20130828Application.pdf

Avista Corp.
1411 East Mission P.O. Box3727
Spokane. Washington 99220-0500
Telephone [phone]
TollFree 8OO-727-917O
i., i
August 27,2013
State of Idaho
Idaho Public Utilities Commission
472W. Washington St.
Boise,ID 83702-5983
Ms. Jean Jewell, Secretary
Re: Application of Avista Corporation for an Accounting Order Authorizing the
Accounting Treatment of Costs Related to Improving Dissolved Oxygen Levels in Lake
Spokane.
Dear Ms. Jewell:
Enclosed for filing with the Commission are an original and seven (7) copies of the Application
of Avista Corporation for an Accounting Order Authorizing the Accounting Treatment of Costs
Related to Improving Dissolved Oxygen Levels in Lake Spokane.
Please direct any questions regarding this filing to Patrick Ehrbar at [phone].
Sincerely,
frwsrt
Corp.
frvu'E- l7'o b
n-
Davrt. Mever
Viie President and Chief Counsel for Regulatory
and Governmental Af;fairs
Enclosures
GERTIFICATE OF SERVICE
I HEREBY CERTIFY that I have served Avista Corporation's Application
Accounting Order by mailing a copy thereof, postage prepaid, to the following:
Ms Jean D Jewell, Secretary
Idaho Public Utilities Commission
472W. Washington St.
Boise, lD 83702-5983
Marv Lewallen
Clearwater Paper
601 W. Riverside Avenue
Suite 1 100
Spokane, WA 99201
ma rv. lewa I len @clearwaterpaper. com
Dean J. Miller
McDevitt & Miller LLP
P.O.Box 2564
Boise, lD 83701
Email : ioe@mcdevitt-m iller. com
Larry A Crowley
The Energy Strategies lnstitute lnc
5549 S. Cliffsedge Ave
Boise, ID 83716
Email: [e-mail]
Patrick Ehrbar
Manager, Rates & Tariffs
for an
$pokane, Washington this 27'" day of August 2013.
DAVID J. MEYER
VICE PRESIDENT AND CHIEF COUNSEL FOR
REGULATORY AND GOVERNMENTAL AFFAIRS
AVISTA CORPORATION
P.O.BOX3727
14I1 EAST MISSION AVENUE
SPOKANE, WASHINGTON 99220 -37 27
TELEPHONE: (509) 49s-4316
david.meyer@ avi stacorp. com
-' t,-
i.1l-: rrrj\ ha tlt F'i ! : - r'l ii
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE APPLICATION OF )
AVISTA CORPORATION, DIBIAAVISTA )
UTILITIES FOR AN ACCOUNTING ORDER )
AUTHORIZINGACCOUNTINGTREATMENT )
OF COSTS RELATED TO IMPROVING )
DISSOLVED OXYGEN LEVELS IN LAKE )SPOKANE. )
CASE No. AVU-E-B-QL,
APPLICATION OF AVISTA CORPORATION
J
4
5
6
I. INTRODUCTION
Avista Corporation, doing business as Avista Utilities (hereinafter Avista or
Company), at l4ll East Mission Avenue, Spokane, Washington, pursuant to Section 6l-524
Idaho Code and Rule 52 of the Idaho Public Utilities Commission ("Commission Rules of
Procedure"), hereby applies Commission for an order authorizing the accounting treatment
detailed in this Application related to costs the Company has incurred to model, analyze, and
develop a plan to improve the dissolved oxygen levels in Lake Spokanel; activities that
stemmed from the Company's Spokane River FERC license.
Avista is a utility that provides service to approximately 362,000 electric customers
and 226,000 natural gas customers in a 26,000 square-mile area in eastern Washington and
northem Idaho. Avista Utilities also serves approximately 96,000 natural gas customers in
Oregon. The largest community served by Avista is Spokane, Washington, which is the
location of its corporate headquarters.
Pursuant to Commission Rule of Procedure 201, the Company requests that this filing
be processed under the Commission's rules for Modified Procedure.
Communications in reference to this Application should be addressed to:
7
8
9
10
11
t2
13
t4
15
t6
t7
l8
t9
20
2t
22
23
24
25
26
27
David J. Meyer, Esq.
Vice President and Chief Counsel for
Regulatory & Governmental Affairs
Avista Corp.
