20151113Andrews Direct in Support of Stipulation.pdf

{:lf:/al: tl,r'11
?fii5 td,tl/ t3 fiH 9: 39
DAVID J. MEYER
vrcE ,RESTDENT AND cHrEE couNSEL FoR lIlAlJo irtiff! icuTii-tTlEs ccMhtt$stoREGULATORY & GOVERNMENTAL AFFAIRS
AVISTA CORPORATION
P.O. BOX 3727
L41,L EAST MISS]ON AVENUE
SPoKANE, WASHTNGTON 99220-3727
TELEPHoNE: [phone]L6
EACSIMILE: [phone]
DAVI D . MEYERGAVI STACORP . COM
BEFORE trHE IDAHO PUBLIC T'EII.,IUES COM!{TSSION
]N THE MATTER OF THE APPLICATION ) CASE NO. AVU-E-15-05
OF AVISTA CORPORAT]ON EOR THE ) CASE NO. AVU-G-15-01
AUTHORITY TO INCREASE ITS RATES )
AND CHARGES FOR ELECTRIC AND ) D]RECT TESTIMONY
NATURAL GAS SERVICE TO ELECTR]C ) OF ELIZABETH M. ANDREWS
AND NATURAL GAS CUSTOMERS ]N THE ) IN SUPPORT OF THE
STATE OF IDAHO ) ST]PULAT]ON AND
) SETTLEMENT
FOR AVISTA CORPORATION
(ELECTRIC AND NATURAL GAS)
I
2
J
4
5
6
7
8
9
l0
ll
t2
l3
t4
l5
l6
t7
l8
t9
20
2t
22
23
24
I.IIITRODUCTION
a.
address.
PJ.ease state your nane, euployer and business
A. My name is Elizabeth M. Andrews and I am
employed by Avista Corporation ("Company" or "Avista")
as Manager of Revenue Requirements in the State and
Federal Requlation Department, at 741,1 East Mj-ssion
Avenue, Spokane, Washington.
A. Have you previously provided direct testimony
in this Case?
A. Yes. My previous direct testimony in this
proceeding covered accountinq and financial data in
support of the Company's need for the proposed increase
in rates. I explained pro formed operating resul-ts
including expense and rate base adjustments made to
actual operating results and rate base.
A. What is the scope of this pre-fiJ.ed testimony?
A. The purpose of my testimony is to explain why
the Stipulation is in the public interestr Els welI as
describe and support the electric and natural gas revenue
requirement elements of the Stipulation and Settlement
("Stipulation"), filed on October 16, 20L5 between the
Staff of the Idaho Public Utllities Commission ("Staff'),
Cl-earwater Paper Corporatj-on ("Clearwater"), Idaho Eorest
Andrews, Di I
Avista Corporation
1
2
5
4
5
6
7
I
9
l0
l1
t2
l3
t4
l5
l6
t7
l8
t9
20
2t
22
23
Group, LLC ("Idaho Forest"), the Community Action
Partnership Association of Idaho ("CAPAI"), the Idaho
Conservation Leaque ("Conservation League"), the Snake
River AIIiance ("Snake River") and the Company, which, if
approved by the Commission, would resolve al-I of the
issues in the Company's filing. These entj-tles are
collectively referred to as the "Partiesr " and represent
all parties in the above-referenced cases.
Company witness Mr. Ehrbar discusses the non-revenue
rel-ated elements of the Stipulation agreed to by the
Parties, such as Rate Spread and Rate Design, the Fixed
Cost Adjustment (FCA) Mechanism, as well as other
Stipulation components related to the Power Cost
Adjustment (PCA) authorized l-evel of expenses and
customer service-related initiatives and programs.
A. Are you sponsoring any exhibits?
copy
16,
A. Yes. I am sponsoring Exhibit No. 1, which is a
of the Stipulation and Settlement filed on October
20L5, wi-th the Commission.
A. Please e:<trrJ.ain how the Parties arrived at the
StipuJ.ation in ttris proceeding.
