20130906Decision Memo.pdf

DECISION MEMORANDUM 1
DECISION MEMORANDUM

TO: COMMISSIONER KJELLANDER
COMMISSIONER REDFORD
COMMISSIONER SMITH
COMMISSION SECRETARY
COMMISSION STAFF

FROM: DON HOWELL
DEPUTY ATTORNEY GENERAL

DATE: SEPTEMBER 5, 2013

SUBJECT: AVISTA CORPORATION’S APPLICATION FOR AN ACCOUNTING
ORDER REGARDING ITS EXPENDITURE TO IMPROVE THE
DISSOLVED OXYGEN LEVELS IN LAKE SPOKANE, CASE NO. AVU-
E-13-06

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.”
BACKGROUND
As Avista explains in its Application, Lake Spokane is a reservoir created by its 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 projects. 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
DECISION MEMORANDUM 2
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 explored various alternatives to address the
low dissolved oxygen levels in Lake Spokane. One alternative examined 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. The WDOE adopted
an alternative for 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.” Id. at 6. The Company provided the following table of its
expenditures:

Summary of Lake Spokane TMDL Costs
(through December 31, 2002)
Washington’s Share (65.01%)
Idaho’s Share (34.99%)
*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
future proceeding, as appropriate.” Id. at 7. Absent an accounting order from the Commission,
DECISION MEMORANDUM 3
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 RECOMMENDATION
After reviewing the Company’s Application, Staff agrees with the Company’s
recommendation that this matter be processed under Modified Procedure. Staff recommends that
comments be due October 24, 2013.
COMMISSION DECISION
Does the Commission wish to process this request for an accounting order via
Modified Procedure with a deadline for comments set for October 24, 2013?

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