital additions,excluding the revenue-producing
8 distribution plant and the 2012 Noxon Unit #4 upgrade,
9 discussed below, was pro formed on a 2012 AMA basis.
10 Noxon Upgrades Adjustment - The 2011 Noxon Unit #2
11 generation plant upgrade and the 2012 Noxon Unit #4
12 generation plant upgrade were pro formed on a December 31,
13 2012 AMA basis.As explained by Mr. Storro, the Company
14 has been upgrading one Noxon unit each year at its Noxon
15 generating facility. The upgrade for Unit #2 was completed
16 in May 2011.The upgrade for Unit #4, which will be
17 completed in May 2012, is also pro formed into this case.
18 Fifty percent of the additional generation and costs have
19 been included in the Aurora power cost model to provide a
20 proper matching of revenues and costs.The Company
21 included fifty percent of the additional generation and
22 costs for the approximate half-year that it will be in
23 service during the 2012 pro forma period.
24 Q.What other impact does the 2011 and 2012 capital
25 addi tions have in this case in addition to the rate base
26 impact?
DeFelice, Di 28
Avista Corporation
1 A.Depreciation expense and property taxes have been
2 computed for the 2011 and 2012 plant vintages for the pro
3 forma rate year on an AM basis for 2012.
4 Q.How were the offsets determined for the pro
5 formed plant investment?
6 A.Each capital addition was analyzed to determine
7 any offsets (e. g. reduced O&M costs, reduced load losses,
8 etc.) .Maintenance records were reviewed to determine
9 whether any specific maintenance costs were incurred in the
10 test period that would be reduced or eliminated by the
11 investment at the facility.For transmission proj ects,
12 analyses were conducted to determine the amount of
13 potential load loss savings that would be achieved. Those
14 costs were quantified and included as a reduction to O&M
15 costs in the O&M Savings restating adjustment included by
16 Ms. Andrews in the revenue requirement.
17 In addition, the output from generation assets is
18 included in the Aurora power cost model. Therefore, to the
19 extent that the additional investments serve to either
20 preserve or increase generation from the generation
21 proj ects, the benefits are reflected in the Aurora model.
22 Q.Wha t is the ra tionale behind the removal of
23 capital expenditures for connecting new customers?
24 A.The pro forma capital expenditures for 2011 and
25 2012 that the Company included in this filing excludes
26 distribution related capital expenditures made that are
27 associated with connecting new customers to the Company's
DeFelice, Di 29
Avista Corporation
1 system. The Company recognizes the fact that new customers
2 provide incremental revenue that helps offset the revenue
3 requirements of the distribution related capital additions
4 that the Company incurs to provide service to those
5 customers.The adjustments discussed above completely
6 eliminated the AMA 2010, the EOP 2011, and the EOP 2012
7 capital acti vi ty related to new customer connections in
8 order to avoid an unintended mismatch of revenues exceeding
9 the cost to serve customers.
10
11
12
V. CONCLUSION
Q.What is the impact of the restating and pro form
13 capital investment adjustments?
14 A.The proposed adj ustments will result in a closer
15 matching of revenues to cost of service at the time new
16 rates go into effect at the conclusion of this general rate
17 proceeding. Without the proposed adjustments, the Company
18 will not have the opportunity to earn its allowed rate of
19 return on investment during the rate year.
20 Q.Does this conclude your pre-filed direct
21 testimony?
22 A.Yes, it does.
DeFelice, Di 30
Avista Corporation
DAVID J. MEYER
VICE PRESIDENT AND CHIEF COUNSEL FOR
REGULATORY & GOVERNMENTAL AFFAIRS
AVISTA CORPORATION
P.O. BOX 3727
1411 EAST MISSION AVENUE
SPOKANE, WASHINGTON 99220-3727
TELEPHONE: [phone]
FACSIMILE: [phone]
DAVID .MEYER~AVISTACORP. COM
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE APPLICATION
OF AVISTA CORPORATION FOR THE
AUTHORITY TO INCREASE ITS RATES
AND CHARGES FOR ELECTRIC AND
NATURAL GAS SERVICE TO ELECTRIC
AND NATURAL GAS CUSTOMERS IN THE
STATE OF IDAHO
CASE NO. AVU-E-11-01
CASE NO. AVU-G-11-01
EXHIBIT NO. 11
DAVE B. DEFELICE
FOR AVISTA CORPORATION
(ELECTRIC AND NATURAL GAS)
Ca
p
i
t
a
l

E
x
p
e
n
d
i
t
u
r
e
s
$2
5
0
$2
0
0
~
$
1
5
0
::
.~~:;¡.5

$
1
0
0
'-
$5
0 $0
20
1
0

2
0
1
1

2
0
1
2

2
0
1
3

2
0
1
4

2
0
1
5
Bu
d
g
e
t

B
u
d
g
e
t

B
u
d
g
e
t

B
u
d
g
e
t

B
u
d
g
e
t
_
E
l
e
c
t
r
i
c

T
&
D

-

O
t
h
e
r

-
I
S
/
I
T

.