A. The Stipulation is the product of settlement
discussions hel-d in the Commission offices on September
Andrews, Di 2
Avista Corporation
1
2
aJ
4
5
6
7
8
9
l0
11
t2
l3
t4
l5
l6
t7
l8
18, 2Ot5.L It represents a compromise among differing
points of view, with concessions made by all Parties, to
reach a balancing of interests. As wiLl be explained in
the Company's testimony, the Stipulation represents a
fair, just and reasonable compromise of the issues and is
1n the public interest. In addition, the Stipulation is
the end result of extensive audit work conducted through
the discovery process2, including various on-site audit
visits by Commission Staff, and hard bargaining by al-l
Partj-es in this proceeding.
As discussed in my testimony, the Stipulation
between the Parties resolved al-L issues associated with
the calculation of the Company's requested cost of
capital,including capital structure and cost
components, and resolved al-l revenue reguirement issues.
As discussed by Mr. Ehrbar, the Stipulation also
addresses agreement regarding rate spread and rate
design and the proposed FCA Mechanism.
1 ICL was unable to attend the Settlement Conference; however, they
did provide a "Position Statement" on September 17, 2015 provi-dingtheir views on issues related to the proposed Fixed Cost Adjustment
mechanisms and rate design.2 For its part, Avista responded to over 176 production requests(including sub-parts) from IPUC Staff and other interveningparties.
Andrews, Di 3
Avista Corporation
I
2
3
4
5
6
7
8
9
l0
ll
t2
13
t4
l5
t6
t7
l8
t9
20
2t
A. Iltry is the StipuJ.ation in ttre pubJ.ic interest?
A. The Stipulation is in the "public interest"
for several reasons. The Stipulation was the product of
the give-and-take of negotiation that produced an "end
result" that is just and reasonable. In addition, it is
supported by the evidence, demonstrating the need for
rate adjustments to provide recovery of necessary
expenditures and investment, the costs of which are not
offset by a growth in sal-es margins. The Settlement
enjoys broad-based support from a variety of
constituencies, including CAPAI, Clearwater, Idaho
Forest, the Conservation League, and the Snake River
Alliance, serving to address their specific needs, and
the Staff of the Commissi-on, representing all customers.
A. Would you briefJ,y sumrarize the Stipulation?
A. Yes. Under the terms of the Stipulation, as
discussed further by Mr. Ehrbar, Avista woul-d implement
revised tarlff schedules deslgned to recover additional
annual el-ectric and natural gas revenue effective January
t, 201,6. These rate changes are designed to provide
retail revenues necessary to allow the Company the
Andrews, Di 4
Avista Corporation
I
2
3
4
5
6
7
8
9
l0
ll
t2
l3
14
15
l6
t7
18
t9
20
2t
opportunity to earn the return agreed
Stipulation for the 2016 rate period.3
3 There was no agreement byrelief originally requested by
from filing for general rateof this proceeding.
to in the
the Parties regardlng the 2017 ratethe Company, nor is Avista precludedrel-ief for 201'7 after the conclusion
Andrews, Di 5
Avista Corporation
For electric operations, the Parties agree to an
overafl base rate increase of 0.12 (0.7% on a biIled
basis) or $1.7 million in el-ectric annua] base tarif f
revenues. In addition, the Parties have agreed to the
proposed extension of Schedule 97 extending the el-ectric
rebate extension in fu1l ($2.8 million annually) for two
years through December 2017. Therefore, a residential
customer using an average of 929 kilowatt hours per month
would see a $0.75r er 0.92, increase per month for a
revised monthly bill of $85.74. (See Exhibit No. t,
Paragraph 18, for the January 7, 2016 percentage change
in rates by rate schedule. )
For natural 9ds, Avista would implement revised
tariff schedules designed to recover $2.5 million in
additional annual natural gas revenue, representing an
overall 3.5% (4. BB on a billed basis) increase. fn
addition, the Parties have agreed to the proposed
extensj-on of Schedule L97, extending the natural gas
rebate extension in part ($0.2 million of the current
1
1L
3
4
5
6
7
8
9
l0
1l
t2
l3
t4
l5
l6
l7
l8
t9
20
2l
22
23
$1.2 million) through December 20L6.Therefore,
residential- customer using an average of 6L therms per
month would see a $3.19, or 5.4e", J-ncrease per month for
a revised monthly bilI of $62.41". (See Exhibit No. L,
Paragraph 19, for the ,January
in rates by rate schedul-e. )
, 201,6 percentaqe change
In determining these revenue increases, the Partj-es
have agreed to varj-ous adjustments to the Company's
original filing,which are summarized in the
testimonyStipulation, and described
be1ow.
