20150601Ehrbar Direct.pdf

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]
[e-mail]

BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION

IN THE MATTER OF THE APPLICATION ) CASE NO. AVU-E-15-05
OF AVISTA CORPORATION FOR THE ) CASE NO. AVU-G-15-01
AUTHORITY TO INCREASE ITS RATES )
AND CHARGES FOR ELECTRIC AND )
NATURAL GAS SERVICE TO ELECTRIC ) DIRECT TESTIMONY
AND NATURAL GAS CUSTOMERS IN THE ) OF
STATE OF IDAHO ) PATRICK D. EHRBAR
)

FOR AVISTA CORPORATION

(ELECTRIC AND NATURAL GAS)

Ehrbar, Di 1
Avista Corporation
I. INTRODUCTION 1
Q. Please state your name, business address and 2
present position with Avista Corporation? 3
A. My name is Patrick D. Ehrbar and my business
address is 1411 East Mission Avenue, Spokane, Washington. I
am presently assigned to the State and Federal Regulation
Department as Manager of Rates and Tariffs.
Q. Would you briefly describe your duties? 8
A. Yes. My primary areas of responsibility include
electric and natural gas rate design, customer usage and
revenue analysis, and tariff administration.
Q. Please briefly describe your educational 12
background and professional experience? 13
A. I am a 1995 graduate of Gonzaga University with a
Bachelors degree in Business Administration. In 1997 I
graduated from Gonzaga University with a Masters degree in
Business Administration. I started with Avista in April
1997 as a Resource Management Analyst in the Company’s DSM 18
Department. Later, I became a Program Manager, responsible
for energy efficiency program offerings for the Company’s 20
educational and governmental customers. In 2000, I was
selected to be one of the Company’s key Account Executives.
In this role I was responsible for, among other things,
being the primary point of contact for numerous commercial
Ehrbar, Di 2
Avista Corporation
and industrial customers, including delivery of the
Company’s site specific energy efficiency programs.
I joined the State and Federal Regulation Department as
a Senior Regulatory Analyst in 2007. Responsibilities in
this role included being the discovery coordinator for the
Company’s rate cases, the development of line extension 6
policy tariffs, as well as addressing miscellaneous
regulatory issues. In November 2009, I was promoted to my
current role.
Q. What is the scope of your testimony in this 10
proceeding? 11
A. My testimony in this proceeding will cover the
spread of the proposed 2016 and 2017 electric and natural
gas revenue increases among the Company’s electric and
natural gas general service schedules. My testimony will
also describe the changes to the rates within the Company’s 16
electric and natural gas service schedules, as well the
proposed increase in the basic charge for residential
electric rate Schedule 1 and natural gas rate Schedule 101.
Finally, I will describe the Company’s request for an
electric and natural gas Fixed Cost Adjustment Mechanism.
Q. Would you please provide an overview of the 22
Company’s electric and natural gas rate requests? 23
Ehrbar, Di 3
Avista Corporation
A. Yes. As discussed by Company witness Mr. Morris,
the Company is proposing a two-year rate plan for calendar
years 2016 and 2017, with proposed increases effective
January 1 of each year. The Company is proposing a two-year
rate plan, to once again, avoid annual rate cases in its
Idaho jurisdiction, providing benefits to all stakeholders.
A two-year rate plan, with increases in 2016 and 2017, would
provide benefits to its customers by providing rate
certainty to customers over this two-year period, a two-year
window also provides Avista with the opportunity to manage
its business in order to achieve a fair rate of return
within known price changes; and finally relief is provided
to all stakeholders (customers, the Commission and its
Staff, intervenors, and the Company) from the administrative
burdens and costs of litigation of annual general rate
cases.
Accordingly, the Company has filed two sets of tariffs
for each of the electric and natural gas service schedules.
The first tariff for each rate schedule provides for an
effective date of July 3, 2015; however, in the Company’s 20
Application in this case, Avista has requested that the
tariffs related to the 2016 rate request be suspended for 30
days plus 5 months from the proposed effective date. This
was done to ensure that new rates for 2016 would not go into
Ehrbar, Di 4
Avista Corporation
Table A: 2016 & 2017 Electric Rate Request by Rate Schedule
Rate Schedule Description
2016 Billing
Increase
2017 Billing
Increase
Residential Service Schedule 1 6.9%6.7%
General Service Schedules 11 & 12 3.5%3.5%
Large General Service Schedules 21 & 22 4.5%4.5%
Extra Large General Service Schedule 25 4.5%4.5%
Clearwater Paper Schedule 25P 2.6%2.7%
Pumping Service Schedules 31 & 32 5.2%5.1%
Street & Area Lights Schedules 41 - 49 6.1%5.9%
Total 5.2%5.1%
Table B: 2016 & 2017 Natural Gas Rate Request by Rate Schedule
Rate Schedule Description
2016 Billing
Increase
2017 Billing
Increase
General Service Schedule 101 6.5%2.9%
Large General Service Schedules 111 & 112 3.5%1.3%
Interruptible Service Schedules 131 & 132 5.5%2.0%
Transportation Service Schedule 146*4.5%5.4%
Total 5.8%2.5%
* excludes commodity and interstate pipeline transportation costs
effect prior to January 1, 2016 pursuant to Order 33130.
The second set of tariffs filed for each of the electric and
natural gas service schedules has an effective date of
January 1, 2017, consistent with the Company’s second-step
increase proposal.
Provided below in Tables A & B is a summary of the
proposed increase, by rate schedule, on a billing basis
(inclusive of all base and billing rate components,
including the effect of the new and expiring rebates
discussed later in my testimony):

23
24
Ehrbar, Di 5
Avista Corporation
Q. Are you sponsoring any Exhibits that accompany 1
your testimony?
A. Yes. I am sponsoring Exhibit No. 15, Schedules 1
through 3 related to the proposed electric increase, and
Schedules 4 through 6 related to the proposed natural gas
increase. I am also sponsoring Schedules 7 and 8 which are
related to the Company’s proposed Electric and Natural Gas 7
Fixed Cost Adjustment mechanisms. These exhibits were
prepared by me or under my supervision. A table of contents
for my testimony is as follows:
Table of Contents Page
I. Introduction 1

II. Proposed Electric Revenue Increase 5
Summary of Rate Schedules and Tariffs 5
Proposed Rate Spread (Increase by Schedule) 8
Proposed Rate Design (Rates within Schedules) 12

III. Proposed Natural Gas Revenue Increase 28
Summary of Rate Schedules and Tariffs 29
Proposed Rate Spread (Increase by Schedule) 31
Proposed Rate Design (Rates within Schedules) 36

IV. Basic Charge for Schedules 1 & 101 42

V. Fixed Cost Adjustment Mechanisms 55

29
II. PROPOSED ELECTRIC REVENUE INCREASE 30
Summary of Electric Rate Schedules and Tariffs 31
Q. Would you please explain what is contained in 32
Schedule 1 of Exhibit No. 15? 33
Ehrbar, Di 6
Avista Corporation
A. Yes. Schedule 1 is a copy of the Company’s 1
present and proposed electric tariffs for 2016 and 2017,
showing the changes (strikeout and underline) proposed in
this filing.
Q. Would you please describe what is contained in 5
Schedule 2 of Exhibit No. 15?
A. Yes. Schedule 2 contains the proposed (clean)
electric tariff sheets for 2016 and 2017 incorporating the
proposed changes included in this filing.
Q. What is contained in Schedule 3 of Exhibit No. 15?
A. Schedule 3 contains information regarding the
proposed spread of the electric revenue increase among the
service schedules and the proposed changes to the rates
within the schedules. Page 1 shows the 2016 and 2017
proposed general revenue and percentage increases by rate
schedule compared to the present revenue under base tariff
and billing rates. Page 2 shows the rates of return and the
relative rates of return for each of the schedules before
and after application of the proposed 2016 general increase.
Pages 3 and 4 show the present rates under each of the rate
schedules, the proposed changes to the rates within the
schedules, and the proposed rates after application of the
2016 and 2017 rate changes. These pages will be referred to
later in my testimony.
Ehrbar, Di 7
Avista Corporation
Q. Would you please describe the Company's present 1
rate schedules and the types of electric service offered 2
under each? 3
A. Yes. The Company presently provides electric
service under Residential Service Schedule 1, General
Service Schedules 11 and 12, Large General Service Schedules
21 and 22, Extra Large General Service under Schedule 25 and
Schedule 25P (Clearwater Paper’s Lewiston Plant), and
Pumping Service Schedules 31 and 32. Additionally, the
Company provides Street Lighting Service under Schedules 41-
46, and Area Lighting Service under Schedules 47-49.
Schedules 12, 22, 32, and 48 cover residential and farm
service customers who qualify for the Residential Exchange
Program operated by the Bonneville Power Administration.
The rates for these schedules are identical to the rates for
Schedules 11, 21, 31, and 47, respectively, except for the
Residential Exchange rate credit.
The following table shows the type and number of
customers served in Idaho (as of December 2014) under each
of the electric service schedules:
Ehrbar, Di 8
Avista Corporation
Table No. 2 - Proposed % Electric Increase by Schedule - 2016
Rate Schedule
Increase in Base
Rates
Increase in
Billing Rates
Residential Schedule 1 7.0%6.9%
General Service Schedules 11/12 3.7%3.5%
Large General Service Schedules 21/22 4.7%4.5%
Extra Large General Service Schedule 25 4.8%4.5%
Clearwater Paper Schedule 25P 2.8%2.6%
Pumping Service Schedules 31/32 5.5%5.2%
Street & Area Lights Schedules 41-48 6.3%6.1%
Overall 5.4%5.2%
Rate Schedule No. of Customers
Residential Schedule 1 103,747
General Service Schedules 11/12 20,669
Large General Service Schedules 21/22 1,156
Extra Large General Service Schedule 25 9
Clearwater Paper Schedule 25P 1
Pumping Service Schedules 31/32 1,406
Table No. 1 - Customers by Service Schedule

6
Proposed Electric Rate Spread 7
Q. For 2016, what is the proposed electric revenue 8
increase, and how is the Company proposing to spread the 9
increase by rate schedule? 10
A. For 2016, the proposed electric increase is
$13,230,000, or 5.4% over present base tariff rates in
effect. The proposed general increase over present billing
rates, including all other rate adjustments (such as DSM and
Residential Exchange), is 5.2%. The proposed percentage
increase by rate schedule is as follows:

Ehrbar, Di 9
Avista Corporation
This information is shown with more detail on page 1 of
Exhibit No. 15, Schedule 3.
Q. What is the Company’s proposal related to the 3
current rebate customers are receiving in 2015? 4
A. Through rate Schedule 97, customers are receiving
a rebate of $0.00091 per kWh for 2015 (approximately $2.8
million). This rebate rate was first approved in the
Company’s 2012 general rate case, Case No. AVU-E-12-08.1 As
a part of the settlement stipulation approved by the
Commission in Case No. AVU-E-14-05, the rebate rate was
extended through December 31, 2015 using the 2013 electric
earnings sharing deferral.2
For 2014, Avista deferred approximately $5.6 million
under the electric earnings sharing.3 The Company is
proposing in this case to use the $5.6 million deferral
balance from 2014 and extend the Schedule 97 rebate rate for
2016 and 2017, and has filed tariff sheet Schedule 97 with
revised language reflecting the two-year extension.4