G
r
o
w
t
h

I
I

G
e
n
e
r
a
t
i
o
n

.

G
a
s

E
n
v
i
r
o
n
m
e
n
t
a
l

-

2
3
0

k
V

P
r
o
j
e
c
t
20
0
5
*
*

2
0
0
6
20
0
7
20
0
8
20
0
9
**

2
0
0
5

e
x
c
l
u
d
e
s

$
5
7
.
5

M

f
o
r

t
h
e

p
u
r
c
h
a
s
e

o
f

t
h
e

s
e
c
o
n
d

h
a
l
f

o
f

C
o
y
o
t
e

S
p
r
i
n
g
s

2

a
n
d

$
1
7
.
8

M

f
o
r

t
h
e
of
f
c
e

b
u
i
l
d
i
n
g

p
u
r
c
h
a
s
e
.
Ex
h
i
b
i
t

N
o
.

1
1
ca
s
e

N
o
s
.

A
V
U
-
E
-
1
1
-
0
1

&

A
V
U
-
G
-
11
-
0
1
D.

D
e
F
e
l
i
c
e
,

A
v
i
s
t
a
Sc
h
e
d
u
l
e

1
,

p
.

1

o
f

1
$1
0
0
.
0
0
$8
0
.
0
0
$6
0
.
0
0
$4
0
.
0
0
$2
0
.
0
0
$0
.
0
0
Ha
n
d
y

W
h
i
t
m
a
n

C
o
s
t

I
n
d
e
x
Tr
a
n
s
m
i
s
s
i
o
n

S
u
b
s
t
a
t
i
o
n
s
~
~
~.

~
.
~
~
4'
~.
~
~~.
.~
~O'~
19
5
9
19
8
9
19
9
9
20
0
9
19
6
9
19
7
9
35
2

S
t
r
u
c
t
u
r
e
s

&

I
m
p
r
o
v
e
m
e
n
t
s

.
3
5
3

S
t
a
t
i
o
n

E
q
u
i
p
Ex
h
i
b
i
t

N
o
.

1
1
Ca
s
e

N
o
s
.

A
V
U
-
E
-
1
1
-
0
1

a
n
d

A
V
U
-
G
-
1
1
-
0
1
D.

D
e
F
e
l
i
c
e
,

A
v
i
s
t
a
Sc
h
e
d
u
l
e

2
,

P
a
g
e

1

o
f

4
$1
0
0
.
0
0
$8
0
.
0
0
$6
0
.
0
0
$4
.
0
0
$2
0
.
0
0
$0
.
0
0
Ha
n
d
y

W
h
i
t
m
a
n

C
o
s
t

I
n
d
e
x
Di
s
t
r
i
b
u
t
i
o
n

S
u
b
s
t
a
t
i
o
n
s
~
~
~.

~
.
.,

.
,
4'
~.
~
~
t\
.
.~
19
5
9
19
6
9
19
7
9
19
8
9
19
9
9
20
0
9
36
1

S
t
r
u
c
t
u
r
e
s

&

I
m
p
r
o
v
e
m
e
n
t
s

I
I

3
6
2

S
t
a
t
i
o
n

E
q
u
i
p
Ex
h
i
b
i
t

N
o
.

1
1
Ca
s
e

N
o
s
.

A
V
U
-
E
-
1
1
-
0
1

a
n
d

A
V
U
-
G
-
1
1
-
0
1
D.

D
e
F
e
l
i
c
e
,

A
v
i
s
t
a
Sc
h
e
d
u
l
e

2
,

P
a
g
e

2

o
f

4
$1
0
0
.
0
0
$8
0
.
0
0
$6
0
.
0
0
$4
0
.
0
0
$2
0
.
0
0
$0
.
0
0
Ha
n
d
y

W
h
i
t
m
a
n

C
o
s
t

I
n
d
e
x
Tr
a
n
s
m
i
s
s
i
o
n

E
~
m
e
n
t

-

A
c
c
t
s

3
5
4
,

3
5
5
,

&

3
5
6
~
~

~
~.

~
.

~
.
~
~

~
4'

r
S
1:
.

1
:
.
~
~
~
19
5
9
19
6
9
19
7
9
19
8
9
19
9
9
20
0
9
35
4

T
o
w
e
r
s

&

F
i
x
t
u
r
e
s

.
3
5
5

P
o
l
e
s

&

F
i
x
t
u
r
e
s

I
I

3
5
6

O
H

C
o
n
d
u
c
t
o
r
s
Ex
h
i
b
i
t

N
o
.