further in my
1
of
of
The Stipulation ca1ls for an overall rate
7.422, determined using a capital structure
508 common stock equity and 50E debtr dn
of return
consisting
authorized
342.
implement
return on equity of 9.58 and cost of debt of 5.
Lastly, the Parties agree that Avista wil-l-
electric and natural gas Fixed Cost Adjustment mechanisms
("FCA"), which will commence concurrently with the
natural gas and electric rate changes ,January L, 20L6.
The key components of the el-ectric and natura1 gas FCA
Mechanisms are described by Mr. Ehrbar in more detail,
and are lllustrated in Appendlces B and C of the
Andrews, Di 6Avista CorporatJ-on
Stipulation attached as Exhibit No. l-.
1
2
3
4
5
6
7
8
9
l0
l1
t2
l3
t4
l5
l6
l7
18
19
20
2l
22
23
24
II. HISTORY OF FILING
9. P1ease describe the Comtrrany's general rate case
request, as fiJ.ed.
A. On June !, 201,5, Avista filed an Application
with the Commlssion for authority to increase revenue
effective January t, 2016 for electric and natural- gas
service in Idaho by 5.22 and 4.52, respectively. If
approved, the Company's 201,6 revenues for electric base
retail rates would have increased by $13.2 mil-1ion
annua11y, and Company revenues for natural gas service
woul-d have increased by $3.2 million annuaIIy. The
Company also requested an increase to electric base
reta j-l- revenue of $ 13 . 7 million (5 . 18 ) , and an increase
in natural gas base retail revenue of $1.7 (2.2e") ,
effective January t, 2011. By Order No. 33324, dated
June 15,201.5, the Commission suspended the proposed
schedules of rates and charges for electrj-c and natural
gas service.
The Company proposed utilizing the results of its
electric and natural- gas service studies, sponsored by
Company witnesses Ms. Knox and Mr. Miller, respectively,
as a guide to spread the overall requested electric and
natural gas revenue increases by rate schedul-e on a basis
which: 1) moved the rates for nearly all the schedules
Andrews, Di 7
Avj-sta Corporatj-on
1
2
J
4
5
6
7
8
9
l0
1l
t2
l3
t4
l5
l6
l7
18
t9
20
2t
22
23
24
closer to the cost of providing service, and 2) resulted
in a reasonabfe range in the (net) proposed percentage
increase across the schedules. The spread of the
proposed efectric and natural- gas increases generally
resulted in the rates of return for the various service
schedules moving approximately 252 closer to the overall-
rate of return (unity) for electrlc, and approximately
338 cl-oser to the overall- rate of return for natural gas.
The Company also requested electric or natural gas
residential basic charge increases from $5.25 to $8.50
for electric, and from $4.25 to $8.00 for natural gas.
A. I[hat are the primary factors driving the
Coryany's need for electric and natural gas increases?
A. The primary factor drj-ving the Company's
proposed electric and natural gas revenue increases in
201,6 and 201,1r dS discussed in the Company' s dj-rect
filing, is an increase in net plant investment. Specific
capital investments over the period 2015-20L1 dj-scussed
by other Company witnesses include, among other things,
replacement of the Company's Customer Information System
(Project Compass) described by Mr. Kensok, and upgrades
to certain major generati-ng facilities, such as the Nine
Mile Rehabil-itation project discussed by Mr. Kinney. In
2016, these increased costs for electric operations are
Andrews, Di 8
Avj-sta Corporation
I
2
J
4
5
6
7
8
9
10
11
t2
13
t4
l5
l6
t7
18
t9
20
2t
22
23
24
offset, in part, by a reduction in net power supply and
transmission expenditures .