1 This rebate was related to a prior settlement with the Bonneville
Power Administration for their prior use of Avista’s transmission
system, and was rebated to customers between October 1, 2013 and
December 31, 2014.
2 In Case No. AVU-E-12-08/AVU-G-12-07, the settlement stipulation
approved by the Commission contained an earnings test. Under the
settlement, the Company agreed to an after-the-fact earnings test, where
it would share with customers one-half of any earnings in excess of the
9.8% ROE for each of the years 2013 and 2014.
3 Id.
4 Consistent with the provisions of Schedule 97, any over- or under-
amortization of the $5.6 million would be trued up in a future PCA filed
by the Company.
Ehrbar, Di 10
Avista Corporation
Present Proposed
Relative Relative
Rate Schedule ROR ROR
Residential Schedule 1 0.76 0.82
General Service Schedules 11/12 1.34 1.26
Large General Service Schedules 21/22 1.16 1.12
Extra Large General Service Schedule 25 1.03 1.02
Clearwater Paper Schedule 25P 1.41 1.31
Pumping Service Schedules 31/32 1.09 1.06
Street & Area Lights Schedules 1.01 1.01
Overall 1.00 1.00
Table No. 3 - Present & Proposed Relative Rates of Return
Q. How did the Company spread the total 2016 general 1
revenue increase request of $13,230,000 among its various 2
rate schedules? 3
A. The Company used the results of the electric cost
of service study (sponsored by Ms. Knox) as a guide to
spread the general increase. The spread of the proposed
increase generally results in the rates of return for the
various electric service schedules moving approximately one-
quarter closer to the overall rate of return (unity). While
we believe it is reasonable and appropriate to use the cost
of service study results as the basis for rate spread, we
have tempered the amount of movement toward unity proposed
in this case due primarily to the impact such movement would
have between the rate schedules. The Company may propose
additional movement toward unity in future proceedings.
Table No. 3 below shows the relative rates of return
before and after application of the proposed general
increase:
19
20
21
22
23
24
Ehrbar, Di 11
Avista Corporation
Table No. 4 - Proposed % Electric Increase by Schedule - 2017
Rate Schedule
Increase in Base
Rates
Increase in
Billing Rates
Residential Schedule 1 6.8%6.7%
General Service Schedules 11/12 3.7%3.5%
Large General Service Schedules 21/22 4.7%4.5%
Extra Large General Service Schedule 25 4.7%4.5%
Clearwater Paper Schedule 25P 2.8%2.7%
Pumping Service Schedules 31/32 5.4%5.1%
Street & Area Lights Schedules 41-48 6.1%5.9%
Overall 5.3%5.1%
This information is shown in detail on Page 2, Schedule 3 of
Exhibit No. 15.
Q. For 2017, what is the proposed electric revenue 3
increase, and how is the Company proposing to spread the 4
increase by rate schedule? 5
A. For 2017, the proposed electric increase is
$13,713,000, or 5.3% over base tariff rates. The proposed
general increase over billing rates, including all other
rate adjustments (such as DSM and Residential Exchange), is
5.1%. The Company used a pro-rata allocation of the
Company’s 2016 electric rate spread percentages for purposes
of spreading the proposed 2017 electric revenue increase to
its electric service schedules. The proposed percentage
increase by rate schedule is as follows:

This information is shown with more detail on page 1 of
Exhibit No. 15, Schedule 3.

Ehrbar, Di 12
Avista Corporation
Proposed Rate Design 1
Q. Where in your Exhibit do you show a comparison of 2
the present and proposed rates within each of the Company’s 3
electric service schedules? 4
A. Pages 3 (for 2016) and 4 (for 2017) of Schedule 3
in Exhibit No. 15 shows a comparison of the present and
proposed rates within each of the schedules, which I will
describe below. Column (a) shows the rate/billing
components under each of the schedules, column (b) shows the
present base tariff rates within each of the schedules,
column (c) shows the present rate adjustments applicable
under each schedule, and column (d) shows the present
billing rates. Column (e) shows the proposed general rate
increase to the rate components within each of the
schedules, column (f) shows the proposed billing rates and
column (g) shows the proposed base tariff rates.
Q. Is the Company proposing any changes to the 17
existing rate structures within its rate schedules? 18
A. No. The Company is not proposing any changes to
the present rate structures within its electric schedules.
Q. Turning to Residential Service Schedule 1, could 21
you please describe the present rate structure under this 22
schedule? 23
A. Yes. Residential Schedule 1 has a present
Ehrbar, Di 13
Avista Corporation
customer or basic charge of $5.25 per month and two energy
rate blocks: 0-600 kWhs and over 600 kWhs. The present
base tariff rate for the first 600 kWhs per month is 8.146
cents per kWh and 9.096 cents for all kWhs over 600.
Q. How does the Company propose to spread Schedule 5
1’s proposed 2016 general revenue increase of $7,349,000 to 6
the rates within that schedule? 7
A. The Company proposes to increase the monthly
customer charge from $5.25 per month to $8.50 per month.
The remaining revenue increase for the schedule is proposed
to be recovered through a uniform percentage increase of
approximately 3.4% applied to the two energy block rates.
The proposed increase for the first 600 kWhs used per month
under the schedule is 0.276 cents per kWh, and an increase
of 0.308 cents per kWh for usage over 600 kWhs per month.
Q. Why is the Company proposing to increase the 16
monthly customer charge from $5.25 to $8.50 per month? 17
A. A substantial portion of the Company's costs are
fixed and do not vary with the amount of energy used by
customers. As reflected in this filing, the fixed costs of
operating and maintaining our electric system are
increasing. The Company believes it is important that rates
better reflect these increasing costs to serve customers.
Later in Section IV of my testimony I will provide greater
Ehrbar, Di 14
Avista Corporation
detail as to why the Company believes the monthly customer
charge should increase to $8.50 per month.
Q. How does the Company propose to spread Schedule 3
1’s proposed 2017 general revenue increase of $7,617,000 to 4
the rates within that schedule? 5
A. The Company proposes to keep the monthly customer
charge at $8.50 per month. The revenue increase for the
schedule is proposed to be recovered through a uniform
percentage increase of approximately 7.5% applied to the two
energy block rates. The proposed increase for the first 600
kWhs used per month under the Schedule is 0.630 cents per
kWh, and an increase of 0.704 cents per kWh for usage over
600 kWhs per month.
Q. For 2016, What is the proposed increase for a 14
residential electric customer with average consumption? 15
A. The proposed increase for a residential customer
using an average of 929 kWhs per month is $5.92 per month,
or a 6.9% increase in their electric bill. The present bill
for 929 kWhs is $85.24 compared to the proposed level of
$91.16, including all rate adjustments.
Q. For 2017, What is the proposed increase for a 21
residential electric customer with average consumption? 22
A. The proposed increase for a residential customer
using an average of 929 kWhs per month is $6.10 per month,
Ehrbar, Di 15
Avista Corporation
or a 6.7% increase in their electric bill, resulting in an
overall bill of $97.26, including all rate adjustments.
Q. Turning to General Service Schedules 11/12, could 3
you please describe the present rate structure and rates 4
under those schedules? 5
A. Yes. General Service Schedules 11/12 are the
service schedules typically applicable to customers with an
average demand of less than 20 kW per month, such as small
retail establishments (Schedule 11), or shops for
residential customers which requires a separate service
(Schedule 12). The present rate structure under the
schedules includes a monthly customer charge of $10.00, an
energy rate of 9.634 cents per kWh for all usage up to 3,650
kWhs per month, and an energy rate of 7.178 cents per kWh
for usage over 3,650 kWhs per month. There is also a demand
charge of $5.25 per kW for all demand in excess of 20 kW per
month. There is no charge for the first 20 kW of demand.
Q. How is the Company proposing to apply Schedule 18
11/12’s proposed 2016 general revenue increase of $1,338,000 19
to the rates within those schedules? 20
A. The Company is proposing that the customer charge
increase by $3.00 per month, from $10.00 to $13.00. The
Company is also proposing that the variable demand rate
increase from $5.25/kW to $5.50/kW. The remaining revenue
Ehrbar, Di 16
Avista Corporation
increase for those schedules is proposed to be recovered
through a 0.203 cent per kWh, or 2.1%, increase to the first
energy block (the first 3,650 kWhs used per month). The
Company is proposing to leave the second energy block
unchanged in order to provide a more meaningful separation
between the blocks, and to ensure that the higher load
factor customers served on those schedules do not pay a
melded rate per kWh that is higher than customers with poor
load factors.
Q. How is the Company proposing to apply Schedule 10
11/12’s proposed 2017 general revenue increase of $1,388,000 11
to the rates within those schedules? 12
A. The Company is proposing that the customer charge
increase by $3.00 per month, from $13.00 to $16.00. The
Company is also proposing that the variable demand rate
increase from $5.50/kW to $6.00/kW. The remaining revenue
increase for the schedules is proposed to be recovered
through a 0.199 cent per kWh, or 1.9%, increase to the first
energy block (the first 3,650 kWhs used per month). Similar
to 2016, the Company is proposing to leave the second energy
block unchanged in order to provide a more meaningful
separation between the blocks, and to ensure that the higher
load factor customers served on the schedules do not pay a
melded rate per kWh that is higher than customers with poor
Ehrbar, Di 17
Avista Corporation
load factors.
Q. Why is the Company proposing to increase the 2
demand charges for Schedules 11, 21, 25 and 25P? 3
A. The system allocated demand cost from the cost of
service study is $17.53 per kilowatt (kW) month.5 The
Company’s present monthly demand charges range from
$4.50/kVA to $5.25/kW. While the exact level of costs
classified as demand-related can be debated, clearly the
levels of demand charges will continue to be well below
demand-related costs.
In addition, the Company’s transmission and 11
distribution system is constructed to meet the collective
peak demand of its customers. Further, the Company must
have adequate resources available to meet peak demand. If
customers reduce their peak demand, it will reduce the need
for additional investment in these facilities and resources.
Customers need to receive the proper price signal to
encourage a reduction in their peak demand, i.e., higher
demand charges.
Q. Turning to Large General Service Schedules 21/22, 20
would you please describe the present rate structure under 21
those schedules and how the Company is proposing to apply 22
Schedule 21/22’s 2016 increase of $2,563,000 to the rates 23