1
1
Ca
s
e

N
o
s
.

A
V
U
-
E
-
1
1
-
0
1

a
n
d

A
V
U
-
G
-
1
1
-
0
1
D.

D
e
F
e
l
i
c
e
,

A
v
i
s
t
a
Sc
h
e
d
u
l
e

2
,

P
a
g
e

3

o
f

4
$1
0
0
.
0
0
$8
0
.
0
0
$6
0
.
0
0
$4
.
0
0
$2
0
.
0
0
$0
.
0
0
Ha
n
d
y

W
h
i
t
m
a
n

C
o
s
t

I
n
d
e
x
Di
s
t
r
i
b
u
t
i
o
n

E
g
l
m
e
n
t
-
A
c
c
t
s

3
6
4
,
3
6
5
,

&

3
6
8
§
§

§
§'

§
'

§
'
~
~

~
19
5
9
19
6
9
19
7
9
19
8
9
19
9
9
20
0
9
Ac
c
t

3
6
4
-
P
o
l
e
s

I
I

A
c
c
t

3
6
5
-

O
H

C
o
n
d
u
c
t
o
r

ß

A
c
c
t

3
6
8

O
H

L
i
n
e

T
r
a
n
s
f
o
r
m
e
r
s
Ex
h
i
b
i
t

N
o
.

1
1
Ca
s
e

N
o
s
.

A
V
U
-
E
-
1
1
-
0
1

a
n
d

A
V
U
-
G
-
1
1
-
0
1
D.