However, for 2011 net power supply expenses
contribute significantly to the proposed incremental
revenue increase requested for 2017. Approximately 403
of the 201-1 proposed revenue increase is related to the
expiration of a capacity sales agreement with Portland
General Electrj-c on December 31, 20L6, increasing overall
net power supply costs.
III. RE\IENT'E REQUIREMENE EI,E['EN![S OF TIIE STIPI'IATION
A. PJ.ease erqrJ.ain ttre derivation of ttre Electric
and Natural Gas Revenue Requirements outlined in ttre
StipuJ.ation.
A. The Parties agreed that Avista would implement
revlsed tariff schedules designed to recover additional-
annual electric and natural gas revenue, effective
January 1t 20L6. These increases are designed to provide
sufficient retail revenues for the 20L6 rate period,
which would provide the Company with the opportunity to
earn the return agreed to in the Stipulation.
While Avista's filing requested 201,6 and 2077
electric revenue requirement increases of $73.2 million
and $13.7 mi11ion, respectively, effectj-ve January 1 of
Andrews, Di 9
Avlsta Corporation
1
2
3
4
5
6
7
8
9
l0
ll
t2
l3
t4
l5
I6
t7
t8
t9
20
2l
22
23
24
each year, the Parties only agreed to a 2016 increase
effective January L, 20L6. Agreed-upon adjustments,
including the agreed-upon rate of return, result in a
recommended electric revenue requirement j-ncrease of $1.7
million effective January 1, 2016.
Similarly, while the Company requested 2016 and 201,7
natural gas revenue requirement increases of $3.2 mil1ion
and $1.7 milIion, respectively, effective January L of
each year, the Parties only agreed to a 2016 increase
effective January L, 2416. Agreed-upon adjustments,
including the agreed-upon rate of return, result in a
recommended natural- gas revenue requirement increase of
$2.5 mil-l-ion effective January 1, 20L6.
No agreement was made by the Parties regarding the
2Ol7 electric and natural gas proposed increases by
Avista, and Avista is not precluded from filing for 20L7
general rate relief after the conclusion of this
proceeding.
A. Please erqrlain ttre Parties' agreaent with
regard to an Auttrorized Rate of Return, inclu.ling the
Return on Equity.
A. The Parties have agreed to an overal-l rate of
return of 7.422, based on a return on equity of 9.52, an
equity component at 504 and cost of debt of 5.348. By
Andrews, Dl 10
Avista Corporation
I
2
J
4
5
6
7
8
9
l0
ll
t2
l3
t4
l5
comparison, the Company's orlginal filing requested an
overall rate of return of 1.62%, a return on equity of
9.92, an equity component of 50? and cost of debt of
5.34%.
A. Please provide an overview of the tevenue
requireuent adjustnents agreed to by the Parties
resulting in the overal.J. eJ.ectric and natural gas revenue
requireoents.