5 See Schedule 3 of Exhibit No. 13, p. 3, ln 28.
Ehrbar, Di 18
Avista Corporation
within the schedules?
A. Yes. Large General Service Schedules 21/22 are
the service schedules applicable to customers with monthly
demands over 50 kW, but less than 3,000 kW. Typical
customers served under Schedule 21 are grocery stores,
schools, and office buildings, and retirement homes and
other qualified residential load for Schedule 22.
These schedules consist of a minimum monthly charge of
$350.00 for the first 50 kW or less, a demand charge of
$4.75 per kW for monthly demand in excess of 50 kW, and two
energy block rates: 6.297 cents per kWh for the first
250,000 kWhs per month, and 5.373 cents per kWh for all
usage in excess of 250,000 kWhs.
The Company is proposing to increase the present
minimum demand charge (for the first 50 kW or less) by $25
per month, from $350.00 to $375.00, and increase the demand
charge from $4.75/kW to $5.50/kW for reasons previously
discussed. The remaining revenue increase for the schedules
is proposed to be recovered through a uniform percentage
increase of approximately 2.8% applied to the two energy
block rates. The proposed increase for the first 250,000
kWhs used per month under the schedules is 0.176 cents per
kWh, and an increase of 0.151 cents per kWh for usage over
250,000 kWhs per month.
Ehrbar, Di 19
Avista Corporation
Q. Would you please describe how the Company is 1
proposing to apply Schedule 21/22’s 2017 increase of 2
$2,654,000 to the rates within the schedule?
A. Yes. The Company is proposing to increase the
minimum demand charge (for the first 50 kW or less) by $25
per month, from $375.00 to $400.00, and increase the demand
charge from $5.50/kW to $6.00/kW. The remaining revenue
increase for the schedules is proposed to be recovered
through a uniform percentage increase of approximately 3.7%
applied to the two energy block rates. The proposed
increase for the first 250,000 kWhs used per month under the
schedules is 0.239 cents per kWh, and an increase of 0.204
cents per kWh for usage over 250,000 kWhs per month.
Q. Turning to Extra Large General Service Schedule 14
25, would you please describe the present rate structure 15
under that schedule, and how the Company is proposing to 16
apply Schedule 25’s 2016 increase of $820,000 to the rates 17
within the schedule?
A. Yes. Schedule 25 is applicable for customers with
demands in excess of 3,000 kVa per month, such as large
industrial customers and universities. Extra Large General
Service Schedule 25 consists of a minimum monthly charge of
$12,500 for the first 3,000 kVa or less, a demand charge of
$4.50 per kVa for monthly demand in excess of 3,000 kVa, and
Ehrbar, Di 20
Avista Corporation
two energy block rates: 5.212 cents per kWh for the first
500,000 kWhs per month and 4.414 cents per kWh for all usage
in excess of 500,000 kWhs.
The Company is proposing that the present minimum
demand charge of $12,500 be increased by $1,250 to $13,750
per month. Further, the Company is proposing to increase
the volumetric demand charge from $4.50/kVA to $5.50/kVA for
reasons discussed earlier in my testimony. The remaining
revenue increase for the schedule is proposed to be
recovered through a uniform percentage increase of
approximately 2.4% applied to the two energy block rates.
The proposed energy rate increase for the first 500,000 kWhs
used per month is 0.124 cents per kWh and the increase for
usage over 500,000 per month is 0.105 cents per kWh.
Q. Would you please describe how the Company is 15
proposing to apply Schedule 25’s 2017 increase of $851,000 16
to the rates within the schedule?
A. Yes. The Company is proposing that the minimum
demand charge of $13,750 be increased by $1,250 to $15,000
per month. Further, the Company is proposing to increase
the volumetric demand charge from $5.50/kVA to $6.00/kVA.
The remaining revenue increase for the schedule is proposed
to be recovered through a uniform percentage increase of
approximately 3.7% applied to the two energy block rates.
Ehrbar, Di 21
Avista Corporation
The proposed energy rate increase for the first 500,000 kWhs
used per month is 0.197 cents per kWh and the increase for
usage over 500,000 per month is 0.167 cents per kWh.
Q. Please describe the service the Company provides 4
to Clearwater Paper’s Lewiston Plant under Schedule 25P.
A. Yes. In Commission Order No. 32841, dated June
28, 2013, the Commission approved a five-year Electric
Service Agreement (Agreement) between Avista and Clearwater,
applicable to its Lewiston Plant. The Agreement became
effective July 1, 2013 and expires June 30, 2018.6 The
Agreement provides for Clearwater to use its on-site
generation to serve its own load, and for Clearwater to
purchase from Avista all of the electric power requirements
that exceed the electric power generated by Clearwater.
Avista serves Clearwater’s load requirements under Schedule
25P.
Q. Please describe the application of the proposed 17
Schedule 25P 2016 increase of $653,000 to the rates within 18
the schedule.
A. Like Schedule 25, the Company is proposing that
the present minimum demand charge of $12,500 be increased by
$1,250 to $13,750 per month. Further, the Company is

6 On May 13, 2015, Avista and Clearwater filed with the Commission a
Joint Petition requesting, among other things, approval of a contract
amendment which would extend the length of the Agreement to June 30,
2021 (Case No. AVU-E-15-06).
Ehrbar, Di 22
Avista Corporation
proposing to increase the volumetric demand charge from
$4.50/kVA to $5.50/kVA for all kVA between 3,000 and 55,000
for reasons discussed earlier in my testimony.7 The
remaining revenue increase for the schedule is proposed to
be recovered through an increase of 0.003 cents per kWh to
the energy charge.
Q. Please describe the application of the proposed 7
Schedule 25P 2017 increase of $678,000 to the rates within 8
the schedule.
A. Like Schedule 25, the Company is proposing that
the minimum demand charge of $13,750 be increased by $1,250
to $15,000 per month. Further, the Company is proposing to
increase the volumetric demand charge from $5.50/kVA to
$6.00/kVA. The remaining revenue increase for the schedule
is proposed to be recovered through an increase of 0.074
cents per kWh to the energy charge. 16
Q. Turning to Pumping Schedules 31/32, would you 17
please describe how the Company is proposing to apply 18
Schedule 31/32’s 2016 increase of $288,000 to the rates 19
within the schedules?
A. The Company is proposing that the customer charge
of $8.00 per month be increased by $2.00, to $10.00 per
month, and that the remaining revenue increase be spread on

7 All kVA over 55,000 is priced at $2.00 per the terms of the Electric
Service Agreement.
Ehrbar, Di 23
Avista Corporation
a uniform percentage basis of approximately 4.9% to the two
energy rate blocks under the schedules. The proposed
increase in the first block rate is 0.460 cents per kWh and
the increase in the second block rate is 0.392 cents per
kwh.
Q. Please describe how the Company is proposing to 6
apply Schedule 31/32’s 2017 increase of $298,000 to the 7
rates within the schedules.
A. The Company is proposing that the customer charge
of $10.00 per month be increased by $2.00, to $12.00 per
month, and that the remaining revenue increase be spread on
a uniform percentage basis of approximately 4.9% to the two
energy rate blocks under the schedules. The proposed
increase in the first block rate is 0.478 cents per kWh, and
the increase in the second block rate is 0.408 cents per
kwh.
Q. How is the Company proposing to spread the 17
proposed 2016 revenue increase of $219,000 applicable to 18
Street and Area Light (Schedules 41-49)? 19
A. The Company proposes to increase present street
and area light (base) rates on a uniform percentage basis.
The proposed increase for all lighting rates is 6.3%. The
(base tariff) rates are shown in the tariffs for those
schedules, in Exhibit No. 15, Schedule 2.
Ehrbar, Di 24
Avista Corporation
Q. How is the Company proposing to spread the 1
proposed 2017 revenue increase of $227,000 applicable to 2
Street and Area Light (Schedules 41-49)? 3
A. The Company proposes to increase present street
and area light (base) rates on a uniform percentage basis.
The proposed increase for all lighting rates is 6.1%. The
(base tariff) rates are shown in the tariffs for those
schedules, in Exhibit No. 15, Schedule 2.
Q. Is the Company proposing any other changes to its 9
Street and Area Light schedules? 10
A. Yes, it is. For Schedule 42 (Company-owned street
lights) and Schedule 47 (Area Lighting), the Company has
added additional lighting codes for 100 watt and 200 watt
LED equivalent lights. These rates will be applicable for
those lights converted to LED technology.
Second, for Schedule 42, the Company is proposing a
methodology for calculating new Street Light rates for
customer-requested lighting that occurs in-between general
rate cases. On occasion customers may request that the
Company install a particular type of street light; however,
that street light may be different than the lights included
in the tariff. The Company is proposing to use the
methodology summarized below, and described more fully in
Schedule 42, to update new lighting standards outside of the
Ehrbar, Di 25
Avista Corporation
Example
100 Watt Light
Luminaire & Lamp $500.00
Electrical Service $117.00
Total $617.00
Multiply by Capital Recovery Factor 13.622%
Annual Capital Recovery $84.05
Monthly Capital Recovery $7.00
context of a general rate case.8
Q. Please describe the basic methodology for 2
calculating the capital component of a new street or area 3
light rate. 4
A. The basic methodology for calculating any new rate
for Schedule 42 is to determine the capital, maintenance,
and energy components to develop a monthly rate. For the
capital component, an engineering estimate of the installed
cost for a new Street Light component would be multiplied by
a Capital Recovery Factor9 to determine the annual revenue
requirement.
Illustration No. 1 below shows an example of the annual
and monthly rate calculation methodology:
Illustration No. 1 – Calculation of Monthly Capital Recovery
15
16
17
18
19
20
21

8 The components would be updated with the final approved capital
structure, gross-up factor, and depreciation factor as ordered by the
Commission at the conclusion of this general rate case.
9 The Capital Recovery Factor is derived by adding together the
Company’s weighted Cost of Capital, grossed up for revenue-related
expenses, and the effective depreciation rate for all Street and Area
Lights (FERC Account 373) from the Company’s Cost of Service study.
Ehrbar, Di 26
Avista Corporation
The maintenance component for a similar existing light
embedded in present rates today would be used for purposes
of the custom rate calculation.10 For the energy component,
the energy rate for a similar wattage light under Schedule
46 would be used. The energy component of any new light
offering will be derived in the same manner as described in
the changes to Schedule 46 below. Any new rates developed
would be included in the tariffs filed in the Company’s next 8
rate case filing.
Q. What other changes are being proposed to the 10
Street and Area Light Schedules? 11
A. First, the Company is proposing to cancel Schedule
43, “Customer Owned Street Light Energy & Maintenance
Service”. This schedule was closed to new customers
effective November 24, 1981, and only customers served on
that schedule could continue to take service. As of May
2015, there are no customers taking service under the
schedule.
Next, under Schedule 44, the Company provides energy
and O&M services to customer-owned street lights. Customer-
owned lights are governed, electrically, by the National