D
e
F
e
l
i
c
e
,

A
v
i
s
t
a
Sc
h
e
d
u
l
e

2
,

P
a
g
e

4

o
f

4
Avista 2011 Capital Additions Detail (System)
Generation:
Thennal - Kettle Falls Capital Projects
Thennal - Colstrp Capital Additions
Thennal - Other small projects
Hydro - Cabinet Gorge Capital Projects
Hydro - Noxon Capital Projects
Hydro - 201 I Noxon Unit #2 Upgre ·
Hydro - Clark Fork Implement PME Agreements
Hydro - Spokane Implement PME Agrements
Hydro - Other small projects
Other. CS2 Captital Projects
Other - Other small generation projects
Electric Transmission:
Spokane-CDA I 15 kY Line Relay Upgrades
SCADA Replacement
System-Replaee/Install Capacitor Banks
Moscow 230 kV Substation Rebuild
Bronx-Cabinet 115 kY Rebuild/Reeonduetor
West Plains Transmission Reinforcements
Beacon Storage Yard Oil Containment
Colstrip Transmission Minor Rebuild
Tribal Pennits
Idaho Road Subsation
Hatwai.N. Lewsiston 230 kY Re-Insulatc
EFM 12F2&PVW241 Feeder Tie
Power Transfonner . Transmission
Trasmission Minor Rebuilds
Power Circuit Breakers
Otis Orchards i 15kY Breaker and Line Relay Replacement
Noxon Rapids B Bank GSU Replacement
Asset Management Replacement Program
Electrc Distribution:
Power Transfonner Distribution
Appleway Substation - 1D
Dear Substation - 10
Sys-Dist Reliability-Improve Fdr - It
EFM 12F2 & PYW 24 i Fceder Tie
CDA East & North - Pullman & Lewis Clark. il
Replace High Resistance Conductor
PCB Related Distribution Rebuilds
Distrbution Projects in Washington
Electric Distribution Minor Blanket
Wood Pole Replacement Program and Capital Dist Fdrs
Electrc Underground Replacement
Distribution Line Relocation
Failed Electrc Plant
Washington Smar Grd Distribution Projects
$ (OOO's)
731
6,926
156
800
1,000
9,110
1,468
2,243
1,874
630
342
25.280
1,000
625
400
400
2.000
2,300
1,020
533
325
1,750
250
265
3.250
2.750
1,600
730
5,874
1.887
26,959
1.350
4,200
1,615
925
360
1,025
2,491
2,500
8,700
8,000
8,900
3,500
1,700
2,000
18,461
65,727
General:
Security Initiativc
Strtues & Improvements
Stores Equipment
Tools Lab & Shop Equipment
COF HV AC Improvement
WSDOT Highway Franchise Consolidation
Colvilc Service Center. W A
Other small general projects
Transportation:
Transporttion Equipment
Technology:
Infonnation Technology Refresh Blankct
Infonnation Technology Expansion Blanket
AFM Product Development Progrm
Nucleus Product Devclopmcnt Progra
Web Product Development Program
Business Application Refresh Progrm
Moducom Replaccment
Microwave Replacement Project
Orle R12 Upgrade
AFM.net Upgrade
Other small technology projects
Gas Storage:
Jackson Prairie Storage
Natural Gas Distribution:
Replace Deteriorating Gas System
Gas Replace-SI&Hwy
Gas Distrbution Non-Revenue Blanket
Roseburg, OR Reinforcemenl
North Clarkston. W A HP Main Reinforce Project
Other small distribution projects
Total Non-Revenue Capital
GrowthIevenue - Producing
Total Capital Additions in 2011
· The 20 i i Noxon Unit #2 upgrde was included with the 2012 Noxon Unit #4 upgrade in the pro fonna capital adjustment.
$ (OOO's)
374
3,500
402
1,300
5,541
350
5,400
1,136
18.003
9,468
8,995
1,180
640
480
960
1,188
1,000
2.813
1,300
2,904
2.613
24.073
581
1,052
1,850
2,900
3,700
2.200
3,610
15,312
185,403
40.005
225,408
Exhibit No. 11
Case Nos. A VU-E-II-01 and A VU-G-I 1-01
D. DeFelìce, Avista
Schedule 3, Page i of2
t .
Avista 2012 Capital Additions Detail (System)
$ (OoO's)$ (OOO's)
Generation:General:
Theral - Kettle Falls Capital Projects 1,000 Security Initiative 392
Thermal - Colstrip Capital Additions 4,963 Strctures & Improvements 3,032
Thermal - Other small projects 160 Stores Equipment 450
Hydro - Little Falls Capital Projects 2.300 Tools Lab & Shop Equipment 1,292
Hydro - Post Falls Capita Projects 2,500 COF HV AC Improvement 5,000
Hydro - 2012 Noxon Unit #4 Upgrade ·8,757 WSDOT Highway Frachise Consolidation 500
Hydro. Clark Fork Implement PME Agreements 1,437 Other small general projects 551
Hydro - Spokane Implement PME Agreements 1.105 11,217
Hydro - Other small projects 952
Other - CS2 Captital Projects 10.400 Transportation:
Other - Other small generation projects 788 Transportation Equipment 6,672
34,362
Electric Transmission:Technology:
Spokane-CDA 115 kV Line Relay Upgrades 1,250 Information Technology Refresh Blanket 6.254
SCADA Replacement 450 Information Technology Expansion Blanket 1,140
System-Replaceflnstall Capacitor Banks 1,200 AFM Product Development Progr 500
Moscow 230 kV Substation Rebuild 3,870 Nucleus Product Development Progrm 480
Irvin - Milwoo 115 kV Rebuild 1,150 Web Product Development Program 650
Thorton Substation 4,900 Business Application Refresh Progrm 500
Bronx - Cabinet 115 kV Rebuild/eeonductor 1,500 Next Generation Radio 18,657
Colstrip Transmission Minor Rebuild 195 Moducom Replacement Project 500
Tribal Permits 325 CiS Replacement 3.000
Power Transformers - Trasmission 2,665 Other small technology projects 1.001
Transmission Minor Rebuilds 1,500 32,682
Power Circuit Breakers 1.200
Asset Management Replacement Progrm 2,202 Gas Storage:
22,407 Jackson Prairie Storage 604
Electric Distribution:
Power Transformer Distrbution 1,450 Natural Gas Distribution:
Big Creek Substation - ID 1,515 Replace Deteriorating Gas System 3,000
Blue Creek Substation - ID i,500 Gas Replace-St&Hwy 2,060
Sys-Dist Reliability-Improve Fdr - ii:1,075 Gas Distrbution Non-Revenue Blanket 3,664
Tenth & Stcwar 250 Highway 95 Relocation - ID 1,250
CDA East & North - ID 1,325 Old Highway 95 Relocation - ID 3,000
Pullman & Lewis Clark - ID 600 Klamath Falls Lateral. OR 2.500
Replace High Resistace Conductor 3,017 Isolated Steel Replacement 1,125
PCB Related Distrbution Rebuilds 2,820 Other small distribution projects 3,686
Distrbution Projects in Washington 11,104 20,285
Electric Distribution Minor Blanket 8,000
Wood Pole Replacement Progrm and Capital Dist Fdrs 9,468 Total Non-Revenue Capital 186,232
Electrc Underground Replacement 3,675
Distribution Line Relocation 1,700 Growth/evenue - Producing 46,096
Failed Electric Plant 2.100
Washington Smart Grd Distrbution Projects 8,404
58,003 Total Capital Additions in 2012 232,328
· The 2012 Noxon Unit #4 upgre was included with the 201 i Noxon Unit #2 upgrade in the pro forma capital adjustment.
Exhibit No. 11
Case Nos. A VU-E-11-01 and A VU-G-1 1-01
D. DeFelice, Avista
Schedule 3, Page 2 of2