A. A number of the adjustments, agreed to by the
Parties, resulted in removlng 20L6 increased costs for
recovery to be determined in a future rate period, as
well as reducing certaln expenditures to the agreed-upon
levels by the Parties. The Parties agreed to revenue
requirements that reflect the adjustments shown below in
the excerpted tables from the Stipul-ation:
Andrews, Di 11
Avista Corporation
I
2
J
4
5
6
7
8
9
l0
ll
t2
l3
t4
15
l6
t7
l8
t9
20
2l
22
23
Andrews, Di L2
trab].e 1: E].ectric Revenue Requirenent
SUMMARY TABLE OF ADJUSTMENTS TO ELECTRIC REVENUE REQUIREMENT
ETFECTIVE JANUARY 1, 2016
(000s of Dollars)
Revenue
Requirrment Rate Base
Amount rs Filed:
Adjustments:
Cost of Capital
Revise 2015 Capital Additbns
Remove 2016 Capital Additirm
Revbe Defened Debits and Credits to Refhct 2015 Balances
$ 13,230 $ 749,22s
$
$
$
s
.) Remove 2016Expenses
i. Insurance Expense
ii. Information Services & Technology
iii. Non-ExecrfiveLabor
iv. O&M Offsets
Update 2015 Employee Beneft Costs
Adlrst Injuries and Damages Expense
Remove Officer Incentives and Restate Non-Officer Incentives
Include Four-Year Amortizatbn of 2015 Project Compass Deferral
Inchrde Four-Year Amortization oflake Spokane Deferral
) Incfude Palouse Wind in PCA
Mbcellaneous A&G Adjusments: Director & Officer Insurance, Board of
Director Erpenses, Reallocatbn of Legal Expenses, Removal of Environmental
Cleanup Coss, and Removal of Mkcellaneous Agreed-To Expenses
Adjusted Amounts Efrective January 1, 2016
$
$
$
$
$
$
$
$
$
$
(2438)
(3345',) $ (l6,r2s
(s48) $ 1,78952 $ r3l
(62)
(s2l)
(38s)
212
481
(8)
(lo0)
(66e)
(lte)
(3.500)
$ (580)
$ 1,700 $ 7
Tab].e 2: Natural Gas Revenue Requirement
SUMMARY TABLE OF ADJUSTMENTS TO NATURAL GAS REVENUE REQUIREMENT
EFFECTIVE JANUARY I, 2016
(000s of Dollrn)
Revenue
Requirement Rate Base
Amountas Filed; $ 3,205 $ 127,498
Adjustments:
a.) Cost of Capital $ (415)
b.) Revbe 2015 Capital Additions $ 440 $ 3,758
.) Remove 2016 Capital Additions $ (76) $ 669
) Revbe Deferred Debits and Credis to Refbct 2015 Balances $ (3)
.) Remove 2016 Expenses
i. Insuance Expense $ (16)
ii. Information Services & Technology $ (132)
iii. Non-Executive Labor $ (185)
f,) Updat€ 2015 Employee Benefil Costs $ 129
Adjust Injurbs and Damages Expense $ (126)
Remove Offrcer Incentives and Restate Non-Offrcer Incentives $ (25)
Include Four-Year Amortizatbn of20l5 Project Compass Deferral $ (168)
Miscellarrcous A&G Adjushents:Director & Offrcer Insuance, Board of
Director Expenses, Reallocatbn ofLegal Expenses, and Removal of
Miscellaneous Agreed-To Expenses $ (128)
Adjusted Amounts Effective January l, 2016 $ 2,500 $ 131,925
Avista Corporation
1
2
3
4
5
6
7
8
9
l0
l1
t2
l3
t4
15
t6
t7
l8
t9
20
2t
22
23
24
As can be seen by a review of the individual- line
descriptions provided within the summary tables excerpted
from the Stipulation, the adjustments accepted for
settlement purposes cover a broad range of revenue and
cost categories, including the authorized rate of return.
The individual adjustments shou1d not be viewed in
isolation; rather, they should be viewed 1n total as part
of the entire Stipulation, and are the resuLt of hard
bargaining and compromise.
A. Ilould you pJ.ease eJ.aborate on ttre individua1
J.ine iteus contained rittrin ttre excerpted tabJ.es?
A. Yes. A description of these adjustments for
electrj-c and natural 9ds, resulting in the revenue
requirements effective January 1, 20L6 foIlows.
Cost of Capital - (Table 1 and Table 2, line a. ) The
overall revenue requlrement reduction of the change in
cost of capital, reduces the overall revenue requirement
for electric by $2.438 million and for natural gas by
$415,000.