P. O.Box3727
l4l I E. Mission Avenue, MSC 13
Spokane, Washingto n 99220 -37 27
Telephone: [phone]
Facsimile: [phone]
E-mail: [e-mail]
Kelly Norwood
Vice President
State and Federal Regulation
Avista Corp.
P. O.Box3727
141I E. Mission Avenue, MSC 13
Spokane, Washingto n 99220 -37 27
Telephone: [phone]
Facsimile: [phone]
E-mail : [e-mail]
I Lake Spokane is a reservoir created by the Company's Long Lake Hydroelectric Project.
Application of Avista Corporation
Case No. AVU-E-I3-
Page I
1
2
J
4
5
6
7
8
9
10
1t
t2
t3
l4
15
t6
t7
18
l9
20
2t
II. SUMMARY OF APPLICATION
Avista requests Commission approval to defer for later possible recovery in rates $469
thousand (Idaho's share of approximately $1.34 million) in costs incurred related to meeting
certain regulatory requirements to improve dissolved oxygen levels in Lake Spokane, the
reservoir created by Avista's Long Lake Hydroelectric Development. As Avista was
incurring these costs, to comply with the provisions of the Spokane River relicensing
agreement, it was exploring multiple alternatives which could potentially provide for the
same level of benefits to Lake Spokane as the more expensive capital project option.
In the final analysis, while Avista could have chosen to move forward with the more
expensive capital project to address oxygen levels, the Company's additional efforts in
evaluating altematives resulted in the opportunity to choose a solution that is much less
expensive for customers. Although the Company believes that the costs incurred that led to
the ultimate decision to avoid the more expensive capital option were prudently incurred, the
Company is not requesting a determination of prudence at this time.
Absent a Commission order allowing for the defenal of these costs, the Company
would be forced to write-off these costs, resulting in a loss to the Company and its
shareholders. Avista proposes to address the prudence and the timing of recovery of these
costs in its next general rate case filing or other future proceeding, as appropriate. The
purpose of this application is to request Commission approval of deferred accounting
treatment to preserve these costs, so that the prudence and recovery of these costs can be
addressed in a future proceeding.
Application of Avista Corporation
CaseNo. AVU-E-I3-
Page2
I
2
J
4
5
6
7
8
9
l0
11
t2
13
t4
III. BACKGROI]ND
The Long Lake development is one of five Avista hydroelectric developments that are
a part of Avista's Spokane River Project. The Spokane River Project consists of five
hydroelectric developments between Coeur d'Alene Lake in Idaho and Long Lake Dam in
Washington (Post Falls, Upper Falls, Monroe Street, Nine Mile and Long Lake). The
Spokane River Project is the subject of Federal Energy Regulatory Commission ("FERC")
Project License 2545, a 50-year license issued by FERC on June 18, 2009. Attached as
Attachment A is a picture of the Spokane River Project. Lake Spokane is located in-between
Nine Mile Dam upstream (to the east) and Long Lake Dam downstream (to the west).
Simultaneous to Avista's work on its Spokane River relicensing process (2002-2009),
the Washington Department of Ecology ("Ecology") undertook a Dissolved Oxygen Total
Maximum Daily Load ("TMDL") process to address impaired water quality in the Spokane
River due to low dissolved oxygen levels. A TMDL is a requirement under the State of
Washington's Clean Water Act obligations. One of the areas listed as "impaired" for low
dissolved oxygen under the Clean Water Act includes Lake Spokane.
The TMDL, which is essentially a water quality cleanup plan, was a multi-year
process that involved public and private entities that discharge wastewater into the Spokane
Rivef, and many stakeholders, including Ecology, the United States Environmental
Protection Agency ("EPA"), Washington Department of Fish and Wildlife, Idaho
Department of Environmental Quality, Native American tribes and other parties. The TMDL
2 While Avista does not discharge into the Spokane River, Ecology, EPA, and others believe that the presence
of the Long Lake Hydroelectric Facility increases the opportunity for algae growth. Algae absorbs oxygen when
it decomposes.
Application of Avista Corporation
Case No. AVU-E-l3-
15
t6
l7
18
t9
20
Page 3
I
2
J
4
5
6
7
8
9
l0
il
t2
13
t4
15
t6
t7
18
19
20
2t
22
process was ongoing when FERC issued the Project License in 2009 for the Spokane River
Project.