10 The maintenance component for an existing light can be derived by
subtracting the Schedule 46 (energy) light code monthly charge from the
same Schedule 44 light code monthly charge (maintenance and energy).
The maintenance component for a new lighting standard that is outside of
what is in the Company’s present offerings will be based on an
engineering estimate of the monthly maintenance cost grossed up for
revenue-related expenses.
Ehrbar, Di 27
Avista Corporation
Electric Code (“NEC”). Utility-owned property, however, is
governed by the National Electric Safety Code (“NESC”). 2
While the Company traditionally works on customer-owned
street lights, adoption of the NESC 2012 Edition has created
a conflict between the Company’s tariff and the NESC. 5
Specifically, Section 1.011.A.2 states that street lights
maintained by a utility must be under the exclusive control
of the utility, i.e., Company-owned lights. Under Schedule
44, Avista provides maintenance on customer-owned lights,
thus creating the conflict between the schedule and the
rule. Closing the schedule to new customers will help to
resolve this conflict. The Company is proposing to close
Schedule 44 to new customers effective January 1, 2016, with
existing customers being allowed to continue to take
service.
For Schedule 46 (Customer-Owned Street Light Energy
Service), the Company is proposing to modify its tariff to
reflect a new prescriptive energy rate calculation for
lights where an existing code does not exist. The rate
would be determined using the following formula:
Custom Rate = Wattage of Street Light * 21
365 Hours * Energy Rate 22
23
The wattage of the street light would be provided by the
Customer and verified by the Company. As for the hours of
Ehrbar, Di 28
Avista Corporation
operation, the Company is basing that on dusk-to-dawn
service (4,380 annual hours, or 365 hours per month).
Finally, the energy rate was determined by dividing the
final revenue requirement for Schedule 46 by total kWh usage
for Schedule 46 included in the final approved billing
determinants.
7
III. PROPOSED NATURAL GAS REVENUE INCREASE 8
Q. Would you please explain what is contained in 9
Schedule 4 of Exhibit No. 15? 10
A. Yes. Schedule 4 of Exhibit No. 15 is a copy of
the Company’s present and proposed natural gas tariffs for
2016 and 2017, showing the changes (strikeout and underline)
proposed in this filing.
Q. Would you please describe what is contained in 15
Schedule 5 of Exhibit No. 15?
A. Schedule 5 of Exhibit No. 15 contains the proposed
(clean) natural gas tariff sheets for 2016 and 2017
incorporating the proposed changes included in this filing.
Q. Would you please explain what is contained in 20
Schedule 6 of Exhibit No. 15?
A. Schedule 6 of Exhibit No. 15 contains information
regarding the proposed spread of the natural gas revenue
increase among the service schedules and the proposed
Ehrbar, Di 29
Avista Corporation
changes to the rates within the schedules. Page 1 shows the
proposed general revenue and percentage increase by rate
schedule. Page 2 shows the rates of return and the relative
rates of return for each of the schedules before and after
the proposed 2016 increase. Pages 3 and 4 show the present
rates under each of the rate schedules, the proposed changes
to the rates within the schedules, and the proposed rates
after application of the 2016 and 2017 rate changes. These
pages will be referred to later in my testimony.
10
Summary of Natural Gas Rate Schedules and Tariffs 11
Q. Would you please review the Company's present rate 12
schedules and the types of natural gas service offered under 13
each? 14
A. Yes. The Company's present Schedules 101 and 111
offer firm sales service. Schedule 101 generally applies to
residential and small commercial customers who use less than
200 therms/month. Schedule 111 is generally for customers
who consistently use over 200 therms/month and Schedule 131
provides interruptible sales service to customers whose
annual requirements exceed 250,000 therms. Schedule 146
provides transportation/distribution service for customer-
owned natural gas for customers whose annual requirements
exceed 250,000 therms.
Ehrbar, Di 30
Avista Corporation
Q. The Company also has rate Schedules 112 and 132 on 1
file with the Commission. Would you please explain which 2
customers are eligible for service under these schedules?
A. Yes. Schedules 112 and 132 are in place to provide
service to customers who at one time were provided service
under Transportation Service Schedule 146. The rates under
these schedules are the same as those under Schedules 111
and 131 respectively, except for the application of
Temporary Gas Rate Adjustment Schedule 155. Schedule 155 is
a temporary rate adjustment used to amortize the deferred
natural gas costs approved by the Commission in the prior
Purchased Gas Cost Adjustment (“PGA”) filing. Because of
their size, transportation service customers are analyzed
individually to determine their appropriate share of
deferred natural gas costs. If those customers switch back
to sales service, the Company continues to analyze those
customers individually; otherwise, those customers would
receive natural gas costs deferrals which are not due them,
thus the need for Schedules 112 and 132. There are only six
customers served under these schedules as of December 31,
2014.
Q. How many customers does the Company serve under 22
each of its natural gas rate schedules in Idaho? 23
A. As of December 31, 2014, the Company provided
Ehrbar, Di 31
Avista Corporation
Rate Schedule No. of Customers
General Service Schedule 101 76,642
Large General Service Schedules 111/112 1,411
Interruptible Sales Service Schedules 131/132 1
Transportation Service Schedule 146 5
Table No. 5 - Customers by Service Schedule
service to the following number of customers under each of
its schedules in Idaho:

7
Q. Is the Company proposing any changes to the 8
present rate structures within its natural gas service 9
schedules? 10
A. No. The Company is not proposing any changes to
the present rate structures within its natural gas
schedules.
14
Proposed Rate Spread 15
Q. For 2016, what is the proposed natural gas revenue 16
increase, and how is the Company proposing to spread the 17
increases by rate schedule?
A. For 2016, the proposed base revenue increase is
$3,205,000, or 8.8% in base margin11 revenue (on a billed
revenue basis, the increase is 4.5%). In addition,
effective January 1, 2016, a rebate of approximately $1.2

11 Base margin revenue refers to the base revenue associated with the
Company’s ownership and operation of its natural gas distribution
operations. It is the revenue related to delivering natural gas to
customers, and does not include the cost of natural gas, upstream third-
party owned transportation, or the effect of other tariffs.
Ehrbar, Di 32
Avista Corporation
million that is being credited to customers in 2015 will
expire. The Company is proposing to replace a portion of
that rebate, approximately $0.2 million, in 2016 to
partially offset the expiring rebate.
Q. What is the Company’s proposal related to the 5
current natural gas rebate customers are receiving in 2015? 6
A. Through rate Schedule 197, customers are receiving
a rebate of $0.01489 per therm through December 31, 2015
(approximately $1.2 million). This rebate rate was first
approved in the Company’s 2012 general rate case, Case No. 10
AVU-G-12-07.12 As a part of the settlement stipulation
approved by the Commission in Case No. AVU-G-14-01, the
rebate rate was extended for 2015 using the 2013 electric
earnings sharing deferral.13 For 2014, Avista deferred
approximately $0.2 million under the natural gas earnings
sharing. The Company is proposing to use the $0.2 million
natural gas deferral balance from 2014 to partially offset
the expiration of the $1.2 million rebate that will occur on
January 1, 2016.14 Effective January 1, 2017, the rebate

12 This rebate was related to certain deferral balances from the 2012
Purchased Gas Cost Adjustment that were rebated to customers between
October 1, 2013 and December 31, 2014.
13 In Case No. AVU-E-12-08/AVU-G-12-07, the settlement stipulation
approved by the Commission contained an earnings test. Under the
settlement, the Company agreed to an after-the-fact earnings test, where
it would share with customers one-half of any earnings in excess of the
9.8% ROE for each of the years 2013 and 2014.
14 Consistent with the provisions of Schedule 197, any over or under
amortization of the $0.2 million would be trued up in a future PGA filed
by the Company.
Ehrbar, Di 33
Avista Corporation
Table No. 6 - Proposed % Natural Gas Increase by Schedule - 2016
Rate Schedule
Increase in
Margin Rates
Increase in
Billing Rates
Billing Increase
Net of New &
Expiring Rebate
General Service Schedule 101 9.8%5.3%6.5%
Large General Service Schedules 111/112 4.8%1.9%3.5%
Interrupt. Sales Service Schedules 131/132 9.6%3.4%5.5%
Transportation Service Schedule 146* 6.6%6.6%4.5%
Overall 8.8%4.5%5.8%
* excludes commodity and interstate pipeline transportation costs
rate will be set at $0.00000 per therm, resulting in a $0.2
million increase for customers.
Q. What is the overall revenue effect when you 3
combine the general rate request and the effect of the new 4
and expiring rebates? 5
A. All together, the net effect of the 2016 base rate
increase coupled with the net effect of new and expiring
tariffs is a billing rate increase of 5.8%. Provided below
is a table showing the effect of the Company’s proposed 9
natural gas increase by rate schedule, including the effects
of the new and expiring rebate:

18
Q. Is the proposed billing percentage increase for 19
Transportation Schedule 146 comparable to the increase for 20
the other service schedules? 21
A. No. The proposed billing percentage increase for
Transportation Schedule 146 is not comparable to the
proposed increases for the other (sales) service schedules,
Ehrbar, Di 34
Avista Corporation
as Schedule 146 revenue does not include an amount for the
cost of natural gas or upstream pipeline transportation.
Transportation customers acquire their own natural gas and
pipeline transportation. Including an estimate of 45.0
cents per therm for the cost of natural gas and pipeline
transportation, the proposed increase to Schedule 146 rates
represents an average increase of 1.0% (2016) and 1.2%
(2017) in those customers’ total natural gas bill.
Q. What information did the Company use to develop 9
the proposed spread of the overall 2016 increase to the 10
various rate schedules?
A. The Company used the results of the cost of
service study (sponsored by Company witness Mr. Miller) as a
guide to spread the natural gas general increase. The
spread of the proposed increase generally results in the
rates of return for the various service schedules moving
approximately one-quarter closer to the overall rate of
return (unity). The relative rates of return before and
after application of the proposed 2016 increase by schedule
are as follows:
Ehrbar, Di 35
Avista Corporation
Present Proposed
Relative Relative
Rate Schedule ROR ROR
General Service Schedule 101 0.89 0.93
Large General Service Schedules 111/112 1.48 1.32
Interruptible Sales Service Schedules 131/132 1.10 1.07
Transportation Service Schedule 146 1.27 1.18
Overall 1.00 1.00
Table 7 - Present & Proposed Relative Rates of Return

Page 2 of Exhibit No. 15, Schedule 6 shows this
information in more detail.
Q. For 2017, what is the proposed natural gas revenue 9
increase, and how is the Company proposing to spread the 10
increases by rate schedule? 11
A. For 2017, the proposed base revenue increase is
$1,665,000, or 4.2% in base margin revenue (on a billed
revenue basis, the increase is 2.2%). Including the
expiration of the proposed $0.2 million rebate that would
expire December 31, 2016, the net increase in billing rates
in 2017 would be 2.5%.
The Company used a pro-rata allocation of the Company’s 18
2016 natural gas rate spread percentages for purposes of
spreading the proposed 2017 natural gas revenue increase to
its natural gas service schedules. Below is a table showing
the effect of the Company’s 2017 proposed natural gas
increase by rate schedule, including the effects of the
expiring rebate:
Ehrbar, Di 36
Avista Corporation
Table No. 8 - Proposed % Natural Gas Increase by Schedule - 2017
Rate Schedule
Increase in
Margin Rates
Increase in
Billing Rates
Billing Increase
Net of Expiring
Rebate
General Service Schedule 101 4.6%2.6%2.9%
Large General Service Schedules 111/112 2.4%0.9%1.3%
Interrupt. Sales Service Schedules 131/132 4.1%1.5%2.0%
Transportation Service Schedule 146* 3.3%3.4%5.4%
Overall 4.2%2.2%2.5%
* excludes commodity and interstate pipeline transportation costs