Revise 2015 Capital Additions (Table l- and Table
2, Iine b. ) The 20L5 electric and natural gas capital
additions were updated by Avista to reflect adjustments
for updated informati-on, including, for example, the
delay in completion of the Nine Mile Hydroelectric
Andrews, Di t-3Avista Corporation
1
2
J
4
5
6
7
8
9
10
ll
t2
13
t4
l5
t6
t7
l8
t9
20
2I
22
Capital Project from 201,5 to 2016 and the impact on
depreciation expense, as well as accumulated depreciation
(A/D) and accumulated deferred federal income taxes
(ADFIT) .
For electric, this adjustment to update capital
investment reduces the overal-1 revenue requirement by
$3.345 million and reduces rate base by $76.L25 mi11ion.
For natural 9ds, this adjustment increases the overalf
revenue requirement by $440,000 and increases rate base
by $3.758 mill-ion.
Remove 201-6 Capital- additions (TabLe 1 and Table
2t line c. ) The 2016 electric and natural gas capital
additions adjustmentsr ds proposed by the Company 1n its
original filings, were removed, delaying recovery by
Avista of the associated revenue requirement until future
rate case proceedings. Total depreciation expenses and
rate base, net of accumufated deprecj-ation and
accumulated deferred j-ncome tax, reflect balances as of
year-end December 31, 20L5.For electric, this
adjustment reduces the overall revenue requirement by
$5481000 and increases rate base by $1.789 million. For
natural gasr this adjustment decreases the overall
Andrews, Di 1,4Avista Corporation
I
2
3
4
5
6
7
8
9
l0
ll
t2
l3
t4
15
l6
t7
18
19
20
2t
revenue requirement by $75,000 and increases rate base by
$669, 000.4
Revise Deferred Debits and Credits to reflect 201-5
Bafances (Tabl-e 1 and Tabl-e 2, Iine d. ) Deferred debits
and credj-ts regulatory
adjusted to reflect
balances and amortizations were
2015 amortj-zation expense and
regulatory balances as of December 31, 2015, rather than
the 201-6 expense and regulatory balances as proposed by
the Company. For electric, this adjustment increases the
overall revenue requirement by $52r000 and increases rate
base by $131,000. Eor natural 9ds, this adjustment
decreases the overall revenue requirement by $3,000.
Remove 2016 Expenses (Table 1 and Table 2, line
e.) The following adjustments remove 20L6 expenses pro
formed in the Company's original filing, delaying
recovery of those expenditures until future rate case
proceedings:
Insurance Expense - (Tab1e 1 and Table 2, l1ne
e., i.) 2016 incremental- insurance expenses related
to general liability, directors and officers
(*D&O") Iiability, and property insurance were
a Removing the j-mpact of 20L6 capital additions, as well as
removing the impact on accumulated depreciation and accumulated
deferred federal- income taxes on total net plant during 2016, has
the result of increasing overall net rate base, but reducing
overall revenue requirement, due primarily to reduced depreciation
expense.
Andrews, Di 15Avista Corporation
I
2
3
4
5
6
7
8
9
l0
ll
t2
13
t4
l5
t6
t7
l8
t9
20
2l
22
23
24
removed. This adjustment reduced the electric
revenue requirement by $62r 000 and reduced the
natural gas revenue requirement by $16,000.
Information Servj-ces & Technology (Tabl-e 1
and Tabl-e 2, Iine e. , ii. ) 20L6 incremental
information service and technology expenses,
related to the Company's replacement of the
Company's Customer Service Information System, and
increased costs to support various business
processes, application support, additional security
requirements, annual contractual agreements and
malntenance and license fees were removed. This
adjustment reduced the el-ectric revenue requj-rement
by $521r 000 and reduced the natural gas revenue
requirement by $132, 000.
Non-Executive Labor (Table 1 and Table 2,
l-ine e. , iii. ) 2016 incremental non-executive labor
increases rel-ated to increases approved by the
Board of Directors for 201,6 for its non-union, non-
executive employees, as well as the 2Ol6 union
contract increases for union employees was removed.
This adjustment reduced the electric revenue
requirement by $385,000 and reduced the natural gas
revenue requirement by $185,000.