The 2009 FERC Project License incorporated in its Appendix B the conditions of
Washington State's Water Quality Section 401 Certification ("401 Certification") as
mandatory conditions under the authority of the Clean Water Act, consistent with the Federal
Power Act. Condition 5.6C relates to dissolved oxygen in Lake Spokane. The 401
Certification and FERC License require Avista to develop a Water Quality Attainment Plan
("Attainment Plan") to "improve oxygen conditions in Lake Spokane....sufficient to address
its proportional level of responsibility, based on its contribution to the dissolved oxygen
problem in the Lake." Condition 5.6C requires that the Attainment Plan be implemented
over a l0-year period, with the potential of "alternative action[s]" being required should the
Plan's results be insufficient after the initial lO-year period.
At the time the 401 Certification and FERC License were issued, the TMDL process
was still ongoing, so Condition 5.6C served essentially as a placeholder until such time as the
TMDL was completed.
The TMDL process continued subsequent to the issuance of the FERC License for
Avista's Spokane River projects. In the TMDL discussions and negotiations, many
stakeholders, including Department of Ecology staff, sought to require Avista to oxygenate
or aerate Lake Spokane as a means to address low dissolved oxygen levels. Avista, for its
part, was actively engaged in the TMDL process both to ensure that the determination of
Avista's proportionate responsibility for the impairment issue was not overstated, as well as
to promote altematives to the oxygenation or aeration capital project - alternatives that
Application of Avista Corporation
Case No. AVU-E-l3-
Page 4
1
2
J
4
5
6
7
8
9
10
1l
t2
l3
t4
15
t6
t7
18
t9
20
2t
22
23
would serve to provide for long-term benefits to the Spokane River and Lake Spokane at a
lower cost to the Company and its customers.
In early 2012, Ecology issued the final TMDL. As the TMDL was now complete,
Condition 5.6C of the Section 401 Certification was amended, as was the 2009 FERC
license. The issuance of the TMDL and FERC License amendment also started Avista's
timeline for developing and submitting the Attainment Plan to Ecology. Avista developed
the Attainment Plan in consultation with Ecology and, after Ecology's approval, submitted it
to FERC for approval in October 2012. FERC subsequently approved the Attainment Plan.
As was discussed earlier, Avista actively participated in the TMDL process. In the
final TMDL, the methodology for how Avista should address the low dissolved oxygen
levels in Lake Spokane was left open for exploration in the Attainment Plan (i.e, it was not
prescriptive in how Avista must address the issue). One of the methodologies to address this
problem was to aerate or oxygenate the Lake. Such a facility would have either used trucked
in liquid oxygen or ambient air, bubbled or pressurized respectively, through an extensive
distribution system installed through much of the 23-mile long lake. Avista had estimated
this project could have cost up to $8.0 million dollars to model, design and construct (not
including additional property rights that may have been required), plus an additional $200-
300 thousand dollars per year in ongoing operations and maintenance, including liquid
oxygen delivery and use.
Through extensive modeling efforts, and through ongoing negotiation over a period
of several years through the TMDL process, Avista was able to avoid being ordered to
construct such an aeration facility. As an altemative, Avista developed a l0-year
implementation plan under which Avista is undertaking a number of smaller-scale efforts,
Application of Avista Corporation
CaseNo. AVU-E-l3-
Page 5
1
2
)
4
5
6
7
8
9
l0
11
t2
13
t4
15
t6
t7
l8
t9
20
2l
22
including such items as removing non-native carp, removing non-native aquatic vegetation,
educating shoreline landowners on proper vegetation management, and a number of other
elements.
Avista incurred approximately $1.34 million in costs through December 2012 related
to determining the best course of action to address the low dissolved oxygen levels in Lake
Spokane. These costs primarily relate to: data gathering, analysis and computer modeling to
create a sound scientific basis for the calculation of Avista's proportionate responsibility;
review and technical analysis of agency modeling efforts and draft documents; legal and
facilitation support to build consensus; and development of alternatives to oxygenation,
including the scientific basis for "crediting" dissolved oxygen improvements to these
altematives. As summary of the expenditures is included in Table 1 below:
Summary of Lake Spokane TMDL Prcject Costs
Costs Irrcured throWh December 31,2012:
Proftssional Services
kgalCosts
Enployee Costs, Contact [abor ard Ottrer
Total Costs Incr.ured
Washingtort's Share (65.0 I %)*
Idaho's Share (3 4.990/)*
* Allocatio ns bas ed on 12/ 3l I 2012 hoduction/Tran s mis s ion Ratio
$ 657,414
$ 383,824
$ 298,840
$ 1,340,077
$ 871,184
$ 468,893
$ 1,340,077
Avista recorded these costs in "Construction Work in Progress", which would have
been capitalized upon completion of the aeration project based on the original expectation
that Avista would be required to construct a facility to add oxygen to the Lake.