This information is also shown on page 1 of Exhibit No.
15, Schedule 6.
9
Proposed Rate Design 10
Q. Would you please explain the present rate design 11
within each of the Company’s present natural gas service 12
schedules?
A. Yes. General Service Schedule 101 generally
applies to residential and small commercial customers who
use less than 200 therms/month. The schedule contains a
single rate per therm for all natural gas usage and a
monthly customer/basic charge.
Large General Service Schedule 111 has a four-tier
declining-block rate structure and is generally for
customers who consistently use over 200 therms/month, such
as schools, restaurants, and office buildings. The schedule
consists of a monthly minimum charge plus a usage charge for
the first 200 therms or less, and block rates for 201-1,000
Ehrbar, Di 37
Avista Corporation
therms/month, 1001-10,000 therms/month and usage over 10,000
therms/month.
Interruptible Sales Service Schedule 131 contains a
single rate per therm for all natural gas usage. The
schedule also has an annual minimum (deficiency) charge
based on a usage requirement of 250,000 therms per year.
The lone customer served on this schedule is a hospital
which has standby facilities with an alternate fuel, as
required by tariff.
Transportation Service Schedule 146 contains a $225 per
month customer charge and contains a single rate per therm
for all natural gas usage. The schedule also has an annual
minimum (deficiency) charge based on a usage requirement of
250,000 therms per year.
Q. Where in your Exhibit No. 15 do you show the 15
present and proposed rates for the Company’s natural gas 16
service schedules?
A. Pages 3 and 4 of Schedule 6 shows the present and
proposed rates under each of the rate schedules, including
all present rate adjustments (adders) for the 2016 and 2017
rate changes. Column (e) on those pages show the proposed
changes to the rates contained in each of the schedules.
Q. How does the Company propose to spread Schedule 23
101’s proposed 2016 general revenue increase of $2,860,000 24
Ehrbar, Di 38
Avista Corporation
to the rates within that schedule? 1
A. The Company proposes to increase the monthly
customer charge from $4.25 per month to $8.00 per month. As
a result of the proposed increase in the basic charge, the
volumetric energy rate would decrease by 0.981 cents per
therm. This is shown in column (e), page 3, Schedule 6 of
Exhibit No. 15.
Q. Why is the Company proposing to increase the 8
monthly customer charge from $4.25 to $8.00 per month? 9
A. Like the electric business, a substantial portion
of the Company's costs are fixed and do not vary with the
amount of energy used by customers. As reflected in this
filing, the fixed costs of operating and maintaining our
natural gas system are increasing. The Company believes it
is important that rates better reflect these increasing
costs to serve customers. Later in Section IV. of my
testimony I will provide greater detail as to why the
Company believes the monthly customer charge should increase
to $8.00 per month.
Q. How does the Company propose to spread Schedule 20
101’s proposed 2017 general revenue increase of $1,486,000 21
to the rates within that schedule? 22
A. The Company proposes to keep the monthly customer
charge at $8.00 per month. The revenue increase for the
Ehrbar, Di 39
Avista Corporation
schedule would be recovered through a 6.0% increase in the
volumetric energy rate. This is shown in column (e), page
4, Schedule 6 of Exhibit No. 15.
Q. For 2016, what is the proposed monthly increase 4
for a residential natural gas customer with average usage? 5
A. The increase for a residential customer using an
average of 61 therms of natural gas per month would be $3.90
per month, or 6.6%, inclusive of the general rate increase
as well as the net effect of the Schedule 197 rebate. A
bill for 61 therms per month would increase from the present
level of $59.22 to a proposed level of $63.12.
Q. For 2017, what is the proposed monthly increase 12
for a residential natural gas customer with average usage? 13
A. The increase for a residential customer using an
average of 61 therms of natural gas per month would be $1.79
per month, or 2.8%, inclusive of the general rate increase
as well as the expiration of the Schedule 197 rebate,
resulting in an overall bill of $64.91, including all rate
adjustments. 19
Q. Would you please explain the proposed changes in 20
the rates for Large General Service Schedules 111? 21
A. Yes. The present rates for Schedules 101 and 111
provide guidance for customer placement: customers who
generally use less than 200 therms/month should be placed on
Ehrbar, Di 40
Avista Corporation
Schedule 101, customers who consistently use over 200 therms
per month should be placed on Schedule 111. Not only do the
rates provide guidance for customer schedule placement, they
provide a reasonable classification of customers for
analyzing the costs of providing service.
The proposed 2016 increase to the minimum charge for
Schedule 111 (for 200 therms or less) of $1.79 per month is
a function of the basic charge increase under Schedule 101
as well as the change in the Schedule 101 variable rate.
This methodology maintains the present relationship between
the schedules, and will minimize customer shifting. The
remaining revenue requirement for the schedule is proposed
to be recovered through a uniform percentage increase of
approximately 5.7% to blocks 2, 3 and 4.
The proposed 2017 increase to the Schedule 111 minimum
charge for Schedule 111 (for 200 therms or less) is $5.33
per month. The remaining revenue requirement for the
schedule is proposed to be recovered through a uniform
percentage increase of approximately 1.4% to blocks 2, 3 and
4.
Q. How is the Company proposing to spread the 21
proposed 2016 increase of $6,000 to the rates under 22
Interruptible Schedule 131? 23
A. The Company proposes to increase the usage charge
Ehrbar, Di 41
Avista Corporation
under the schedule by 1.956 cents per therm.
Q. How is the Company proposing to spread the 2
proposed 2017 increase of $3,000 to the rates under 3
Interruptible Schedule 131? 4
A. The Company proposes to increase the usage charge
under the schedule by 0.909 cents per therm.
Q. How is the Company proposing to spread the 7
proposed 2016 increase of $23,000 to the rates under 8
Transportation Schedule 146? 9
A. The Company is proposing to increase monthly Basic
Charge from $225 per month to $400 per month. The remaining
revenue requirement would be recovered through an increase
of 0.448 cents to the per-therm rate.
Q. How is the Company proposing to spread the 14
proposed 2017 increase of $12,000 to the rates under 15
Transportation Schedule 146? 16
A. The Company is proposing to increase the per therm
charge under the schedule by 0.445 cents per therm.
Q. Is the Company proposing any other changes to its 19
natural gas service schedules? 20
A. No, it is not.
Ehrbar, Di 42
Avista Corporation
IV. BASIC CHARGE FOR SCHEDULES 1 & 101 1
Q. Why is the Company proposing to increase the 2
electric monthly customer charge for Schedule 1 from $5.25 3
to $8.50 per month? 4
A. A significant portion of the Company’s costs are 5
fixed and do not vary with customer usage. These costs
include distribution plant and operating costs to provide
reliable service to customers. Upon evaluation of the total
customer allocated costs for Schedule 1, as shown in
Schedule 3 of Ms. Knox’s Exhibit No. 13, page 4, line 26,
those costs are $17.82 per customer per month. Factoring in
distribution demand costs per customer per month of $23.58,
as shown in Schedule 3 of Exhibit No. 13, page 4, line 28,
the total customer and distribution demand monthly cost per
customer is $41.40 These are essentially the fixed
distribution costs for providing service to customers.
Given the large disparity between the level of customer and
demand costs and the present level of the basic charge, the
Company believes that it is appropriate to recover a more
reasonable level of these fixed customer costs through the
basic charge.
Q. Why is the Company proposing an increase in the 22
basic charge for Schedule 1 of $3.25 per month in this 23
filing? 24
Ehrbar, Di 43
Avista Corporation
A. One of the arguments against higher residential
basic charges in the past was one of customer
understandability and acceptance. We believe it is
increasingly important that our charges to customers more
accurately reflect the actual costs to serve customers. With
regard to fixed charges, many other utility assessments
(phone, water, sewer, solid waste, television, internet,
etc.) are generally a flat monthly fee. Typically, there is
little correlation between the level of use and the monthly
amount paid for service related to these other
utilities/services. Consumers understand that most of the
costs associated with these other utilities/services are
fixed, and have become accustomed to paying a relatively
constant monthly fee for service.
Publicly-owned electric utilities have been charging
higher monthly customer charges for years in order to more
accurately reflect (and recover) the fixed costs of
providing service. For example, Avista’s nearest neighbor 18
in North Idaho, Kootenai Electric Cooperative, has a
residential monthly basic charge of $19.50, and a minimum
charge of $25.00 per month. Avista’s nearest neighbor in 21
Eastern Washington, Inland Power and Light, has a
residential monthly basic charge of $19.23 per month.
Ehrbar, Di 44
Avista Corporation
Q. Turning now to natural gas, why is the Company 1
proposing to increase the Schedule 101 monthly customer 2
charge from $4.25 to $8.00 per month? 3
A. Schedule 101 total customer allocated costs, as
shown in Schedule No. 2 of Mr. Miller’s Exhibit No. 14, page
4, line 25, is $21.57 per customer per month. $11.60 of the
$21.57 noted above is related to the cost of the meter and
service, billing, and providing customer service, as shown
in Schedule No. 2 in Exhibit No. 14, page 4, line 23. The
Company believes that the requested increase in the basic
charge provides for rates that are more cost-based.
Q. What is the consequence to an electric or natural 12
gas customer of a Basic Charge that is priced below cost? 13
A. Because rate design is a “zero sum game”, if 14
customer charges are set below the cost, then other charges
are, by definition, set above their cost of service. For
residential natural gas and electric customers, the only
other charge is the volumetric charge. When volumetric
rates are increased above their cost of service to include
customer costs that are not in the Basic Charge, several
consequences ensue:
• It results in almost all customers paying more
“per-customer” related costs in the winter, even though 23
their customer costs are not higher in the winter.
Ehrbar, Di 45
Avista Corporation
• It results in the amount of customer costs a
customer pays being unpredictable, even though customer
costs are actually very predictable.
• A portion of fixed costs of providing service to
low usage customers is actually recovered from other higher
usage customers served under the same schedule.
Ideally, to properly match revenues with the cost of
service, the fixed costs of providing service would be
recovered through a fixed monthly charge, paid by each
customer irrespective of actual usage. The rationale for
that type of rate design is that a utility’s facilities and 11
support functions are made available to its customers
irrespective of how much energy they use.
In summary, setting the basic charge at a rate
substantially less than an amount that covers annual
customer costs can result in rates that do not reflect the
cost to serve, and monthly bills that are unnecessarily
volatile.
Q. But won’t increasing the Basic Charge send the 19
wrong price signal through the energy rates? 20
A. No. Conservation of electricity and natural gas
is important for customers and for the Company, and one
might argue that a lower basic charge results in higher
commodity charges and a stronger price signal related to
Ehrbar, Di 46
Avista Corporation
volume usage. However, sending a price signal to customers
through a residential rate design that contains a two-tier
increasing block rate for electric (natural gas has two
volumetric tiers) was developed for just such a reason. The
more electricity that is used, the higher the rate, and
therefore the higher the overall customer bill. The
volumetric pricing components will still send a very clear
price signal to conserve, even with the Company’s proposed 8
basic charge increase.
The Company’s Integrated Resource Plans provide a 10
perspective of the incremental cost of electricity and
natural gas on a forward looking basis, as compared to
retail rates. Illustration No. 2 below shows the average or
melded Schedule 1 volumetric rate per kWh, at varying usage
levels, and with the current $5.25 basic charge (and the
rate increase applied to the two energy blocks) and the
proposed basic charge of $8.50.
Ehrbar, Di 47
Avista Corporation
$0.08754
$0.09539
$0.08422
$0.09177
$0.05000
$0.05500
$0.06000
$0.06500
$0.07000
$0.07500
$0.08000
$0.08500
$0.09000
$0.09500
$0.10000
600 800 1,000 1,200 1,400 1,600 1,800 2,000 2,200 2,400 2,600
Monthly Usage -kWhs
Schedule 1 -Current and Proposed Basic Charge -Resulting Volumetric Melded Rate
$5.25 Basic -
Per kWh Rate
$8.50 Basic -
Per kWh Rate
20 Yr IRP
Levelized=
$0.05520/kWh
Illustration No. 2 1

