20131023Comments.pdf

DONALD L. HOWELL, II
DEPUTY ATTORNEY GENERAL
IDAHO PUBLIC UTILITIES COMMISSION
PO BOX 83720
BOISE, IDAHO 83720-0074
[phone]
IDAHO BAR NO. 3366
Street Address for Express Mail:
472 W. WASHINGTON
BOISE, IDAHO 83702-5918
Attomey for the Commission Staff
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BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE APPLICATION )
OF AVISTA CORPORATION DBA AVISTA ) CASE NO. AVU.E.13.O6
UTILITIES FOR AN ACCOUNTING )
ORDER AUTHORIZING DEFERRED ) COVTMENTS OF THE
ACCOUNTING TREATMENT OF COSTS ) COVTMISSION STAFF
RELATED TO IMPROVING DISSOLVED )
oxYGEN LEVELS IN LAKE SPOKANE. )
)
The Staff of the Idaho Public Utilities Commission, by and through its Attorney of
Record, Donald L. Howell II, Deputy Attorney General, submits the following comments in
response to Order No. 32889 issued on September 10, 2013.
BACKGROUND
On August 28,2013, Avista Corporation dba Avista Utilities (Avista) 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 'olater 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.
STAFF COMMENTS ocToBER 23,2013
Lake Spokane is a reservoir created by Avista's Long Lake hydroelectric facility. Id. at2.
The Long Lake facility is one of five hydroelectric facilities that are part of Avista's Spokane
River project. In2009, FERC issued a new 50-year license for the Company to operate the
project. One of the provisions 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 . . . sufhcient 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 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. One alternative was to
introduce liquid oxygen or ambient air o'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 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.
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:
STAFF COMMENTS OCTOBER 23,20T3
Summary of Lake Spokane TMDL Costs
(through December 31, 2012)
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 (65.01%)* $ 871,184
Idaho's Share (34.99%)* $ 468,893
* Al location based vpon I 2 I 3 I I 20 12 production/transmi s si on 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 and record 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. at7. Absent an accounting order from the
Commission, the Company asserts that it would be forced to write-off these costs resulting in an
uffecovered 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 does not
seek accrued interest on its deferral balances.
STAFF REVIEW
Staff has reviewed the Application of Avista for an Accounting Order to authorize an
accounting treatment of costs related to improving dissolved oxygen levels in Lake Spokane and
recommends approval of the Company's Application. As noted in its filing, the Company is
requesting an Order allowing the deferral of expense amounts related to improving the dissolved
oxygen levels in Lake Spokane. The proposed accounting treatment would provide the
Company with the opportunity to recover the costs associated with determining the best course
of action to address the low dissolved oxygen levels in Lake Spokane. Idaho customers currently
share in the benefits from Avista's Long Lake Hydroelectric project. These costs are related to
meeting the regulatory requirements of the 2009 FERC license, and as such it is reasonable that
customers pay the costs for benefits received, once the costs have been deemed prudent. The
Company will address the prudence and recovery of the deferred costs in its next general rate
STAFF COMMENTS ocroBER 23,2013
case filing or other future proceeding, as appropriate. Until the next rate case, approval of this
request would not change rates currently charged to customers.
Avista requests authority to defer the Lake Spokane TMDL project costs in Account 182
- Other Regulatory Assets. The project costs will be allocated to the Washinglon and Idaho
jurisdictions based on the production/transmission allocation of 65.01% to Washington and
34.99 % to Idaho, and placed in separate Washington and Idaho 182-accounts. Staff agrees that
the current production/transmission allocation is a reasonable allocation of these costs. Avista
did not request a carrying charge on the project costs. As noted above, the Company may
propose the recovery ofthe project costs in its next general rate case.
Regulatory assets can be established for expenses that are currently not included in rates,
yet are significant enough to warrant deferring for possible inclusion in future rates. If a
company proposes that certain expenses from past years be included in prospective rates, it
would constitute retroactive ratemaking unless those past expenses were recorded and deferred
by Commission Order. In order to be considered for future recovery, the utility must have an
accounting Order or other authority allowing them to defer the costs for possible future recovery.
Avista's filing appropriately requests such an Order.
STAFF RECOMMENDATION
Staff recommends approval of Avista's Application for an accounting order authorizing
accounting treatment of costs related to improving dissolved oxygen levels in Lake Spokane.
The deferred accounting pertains to costs related to the Lake Spokane TMDL process and the
Attainment Plan that is part of the FERC license. The accounting treatment would be as follows:
o Record the deferred Lake Spokane dissolved oxygen costs in Account 182 - Other
Regulatory Assets.
o Record the deferred costs in separate Washington and Idaho accounts based on the
production/transmission jurisdictional allocation ratio.
. Delay recovery of the deferred costs until new rates are established in the next general
rate case or other future proceeding as appropriate.
o No carrying charges apply to these deferred expenses.
4STAFF COMMENTS ocroBER 23,20t3
Staff recommends that recovery of the Lake Spokane deferred costs and the prudency of
these expenses be reviewed in the Company's next general rate case. Staff emphasizes that the
Company is not currently seeking recovery of these costs. Staff has not examined the prudency
ofthese expenses.
Respecttully submitted this 23l 6urof October 2013.
Technical Staff: Kathy Stockton
i:umisc:commentVavuel 3.6dhkls.doc
Donald L. Hdfrell, II
STAFF COMMENTS ocroBER 23,2013
CERTIFICATE OF SERVICE
I HEREBY CERTIFY THAT I HAVE THIS 23RD DAY OF OCTOBER 2013,
SERVED THE FOREGOING COMMENTS OF THE COMMISSION STAFF, IN CASE
NO. AVU-E-I3.06, BY E-MAILING AND MAILING A COPY THEREOF, POSTAGE
PREPAID, TO THE FOLLOWING:
KELLY O NORWOOD
VP STATE & FED REG
AVISTA CORPORATION
PO BOX3727
SPOKANE WA99220-3727
DAVID J MEYER
VP & CHIEF COUNSEL
AVISTA CORPORATION
PO BOX3727
SPoKANE WA99220-3727
E-MAIL: [e-mail] E-MAIL: [e-mail]
SECRETARY
CERTIFICATE OF SERVICE