20131031final_order_no_32917.pdf

Office ofthe Secretary
Service Date
October 31,2013
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE APPLICATION )
OF AVISTA CORPORATION DBA AVISTA )CASE NO.AVU-E-13-06
UTILITIES FOR AN ACCOUNTING ORDER )
AUTHORIZING DEFERRED ACCOUNTING )
TREATMENT OF COSTS RELATED TO )ORDER NO.32917
IMPROVING DISSOLVED OXYGEN )
LEVELS IN LAKE SPOKANE )
On August 28,2013,Avista Corporation dba Avista Utilities filed an Application
seeking an accounting order related to the costs “to model,analyze,and develop a plan to
improve the dissolved oxygen levels in Lake Spokane.”Application at 1 (footnote omitted).
More specifically,Avista seeks to record and defer for “later possible recovery”approximately
$469,000 (Idaho’s share of the total cost of about $1.34 million)related to improving the
dissolved oxygen levels in Lake Spokane.
On September 10,2013,the Commission issued a Notice of Modified Procedure
requesting public comment on Avista’s Application for an accounting order.The only comments
filed in response to the Commission’s Notice were submitted by the Commission Staff.Based
upon our review of the Application and the comments,we grant the Company’s request for an
accounting order.
BACKGROUND
Lake Spokane is a reservoir created by Avista’s Long Lake hydroelectric facility.Id.
at 2.The Long Lake facility is one of five hydroelectric facilities that are a part of Avista’s
Spokane River project.In 2009,FERC issued a new 50-year license for the Company to operate
the entire project.One of the conditions of the FERC license included obtaining a Section 401
Certificate from the State of Washington under the Clean Water Act.“The 401 Certificate and
FERC license require Avista to develop a Water Quality 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.”Id.at 4.
While Avista was pursuing its FERC relicensing,the Washington Department of
Ecology (WDOE)initiated a dissolved oxygen total maximum daily load (TMDL)process to
ORDERNO.32917 1
address the low oxygen levels in Lake Spokane.In early 2012,WDOE issued its final TMDL
Attainment Plan,and the Plan was subsequently included in the 2009 FERC license.
During the TMDL process,the parties to the WDOE proceeding explored various
alternatives to address the low dissolved oxygen levels in Lake Spokane.For example,one
alternative was to introduce liquid oxygen or ambient air “through an extensive distribution
system installed through much of the 23-mile long lake.”Id.at 5.Avista estimated that this
alternative might have capital costs of up to $8 million and $200-300,000 in annual operating
and maintenance costs.After examining the various alternatives,the WDOE adopted an
alternative that requires Avista to undertake a number of “smaller-scale efforts,including
removing non-native carp,removing non-native aquatic vegetation,educating shoreline owners
on proper vegetation management,and a number of other elements.”Id.at 5-6.This latter
alternative was incorporated into the FERC license as Condition 5.6C of Appendix B of the 401
Certificate.
THE APPLICATION
Avista reports that it incurred costs of approximately $1.34 million through December
2012 related to satisfying Condition 5.6C.Avista states that these costs primarily relate to:“data
gathering,analysis and computer modeling ..;review and technical analysis of agency
modeling efforts and draft documents;legal and facilitation support ...;development of
alternatives to oxygenation,including the scientific basis for ‘crediting’dissolved oxygen
improvements to these alternatives.”Application at 6.The Company provided the following
table of its expenditures:
Summary of Lake Spokane TMDL Costs
(through December 31,2002)
Professional Services $657,414
Legal Costs $383,824
Employee Costs,Contract Labor and Miscellaneous $298,840
Total Costs Incurred $1,340,077
Washington’s Share (65.0l%)*$871,184
Idaho’s Share (34.99%)*$468,893
*Allocation based upon 12/31/2012 production/transmission ratio
Avista states that it has recorded these costs in FERC Account 107.0 (Construction
Work in Progress).If the Commission allows Avista to defer these costs,the Company intends
to address “the prudency and recovery of these costs in its next general rate case filing or other
ORDER NO.32917 2
future proceeding,as appropriate.”Id.at 7.Absent an accounting order from the Commission,
the Company asserts that it would be forced to write-off these costs resulting in a loss to the
Company and its shareholders.If the Commission grants the Company’s request for an
accounting order,Avista indicates it will transfer the apportioned Idaho costs from Account
107.0 (CWIP)to Account 182.3 (Other Regulatory Assets).The Company states it does not seek
accrued interest on its deferral balances and requests that the Commission process its Application
under Modified Procedure.
STAFF COMMENTS
Based upon its review of the Application,Staff recommended the Commission issue
the requested accounting order.Staff noted that authorizing an accounting order would provide
the Company with an opportunity to recover the costs associated with operation of its Long Lake
hydroelectric project.Staff maintained that Idaho customers currently share in the benefits from
the generation of electricity at the Company’s Long Lake project.
Staff also concurred with the proposed accounting treatment to record the TMDL
project costs.Staff agreed that the deferred costs be transferred from Account 107.0 (CWIP)to
Account 182.3 (Other Regulatory Assets —Idaho).Staff agreed that the current
productionltransmission allocation ratio is a reasonable means to allocate these expenses
between Washington and Idaho.Staff also concurred that no carrying charges be accrued on
these deferred expenses.Finally,Staff recommended that recovery of the deferred expenses be
reviewed in the Company’s next general rate case or other future proceeding as the Commission
deems appropriate.Staff specifically reserved the examination of prudency for the deferred
expenses until such time as the Company seeks recovery in rates.
FINDINGS
Based upon our review of Avista’s Application and Staff comments,we find it is
reasonable to grant the request for an accounting order authorizing the Company to record and
defer its expenses associated with improving the dissolved oxygen levels in Lake Spokane.
Given the agreement between the Company and Staff,we approve the proposed accounting
treatment.The Idaho jurisdictional cost of $468,893 should be transferred from FERC Account
107.0 (CWIP)to FERC Account 182.3 (Other Regulatory Assets —Idaho).Consistent with the
Company’s Application and comments,we find it appropriate that no carrying charges should
accrue on this account and the productionltransmission allocation ratio is a reasonable means to
ORDER NO.32917 3
allocate these costs between the Washington and Idaho jurisdictions.The Commission
specifically reserves its right to examine the prudency of the deferred expenses when the
Company seeks recovery of these expenses in Idaho rates.
ORDER
IT IS HEREBY ORDERED that Avista’s Application for an accounting order
regarding its expenses related to improving dissolved oxygen levels in Lake Spokane is granted
as set out in greater detail above.No carrying charges shall be accrued on these deferred
expenses.
IT IS FURTHER ORDERED that the Commission specifically reserves judgment on
the prudency of these deferred expenses until such time as the Company seeks to recover these
expenses in Idaho rates.
THIS IS A FINAL ORDER.Any person interested in this Order (or in issues finally
decided by this Order)or in interlocutory Orders previously issued in this Case No.AVU-E-13-
06 may petition for reconsideration within twenty-one (21)days of the service date of this Order
with regard to any matter decided in this Order or in interlocutory Orders previously issued in
this case.Within seven (7)days after any person has petitioned for reconsideration,any other
person may cross-petition for reconsideration.See Idaho Code §61-626.
ORDER NO.32917 4
DONE by Order of the Idaho Public Utilities Commission at Boise,Idaho this 3/
day of October 2013.
PAUL K(1 PRESIDENT
MACK A.REDFORD,COMMISSIONER
ATTEST:
bls/O:AVU-E-I 3-06dh2
MARSHA H.SMITH,COMMISSIONER
ORDERNO.32917 5