The dotted line at the top of the graph shows the
melded volumetric rate per kWh with the present $5.25 per
month basic charge. The second solid line shows the melded
volumetric rate per kWh with a $8.50 basic charge. At the
bottom of the graph is a dashed line which shows the
levelized 20-year avoided cost from the Company’s 2013 17
electric Integrated Resource Plan ($0.05520 per kWh). By
adjusting the basic charge from its current $5.25 per month
level to $8.50 per month, the resulting melded volumetric
rate, remains well above the 20-year levelized avoided cost.
With a basic charge of $8.50 per month, customers will
continue to pay a volumetric rate, regardless of usage, that
Ehrbar, Di 48
Avista Corporation
exceeds the Company’s avoided cost and, therefore, sends a 1
very clear price signal.
For natural gas, the Company included several forecasts
in its 2014 Integrated Resource Plan which all showed
forecast natural gas prices at Henry Hub over the next 20
years being lower than Avista’s retail rate, which means
that a clear price signal is also being provided on the
natural gas side of the business.15
Q. Does the fact that that Avista is requesting Fixed 9
Cost Adjustment mechanisms change the Company’s view of the 10
appropriate level of the basic charge? 11
A. No. The proposed Fixed Cost Adjustment mechanisms
are important mechanisms which would allow the Company to
recover, on a per customer basis, the fixed costs of
providing service to customers which are not otherwise
recovered in the basic charge. A Fixed Cost Adjustment
mechanism, however, does not fix the problem of intra-
schedule cross subsidization. As long as a portion of the
Company’s fixed costs are recovered in volumetric rates, 19
ultimately some customers in a rate schedule are being
subsidized by other customers. The Company believes that
progress needs to be made in reducing the amount of intra-

15 See. Exhibit No. 7, Schedule 1, p. 6.
Ehrbar, Di 49
Avista Corporation
Monthly Bill Impact
Current $5.25
Basic Charge
Proposed
$8.50 Basic
Charge Difference
Percent.
Difference
600 kWh/mo Customer $58.54 $59.80 $1.26 2.1%
929 kWh/mo Customer $89.93 $89.97 $0.04 0.0%
1600 kWh/mo Customer $155.52 $153.07 -$2.45 -1.6%
Avista - Bill Impacts for Low, Medium and High Use Customers (Sch 1)
schedule subsidization, and the proposed basic charges help
to do just that.
Q. Have you prepared an analysis to show what impact 3
the proposed rate design changes would have on customers on 4
electric Schedule 1 and natural gas Schedule 101, including 5
the proposed increases to the monthly basic charges? 6
A. Yes. The Company completed an analysis
demonstrating the effect of the increased basic charge on
low, average, and high use electric and natural gas
customers. The comparison shows the difference in a
customer’s bill (base rates only) if the Company had
proposed to keep the basic charge unchanged versus the
proposed increase. Table No. 9 below details the results of
that analysis for residential electric customers on Schedule
1:
Table No. 9 – Electric Results 16

Ehrbar, Di 50
Avista Corporation
Monthly Bill Impact
Current $4.25
Basic Charge
Proposed $8.00
Basic Charge Difference
Percent.
Difference
46 therms/mo Customer $48.63 $49.56 $0.94 1.9%
61 therms/mo Customer $63.38 $63.39 $0.00 0.0%
100 therms/mo Customer $100.72 $98.35 -$2.36 -2.3%
Avista - Bill Impacts for Low, Medium and High Use Customers (Sch 101)
Table No. 10 below details the analysis for natural gas
customers on Schedule 101: 2
Table No. 10 – Natural Gas Results 3
4
5
6
7
8
The impact of the Company’s proposed change to the 9
basic charge varies based on monthly consumption. For an
electric customer who uses less than the average 929 kWhs
per month, and/or a natural gas customers who uses less than
61 therms per month, the percentage impact will be slightly
higher than for those customers who use more than the
average. That makes sense in that, with fixed costs being
recovered in variable energy rates, customers with higher
use are subsidizing lower use customers. We believe
movement toward matching customer payment of fixed costs
with the fixed costs to serve customers, together with
removing part of the inequity among customers on the amount
of fixed costs paid, is appropriate.
Table No. 11 below shows a comparison of monthly bills
for an electric customer with average usage for a 12-month
period. It shows the difference in the monthly bills with
Ehrbar, Di 51
Avista Corporation
Month kWh's
Current
$5.25 Basic
Charge
Proposed
$8.50 Basic
Charge
Higher / Lower
Bill
January 1,284 $126.28 $125.00 ($1.28)
February 1,066 $104.69 $104.22 ($0.47)
March 1,076 $105.68 $105.17 ($0.51)
April 859 $84.19 $84.49 $0.30
May 789 $77.26 $77.82 $0.56
June 700 $68.45 $69.33 $0.89
July 782 $76.57 $77.15 $0.58
August 791 $77.46 $78.01 $0.55
September 545 $53.66 $55.10 $1.44
October 788 $77.16 $77.72 $0.56
November 1,068 $104.89 $104.41 ($0.48)
December 1,395 $137.27 $135.58 ($1.69)
Total Annual 11,143 $1,093.54 $1,093.99 $0.45
Total % Bill Change 0.0%
Monthly Bills of an Electric Customer
the basic charge as compared to the Company’s proposed $8.50 1
Schedule 1 basic charge. The table illustrates the reduction
in payment of fixed costs in the winter months, and
increased payment in the summer, with the net result being
improved alignment of payment of fixed costs by customers
with the fixed costs to serve customers, with essentially no
change in overall annual payment.
Table No. 11 – Monthly Bills for a Residential Schedule 1 8
Electric Customer using an Average of 929 kWhs per Month 9
10
11
12
13
14
15
16
17
18
19

Table 12 below provides a similar comparison for a 12-
month period for a natural gas customer with average usage.
The net result is similar to the electric results above,
namely a better alignment of payment of fixed costs by
customers with the fixed costs to serve customers.
Ehrbar, Di 52
Avista Corporation
Month Therms
Current $4.25
Basic Charge
Proposed $8.00
Basic Charge
Higher /
Lower Bill
January 118 $118.08 $114.62 ($3.47)
February 103 $103.61 $101.06 ($2.55)
March 90 $91.07 $89.32 ($1.75)
April 52 $54.41 $54.98 $0.57
May 34 $37.05 $38.72 $1.67
June 21 $24.51 $26.97 $2.47
July 13 $16.79 $19.75 $2.96
August 13 $16.79 $19.75 $2.96
September 16 $19.68 $22.46 $2.77
October 50 $52.48 $53.18 $0.69
November 99 $99.75 $97.45 ($2.30)
December 126 $125.80 $121.84 ($3.95)
Total Annual 735.0 $760.04 $760.09 $0.05
Total % Bill Change 0.0%
Monthly Bills of an Average Natural Gas Customer
Table No. 12 – Monthly Bills for a Schedule 101 Natural Gas 1
Customer using an Average of 61 therms per Month 2
3
4
5
6
7
8
9
10
11
12
13
Q. How will the proposed change in the residential 14
basic charge affect limited income customers? 15
A. Traditional thinking might lead one to believe
that a limited income electric customer would tend to be a
lower user of electricity. As explained below, the
available data that we have suggests that just the opposite
is true, which means the increased basic charge would
generally be beneficial to limited income customers.
A majority of our customers have natural gas for space
and water heating, and therefore may have, on average, lower
electric usage during the winter. However, many limited
income customers still use electricity for space and water
Ehrbar, Di 53
Avista Corporation
heating. Many of these customers live in apartments (which
in Avista’s service territory predominantly have electric 2
space and water heat), live in areas where natural gas is
not available, or live in areas where natural gas is
available, but conversion is not affordable. These limited
income customers, with electric space and water heat, can
have electric usage in the tail-block (above 600 kWhs)
during the winter months.
Q. Does the Company have any analysis showing that 9
limited income customers tend to use more electricity than 10
other residential customers? 11
A. Yes. The Company recently conducted an analysis
which shows that limited income customers, on average, do
use more electricity than other residential customers. For
the analysis, the Company looked at those limited income
customers who received a LIHEAP grant during the January –
December 2014 time period, and compared their annual usage
to the usage of all of the other residential customers.16
The results of the analysis are shown in the Table 13 below:

16 Customer usage extracted from the Company’s billing system were from
Schedule 1 customers that had their account open during the entire test
year, i.e., from January 1, 2014 through December 31, 2014. Any
accounts opened for a partial year were excluded. The Company
acknowledges that the limited income population used for this analysis
is not comprehensive. However, because the Company does not track
customer incomes, it is based on the best information available.
Ehrbar, Di 54
Avista Corporation
Idaho Residential Electric Usage Analysis (Billed Usage - Not Weather Corrected)
Year: Calendar 2014
Sample Size
Average Annual
kWh Usage
Average Monthly
kWh Usage
Electric Only Customers - Limited Income (LIHEAP)2,615 13,160 1,097
Electric Only Customers - All Other Residential Customers 34,641 12,800 1,067
Difference 360 30
Dual Fuel Customers - Limited Income (LIHEAP)1,727 9,828 819
Dual Fuel Customers - All Other Residential Customers 44,235 10,507 876
Difference -679 -57
Total Limited Income (LIHEAP)4,342 11,835 986
Total All Other Residential Customers 78,876 11,514 960
Difference 321 27
Table No. 13 1

The analysis shows that limited income customers who
only have electric service use 360 kWhs more per year than
the “All Other Residential Customers” population. For the
combined limited income population, the analysis shows that
they used 321 kWhs more in 2014 than “Total All Other 14
Residential Customers” population.
This analysis shows that limited income customers may
be harmed by having a rate design with a lower basic charge
and a higher tail-block rate, as these customers are more
susceptible to use in the tail-block. A higher basic
charge, on the other hand, would result in lower volumetric
rates (than would otherwise be the case), providing some
relief to these high-use customers during the winter months.
Ehrbar, Di 55
Avista Corporation
V. ELECTRIC AND NATURAL GAS FIXED COST ADJUSTMENT MECHANISMS 1
Q. Is the Company requesting approval of electric and 2
natural gas fixed cost adjustment mechanisms in this general 3
rate case? 4
A. Yes, the Company is requesting both an electric
and natural gas Fixed Cost Adjustment Mechanism (“FCA”) in 6
this case. The Company believes, for reasons stated below,
that the FCA would provide benefits to both customers and
the Company, and therefore is in the public interest and
should be approved.17
Q. Do you believe that the electric and natural gas 11
FCA proposed by the Company is consistent with what the 12
Commission generally has been supportive of in the past?
A. Yes. The proposed mechanism is in keeping with
the Commission’s previous orders related to Idaho Power’s 15
Fixed Cost Adjustment mechanism. In Order No. 33295 issued
on May 6, 2015, in Case No. IPC-E-14-17, the Commission
approved a settlement stipulation filed by certain parties
that modified Idaho Power’s Fixed Cost Adjustment mechanism.
The mechanisms requested by Avista in this case removes the
relationship between kilowatt-hour and therm sales and
revenues, mitigates the disincentive to promote energy