Application of Avista Corporation
Case No. AVU-E-I3-
Page 6
1
2
3
4
5
6
7
8
9
l0
1l
t2
l3
t4
l5
t6
t7
l8
t9
20
2t
22
23
However, Avista was able to successfully address stakeholders issues related to the
low dissolved oxygen levels through the smaller scale efforts noted above. While the
estimated cost of the larger capital project could have been as high as $8.0 million, with
$200-$300 thousand ongoing annual O&M costs, it is our belief that the small scale efforts
will only cost approximately $100 - $150 thousand per year, and that the Company may be
able to integrate these efforts with other plans required under our FERC license.
IV. PROPOSED ACCOUNTING TREATMENT
In this filing, the Company is requesting an order allowing for the deferral of $469
thousand (Idaho's share of approximately $1.34 million) related to the Lake Spokane TMDL
process and Attainment Plan. Avista will address the prudence and recovery of these costs in
its next general rate case filing or other future proceeding, as appropriate. Absent a
Commission order allowing for the deferral of these costs, the Company, having foregone the
construction of the oxygenation facility, would be forced to write-off these costs, resulting in
a loss to the Company and its shareholders.
The Company requests to defer the TMDL costs in Account 182.3 - Other Regulatory
Assets. Upon approval, the Company will transfer the costs from Account 107.0 -
Construction Work in Progress to Account 182.3. A summary of the accounting entry
follows:
FERC Accormt Account Description Debit Credit
182.3 OtherRegulatoryAssets(Washington) $ 871,184
182.3 Other Regulatory Assets (Idaho) $ 468,893
107.0 ConstuctionWork inProgress $ 1,340,077
Application of Avista Corporation
Case No. AVU-E-I3-
PageT
I The Company does not seek to accrue interest on the Idaho share of the deferrals.
2
3 V. REQUEST FOR RELTEF
4 WHEREFORE, Avista respectfirlly requests that the Commission issue an Order
5 approving the defened accounting treafinent proposed above. Avista will address the
6 prudence and recovery of these costs in its next general rate case filing or other future
7 proceeding, as appropriate.
8 The Company requests that the matter be processed under the Commission's
9 Modified Procedure rules through the use of written comments.
ahl0 DATED at Spokane, Washington, this 7t'aay of August, 2013.
ll
t2
13
t4
t5
t6
t7
l8
AVISTA CORPORATION
,rr//
David J. Meyer
Vice President and Chief Counsel for
Regulatory and Govemmental Affairs
Application of Avista Corporation
Case No. AVU-E-I3-
Page 8
srATE OF WASHINGTON )
County ofSpokane
David J. Meyer, being duly sworn, on oath deposes and says:
That he is the Vice President and Chief Counsel for Regulatory and Governmental
Affairs of Avista Corporation;
That he has read the foregoing Application, knows the contents thereof and believes the
same to be true.
Subscribed and sworn to before me this 276 day of August, 2013.
Application of Avista Corporation
Case No. AW-E-13-
ss
)
Notary Public in and for the State
Washington, residing in Spokane
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
CASE NO. AVU-E-l3-
APPLICATION OF AVISTA CORPORATION
ATTACHMENT A
*:u%t6
hington
.r/J'4-. ,/\{q
h
l"-\ t
(
:t'\'il
o),c(\,QI)\{A
B+
l\ )
l(
Ir
:7-\ \'
'. i'.\ *-.i
i-\\,1,.\
,", l \' iLiiil,
lrtl
lii;I
I
I
Io
L
Lo
ilo
aa
I
q)
Icl
q<
Obo
cg
L-
oo
ao
o ttJOT
L
Co
o
EoO IJJOrcr-
2
oLqoJUIo-rc*o