17 The Company is proposing that the FCA go into effect on the first day
of the calendar month that is on, or subsequent to, the effective date
of new retail rates from this case.
Ehrbar, Di 56
Avista Corporation
efficiency, and improves fixed cost recovery, similar to
Idaho Power’s mechanism.
Q. Before describing the mechanism, would you please 3
provide further details on how the mechanism provides 4
benefits the Company and its customers? 5
A. Yes. To the extent use-per-customer declines
between general rate cases, the FCA would provide recovery
of the fixed costs of providing service to its customers.
These are the same fixed costs, on a revenue-per-customer
basis, that the Commission approves for recovery in a
general rate case. The mechanism would also ensure that, to
the extent there is customer growth in the rate year and
beyond, the revenues from those new customers would be
available to offset the growth in utility costs following
the test year.
Customers benefit from the proposed mechanism. By
separating sales from revenues, the disincentive to promote
conservation would be removed, as would any incentive for
the utility to increase throughput. Customers benefit if the
overall actual sales revenue collected by the Company on a
per-customer basis is greater than that approved by the
Commission. For example, if a winter is colder than normal,
leading to loads that are higher than normal, the Company
would rebate to customers all of the revenue collected above
Ehrbar, Di 57
Avista Corporation
the allowed level. And on the other hand, should sales be
lower due to warmer than normal winter weather, the
associated reduction in revenues would be deferred for later
recovery from customers.
The revenue provided to Avista through a FCA would not
represent additional revenue to the Company over and above
what is needed to recover its costs; it represents
restoration of revenues that the Commission has already
determined should be provided to the utility from the last
rate case, on a per customer basis. Furthermore, customers
can expect to see rebates as well as surcharges over time
with the FCAs.
Q. Is weather normalized as a part of the proposed 13
mechanism? 14
A. No, the proposed electric and natural gas FCA
mechanisms do not have a weather normalization adjustment.
The Company has a certain level of fixed costs that are
recovered in its variable energy rates. If weather were to
be normalized as part of the mechanism, the mechanisms would
not provide the same level of fixed cost recovery as
determined in the last general rate case. With the
Company’s proposed FCA, should sales be higher due to colder
than normal winter weather, those additional revenues would
be deferred and returned to customers. And on the other
Ehrbar, Di 58
Avista Corporation
hand, should sales be lower due to warmer than normal winter
weather, the associated reduction in revenues would be
deferred for later recovery from customers.
Q. Does the Company have a FCA in its other 4
jurisdictions? 5
A. Yes. Effective January 1, 2015, Avista has an
electric and natural gas adjustment mechanism that, with the
exception of the name, is materially the same as the
proposed FCA in this case. Further, on May 2, 2015 Avista
filed a general rate case in the State of Oregon (Docket No.
UG-288), and requested a similar adjustment mechanism as
well. 12
13
ELEMENTS OF THE ELECTRIC AND NATURAL GAS FIXED COST 14
ADJUSTMENT MECHANISMS 15
16
Q. Would you please provide a summary of how the 17
proposed electric and natural gas FCA would function? 18
A. Yes. As I will explain in more detail below, the
Company is proposing a Revenue-Per-Customer FCA for its
Idaho electric and natural gas operations. The proposed FCA
compares the actual revenues to the allowed revenues
determined on a per customer basis, with any differences
deferred for later rebate or surcharge. In addition, the
Company is proposing to group customers into two Rate Groups
Ehrbar, Di 59
Avista Corporation
– Residential and Non-Residential. More discussion on the
two Rate Groups will follow later in my testimony.
Q. Please provide information related to when the 3
Company would file for a rate adjustment under the proposed 4
FCA.
A. On or before September 1, the Company would file a
proposed rate adjustment surcharge or rebate based on the
amount of deferred revenue recorded for the prior January
through December time period. The rate adjustment would be
calculated separately for each Rate Group.
The proposed tariff included with that filing would
include a rate adjustment that recovers/rebates the
appropriate deferred revenue amount over a twelve-month
period effective on November 1st. The deferred revenue
amount approved for recovery or rebate would be transferred
to a balancing account and the revenue surcharged or rebated
during the period would reduce the deferred revenue in the
balancing account. Any deferred revenue remaining in the
balancing account at the end of the amortization period
would be added to the new revenue deferrals to determine the
amount of the proposed surcharge/rebate for the following
year.
After determining the amount of deferred revenue that
can be recovered through a surcharge (or refunded through a
Ehrbar, Di 60
Avista Corporation
rebate) by Rate Group, the proposed rates under this
Schedule would be determined by dividing the deferred
revenue to be recovered by Rate Group by the estimated kWh
sales (Electric FCA) or therm sales (Natural Gas FCA) for
each Rate Group during the twelve-month recovery period.
Interest would be accrued on the unamortized balance in
the FCA balancing accounts at the quarterly rate published
by the Federal Energy Regulatory Commission (“FERC”).18
Q. For the Electric FCA, would you please describe 9
how the Fixed Cost Adjustment Revenue is determined? 10
A. Yes. Provided on Page 1 of Exhibit No. 15,
Schedule 7 is information that calculates the Fixed Cost
Adjustment Revenue.19 This is the revenue that the Company
collects in its variable energy and demand charges to cover
the fixed costs of providing service to customers. It
excludes revenues associated with power supply, and revenues
that are collected in fixed basic, demand and minimum
charges.
The steps to calculate the base FCA-related revenue are
as follows:
 Step 1 – Determine Total Rate Revenue - Lines 1 through
3 on Page 1 of Exhibit No. 15, Schedule 7 shows the

18 18 CFR 35.19a.
19 If the Commission approves the FCA, the Company would file conforming
Exhibit No. 15, Schedules 7 & 8 reflecting the final approved revenue
and rates for both January 1, 2016 and January 1, 2017.
Ehrbar, Di 61
Avista Corporation
Total Normalized Test Year Revenue from the test period
($245.0 million) and adds to that total the Proposed
Revenue Increase ($13.2 million). The resulting
calculation is the Total Rate Revenue that the Company
has requested in this case ($258.2 million) effective
January 1, 2016.

 Step 2 – Remove Variable Power Supply Revenue – The
Normalized kWhs by rate schedule for the test year are
detailed on Line 4. On Line 5, those kWhs are
multiplied by the proposed Load Change Adjustment Rate
of $0.02513 to determine the total Variable Power
Supply Revenue.20 Lines 12-14 show the calculation of
the Load Change Adjustment Rate grossed up for revenue-
related expenses.

 Step 3 – Remove Fixed Charge Revenues – Because the
proposed FCA only tracks revenue that varies with
customer usage, the revenue from Fixed Charges must be
removed. Line 8 shows the number of Customer Bills in
the test period, and Line 9 shows the proposed basic
and fixed demand charges in this case. Line 10 is the

20 See Exhibit No. 13, Schedule No. 1 for the Load Change Adjustment
Rate of $0.02399/kWh. As shown on page 1 of Exhibit No. 15, Schedule 7,
the Load Change Adjustment Rate has been grossed up for revenue-related
expenses to $0.02513/kWh.
Ehrbar, Di 62
Avista Corporation
total Fixed Charge Revenue which is calculated by
taking the number of customer bills and multiplying
those by the associated Basic Charges, by rate
schedule.

 Step 4 – Determine Fixed Cost Adjustment Revenue – The
final step to calculate the allowed or base Fixed Cost
Adjustment Revenue, as shown on Line 11, is to subtract
the Fixed Charge Revenue (Line 10) from the subtotal on
Line 7.

Steps 1 through 4 above subtract from the Total Rate
Revenue the revenues associated with Variable Power Supply
and Fixed Charges in order to develop the Allowed Fixed Cost
Adjustment Revenue. The next step will be to determine the
Allowed Fixed Cost Adjustment Revenue on a per-customer
basis.
Q. Would you please describe how the Allowed Fixed 18
Cost Adjustment Revenue per-Customer is determined? 19
A. Yes. Provided on Page 2 of Exhibit No. 15,
Schedule 7 are the inputs and calculations to determine the
Allowed Fixed Cost Adjustment Revenue per-Customer. Line 1
on Page 2 of Exhibit No. 15, Schedule 7 shows the Allowed
Fixed Cost Adjustment Revenue, by Rate Group, that was
Ehrbar, Di 63
Avista Corporation
calculated earlier. Note that the information on Page 2 now
shows the revenues by Rate Group rather than by individual
rate schedule. More discussion related to the Rate Groups
will follow later in my testimony.
Line 2 shows the Test Year Customers, by Rate Group.
Finally, Line 3 divides the Allowed Fixed Cost Adjustment
Revenue by the Test Year number of Customers to determine
the annual allowed Fixed Cost Adjustment Revenue per-
Customer.
Page 3 of Exhibit No. 15, Schedule 7 calculates the
monthly allowed Fixed Cost Adjustment Revenue per-Customer.
To determine the monthly allowed Fixed Cost Adjustment
Revenue per customer, which is required for the monthly
deferral calculations discussed later in my testimony, the
annual allowed Fixed Cost Adjustment Revenue per customer is
shaped based on the monthly kWh usage from the test year, as
shown on Page 3 of Exhibit No. 15, Schedule 7. For example,
as shown on line 4, the Residential Group used 11.50% of its
annual usage in January 2014 (131,9655 MWh / 1,147,395 MWh).
The Company used the resulting monthly percentage of usage
by month and multiplied that by the annual allowed Fixed
Cost Adjustment Revenue per Customer to determine the 12
monthly values.
Ehrbar, Di 64
Avista Corporation
Q. Please describe how deferrals for the Electric FCA 1
would be calculated? 2
A. In the rate year, the Company would compare the
Actual revenue it receives with the allowed Fixed Cost
Adjustment Revenue, and defer the difference between the
two. Deferrals would be tracked separately for each Rate
Group. A sample calculation, provided for illustrative
purposes, is included on Page 4 of Exhibit No. 15, Schedule
7. Detailed below are the steps outlined on Page 4 to
calculate the deferral. For purposes of describing the
deferral calculation, I will only refer to the calculation
of the deferral for the Residential Group; there is no
difference in the calculations for the Non-Residential
Group.

 Step 1 – Determine Allowed Fixed Cost Adjustment
Revenue - The first step is to pull from the Company’s 17
billing system the actual number of customers each
month. Line 1 on Page 4 of Exhibit No. 15, Schedule 7
shows an illustrative Residential Group level of
customers for the Rate Year of 2016. Line 2 shows the
Allowed Monthly Fixed Cost Adjustment Revenue per-
Customer for that group. Multiplying those values
together results in an Allowed Fixed Cost Adjustment
Ehrbar, Di 65
Avista Corporation
Revenue for each month, shown on Line 3. The
calculated values on Line 3 show, by month, the total
amount of FCA revenue that the Company would be
allowed.

 Step 2 – Determine Period “Actuals” - The next step is
to pull from the Company’s billing system the Actual 7
Base Rate Revenue (Line 4 on Page 4 of Exhibit No. 15,
Schedule 7), Actual Fixed Charge Revenue (Line 5) and
Actual Usage (Line 6). These “actuals” would not be 10
weather normalized.

 Step 3 – Calculation of Variable Power Supply Revenue –
The next step in the deferral calculation multiplies
the approved Load Change Adjustment Rate (Line 7 on
Page 4 of Exhibit No. 15, Schedule 7)) by the Actual
Usage (kWhs) shown on Line 6. The result is the level
of revenues associated with variable power supply that
will be deducted in Step 4.

 Step 4 – Calculation of Actual Fixed Cost Adjustment
Revenue – Line 9 on Page 4 of Exhibit No. 15, Schedule
7 shows the calculation of the Actual Fixed Cost
Adjustment Revenue. This calculation subtracts from
Ehrbar, Di 66
Avista Corporation
Actual Base Rate Revenue on Line 4 the Actual Basic
Charge Revenue (Line 5) and the Variable Power Supply
Revenue (Line 8). The calculated values on Line 9
show, by month, the total amount of FCA revenue that
the Company actually received.

 Step 5 – Deferral Calculation – In order to determine
if the Company over- or under-recovered its fixed
costs, Actual Fixed Cost Adjustment Revenue (Line 9 on
Page 4 of Exhibit No. 15, Schedule 7) is subtracted
from allowed Fixed Cost Adjustment Revenue (Line 3).
Line 10 shows the result. If the number is positive
(surcharge direction), then the Company under-recovered
its allowed revenue. If the number is negative, then
the Company over-recovered its allowed revenue. The
monthly deferrals are tracked on a monthly basis, and
accrue interest at the FERC rate (as shown on Line
12).21 Finally, Line 13 shows the Cumulative
Deferral.22

21 Interest would be accrued on the balance in the fixed cost adjustment
balancing accounts at the quarterly rate published by the Federal Energy
Regulatory Commission (“FERC”).
22 Note that the deferral calculations would be completed at the revenue
level. The actual deferral would have an additional calculation to
remove revenue-related expenses, as shown on line 11. The final
deferred balance which the Company would file for later rebate or
recovery from customers would then be grossed up for revenue-related
expenses.
Ehrbar, Di 67
Avista Corporation
In summary, the calculations shown on Page 4 of Exhibit
No. 15, Schedule 7 provide an example of how the Electric
FCA would work. It shows the use of the Monthly allowed
Fixed Cost Adjustment Revenue per-Customer and how that
value is applied to the actual level of customers to
determine the allowed Fixed Cost Adjustment Revenue.
Further, the example shows how actual Basic Charge and
variable power supply revenue are removed from actual
revenues to determine the amount of revenues the Company
actually received related to fixed costs. Finally, the
example shows the monthly and cumulative deferral
calculations, including the effect of interest.
Q. For the Natural Gas FCA, would you please describe 13
how the Fixed Cost Adjustment Revenue is determined? 14
A. Yes, and it is very similar to the calculation for
the Electric FCA. Provided on Page 1 of Exhibit 15,
Schedule 8 is information that calculates the Fixed Cost
Adjustment Revenue. This is the revenue that the Company
collects in its variable energy charges to cover the fixed
costs of providing service to customers. It excludes
revenues associated with the natural gas commodity and
interstate pipeline transportation, and revenues that are
collected in basic and minimum charges.
Ehrbar, Di 68
Avista Corporation
 Step 1 – Determine Total Delivery Revenue - Lines 1
through 3 on Page 1 of Exhibit 15, Schedule 8 shows the
Total Normalized Test Year Revenue ($36.1 million) and
adds to that total the Proposed Revenue Increase ($3.2
million). The resulting calculation is the proposed
Total Delivery Revenue that the Company has requested
in this case ($39.4 million).
 Step 2 – Remove Fixed Charge Revenue – Included in the
Total Delivery Revenue on Line 3 are revenues that are
recovered from customers in fixed monthly basic
Charges. Because the proposed FCA only tracks revenue
that varies with customer usage, the revenue from Fixed
Charges must be removed. Line 4 shows the number of
Customer Bills in the test year, and Line 5 shows the
Proposed Fixed Charges in this case.23 Line 6 is the
total Fixed Charge Revenue which is calculated by
taking the number of customer bills and multiplying
those by the associated Fixed Charges, by rate
schedule.
 Step 3 – Determine Fixed Cost Adjustment Revenue – The
final step to calculate the Allowed Fixed Cost
Adjustment Revenue, as shown on Line 7, is to subtract

23 If the Commission approves basic charges that are different than what
the Company proposed, the basic charges included in Exhibit 15, Schedule
8 p. 1, ln. 5 would need to be updated.
Ehrbar, Di 69
Avista Corporation
the Fixed Charge Revenue (Line 6) from the Total
Delivery Revenue (Line 3).
Steps 1 through 3 above subtract from the Total
Delivery Revenue the revenues associated with the Fixed
Charges to develop the Fixed Cost Adjustment Revenue. The
next step will be to determine the allowed Fixed Cost
Adjustment Revenue on a per-customer basis.
Q. Would you please describe how the Allowed Fixed 8
Cost Adjustment Revenue per-Customer is determined? 9
A. Yes. Provided on Page 2 of Exhibit 15, Schedule 8
are the inputs and calculations to determine the Allowed
Fixed Cost Adjustment Revenue per-Customer. Line 1 on Page
2 of Exhibit 15, Schedule 8 shows the Fixed Cost Adjustment
Revenue, by Rate Group, that was calculated earlier. Note
that the information on Page 2 now shows the revenues by
Rate Group rather than by individual rate schedule. More
discussion related to the Rate Groups will follow later in
my testimony.
Line 2 shows the Test Year Number of Customers, by Rate
Group. Finally, Line 3 divides the Fixed Cost Adjustment
Revenue by the Test Year Number of Customers to determine
the annual Fixed Cost Adjustment Revenue per-Customer.
Page 3 of Exhibit 15, Schedule 8 calculates the monthly
Fixed Cost Adjustment Revenue per-Customer. To determine
Ehrbar, Di 70
Avista Corporation
the monthly Fixed Cost Adjustment Revenue per-Customer,
which is required for the monthly deferral calculations
discussed later in my testimony, the annual Fixed Cost
Adjustment Revenue per-Customer is shaped based on the
monthly therm usage from the test year as shown on Page 3 of
Exhibit 15, Schedule 8. For example, the Residential Group
used to use 15.95% of its annual usage in January 2014
(8,886,364 therms / 55,714,011 annual therms) as shown on
line 5. The Company used the resulting monthly percentage
of usage by month and multiplied that by the annual allowed
Fixed Cost Adjustment Revenue per Customer to determine the
12 monthly values shown by Rate Group on lines 14 and 18.
Q. Please describe how deferrals for the Fixed Cost 13
Adjustment Mechanism would be calculated. 14
A. In the rate year, the Company would compare the
Actual revenue it receives with the allowed Fixed Cost
Adjustment Revenue, and defer the difference between the
two. Deferrals would be tracked separately for each Rate
Group. A sample calculation, provided for illustrative
purposes, is included on Page 4 of Exhibit 15, Schedule 8.
Detailed below are the steps outlined on Page 4 to calculate
the deferral.
For purposes of describing the deferral calculation, I
will only refer to the calculation of the deferral for the
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Avista Corporation
Residential Group; there is no difference in the
calculations for the Non-Residential Group.
 Step 1 – Determine Allowed Fixed Cost Adjustment
Revenue – The first step is to pull from the Company’s 4
billing system the actual number of customers each
month. Line 1 on Page 4 of Exhibit 15, Schedule 8
shows an illustrative Residential Group level of
customers for the Rate Year of 2016. Line 2 shows the
allowed Monthly Fixed Cost Adjustment Revenue per-
Customer for that group. Multiplying those values
together results in an allowed Fixed Cost Adjustment
Revenue for each month, shown on Line 3. The
calculated values on Line 3 show, by month, the total
amount of revenue that the Company would be allowed.

 Step 2 – Determine Period “Actuals” – The next step is
to pull from the Company’s billing system the Actual
Monthly Delivery Revenue, which excludes the cost of
natural gas (Line 5 on Page 4 of Exhibit 15, Schedule
8). These “actuals” would not be weather normalized.

 Step 3 – Calculation of Actual FCA Revenue – Line 7 on
Page 4 of Exhibit 15, Schedule 8 shows the calculation
of the Actual Fixed Cost Adjustment Revenue. This
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Avista Corporation
calculation subtracts from Actual Monthly Delivery
Revenue on Line 5 the Actual Fixed Charge Revenue (Line
6). The calculated values on Line 7 show, by month,
the Actual Fixed Cost Adjustment Revenue (e.g., the
actual fixed costs recovered in volumetric rates).

 Step 4 – Deferral Calculation – In order to determine
if the Company over- or under-recovered its fixed
costs, Actual Fixed Cost Adjustment Revenue (Line 7 on
Page 4 of Exhibit 15, Schedule 8) is subtracted from
Allowed Fixed Cost Adjustment Revenue (Line 3). Line 7
shows the calculation. If the number is positive
(surcharge direction), then the Company under-recovered
its allowed revenue. If the number is negative, then
the Company over-recovered its allowed revenue. The
monthly deferrals are tracked on a monthly basis, and
accrue interest at the FERC rate (as shown on Line 12).
Finally, Line 9 shows the Cumulative Deferral.

In summary, the calculations shown on Page 4 of Exhibit
15, Schedule 8 provide an example of how the Natural Gas FCA
would work. It shows the use of the Allowed Monthly Fixed
Cost Adjustment Revenue per-Customer and how that value is
applied to the actual level of customers to determine the
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Avista Corporation
Allowed Fixed Cost Adjustment Revenue opportunity. Further
the example shows how actual revenue from Fixed Charges are
removed from actual delivery revenue to determine the Actual
Fixed Cost Adjustment Revenue. Finally, the example shows
the monthly and cumulative deferral calculations, including
the effect of interest.
Q. Earlier in your testimony you mentioned that 7
customers will be combined into Rate Groups. Please 8
explain. 9
A. Avista has combined customers into Rate Groups.
For the Electric FCA, customers would be included in one of
two Rate Groups:

1. Residential – Schedule 1
2. Commercial – Schedules 11, 12, 21, 22, 31, and 32

First, the Company believes that Schedule 1 is a
homogenous group, unlike all of the other rate schedules,
and therefore should be individually tracked in the FCA.
For the “Commercial” rate schedules, the Company believes 20
that keeping these non-residential customers as its own
group strikes a reasonable balance between a desire to
minimize cross-subsidization between customer groups (i.e.,
customers switching rate schedules to avoid potential
surcharges or to enjoy potential rebates) and the
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Avista Corporation
administrative complexity that could result from greater
delineation of non-residential customers.
Street and Area Lighting customers served on Schedules
41-49 were excluded because the fixed costs to serve them
are recovered in their flat monthly rates, and therefore
fixed cost recovery is not dependent upon customer usage.
Extra Large General Service Schedule 25 and Extra Large
General Service to Clearwater Paper Schedule 25P were
excluded from the mechanism primarily because these
customers tend to be higher load factor customers. With a
higher load factor, the Company believes that the recovery
of fixed costs from these customers is less volatile versus
the other schedules, and as such inclusion in the FCA at
this time is not necessary.
For the Natural Gas FCA, customers would be included in
one of two Rate Groups:

1. Residential – Schedule 101
2. Commercial – Schedules 111, 112, 131, and 132

For similar reasons that were provided for the
residential and commercial electric grouping, the Company
believes that the two proposed rate groups are appropriate.
Schedule 146 transportation customers were not included in
the design of the FCA because, like Schedule 25 customers,
they tend to have less volatile usage (higher load factor).
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Avista Corporation
As such, the Company believes that the fixed costs recovered
in these customer’s variable rates tend to be more stable,
and therefore do not need to be included in the mechanism.
Q. Would you describe the accounting for the proposed 4
electric and natural gas FCA? 5
A. Yes. The Company would record the deferral in
account 186 – Miscellaneous Deferred Debits. The amount
approved for recovery or rebate would then be transferred
into a Regulatory Asset or Regulatory Liability account for
amortization. On the income statement, the Company would
record both the deferred revenue and the amortization of the
deferred revenue through Account 456 –Other Electric
Revenue, or Account 495 – Other Gas Revenue, in separate
sub-accounts. The Company would file quarterly reports with
the Commission showing pertinent information regarding the
status of the current deferral. This report would include a
spreadsheet showing the monthly revenue deferral calculation
for each month of the deferral period (January - December),
as well as the current and historical monthly balance in the
deferral account.
Q. Has the Company prepared electric and natural gas 21
tariffs that would administer the FCA? 22
A. Yes, included in Exhibit 15, Schedule 2 (electric)
and Schedule 5 (natural gas) are new tariff Schedules 75
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Avista Corporation
(electric) and 175 (natural gas). These tariffs outline the
mechanics of the FCA and would serve as the rate adjustment
tariff. 3
Q. Does this conclude your pre-filed, direct 4
testimony? 5
A. Yes, it does.