Andrews, Di 16
Avista Corporation
1
2
3
4
5
6
7
8
9
l0
ll
t2
t3
t4
l5
l6
t7
l8
t9
20
2t
O&M Offsets (Table l, Iine e., iv. ) In the
Company's direct filing, 2016 capital additions
were reviewed for any net O&M offsets, both
j-ncreases in expenses and savings that are expected
in the 2016 rate period. Specific expenses and
savings for 2076 identi-fied and included in the
Company's direct fiJ-ing were removed, consistent
wi-th the removal of 20L6 capital additions noted
above.This adjustment increased the electric
revenue requirement by $21,2,000.
Update 2015 Employee Benefit Costs (Tab1e l- and
Table 2, line f. ) Employee benefit costs include costs
assocj-ated with pension and medical- insurance and post-
retirement expenses included in the Company's direct
filing. Pension expense was determined in accordance
with Accounting Standard Codification 715 (ASC-715) by an
independent actuarial firm, Towers Watson, which is
reviewed by the Company's outside accounting firm
annually for reasonableness and comparability to other
companJ-es. s Medical j-nsurance and post-retirement
expense includes costs associated with the employee and
s In October 2013, the Company revised its defined benefit pension
plan such that, as of January 1t 201-4t the plan is no longer
offered to its non-union employees hired or rehired by Avista on or
after January 1, 2014. A defined contrlbution 401(k) plan replaced
the deflned benefit pension plan for all non-union employees hired
or rehired on or after ,January 1, 201-4.
Andrews, Di l1
Avista Corporation
1
2
J
4
5
6
7
8
9
l0
ll
t2
l3
t4
l5
l6
t7
t8
t9
retiree medical- plans and the EAS 106 expense, which
records the costs associated with post retirement
medical.6 This adjustment reflects updated information,
and reflects employee benefits at a 201,5 expense 1evel.
This adjustment increased the electric revenue
requirement by $481,000 and increased the natural gas
revenue requirement by $129,000.
Adjust fnjuries and Damaqes Expense - (Table 1 and
Table 2, line g.) Injuries and damages expense is a
restating adjustment that replaces the accrual recorded
in the test period with the six-year rolling average of
actual injuries and damages payments not covered by
insurance. This adjustment revises the six-year rolling
average as proposed by Staff. This adjustment reduced the
electric revenue requirement by $8r 000 and reduced the
natural gas revenue requirement by $L26,000.
Remove Officer Incentives and Restate Non-Officer
Incentives (Table l- and Table 2 , l-ine h. )This
adjustment removes the officer portion of the employee
6 In October 2013 the Company revised its health care benefit plan
for non-union employees hired or rehired on or after January L,
2074. Upon retj-rement the Company will no longer provide a
contribution towards his or her medical premiums. The Company will
provide access to the retiree medical p1an, but the non-union
employees hired or rehired on or after January L,201,4, will- pay
the fuII cost of premiums upon retirement. In addition, beginning
January 1-, 2020, the method for cafculating health insurance
premiums for non-union retirees under age 65 and active Company
employees will be revi-sed. The revlsion wiII resuft in separate
health insurance premiums for each group.
Andrews, Di 18
Avista Corporation
1
2
3
4
5
6
7
8
9
10
11
t2
13
t4
15
16
17
l8
t9
20
2l
22
23
24
incentive expense included in the Company's original
filing. This adjustment also adjusts the Company's
proposed non-officer six-year average incentj-ve payout
percentage of L02Z to 1003, as proposed by Staff. This
adjustment reduced the electric revenue requirement by
$100,000 and reduced the natural gas revenue requj-rement
by $25, 000.
Include Four-Year Amortization of 2015 Project
Compass Deferral- - (Table 1 and Tabl-e 2, Iine i.) fn Case
Nos. AVU-E-14-05 and AVU-G-14-01, the Commission approved
an all-party settlement, in which the Parties agreed that
eighty-percent (BOt) of the revenue requirement
associated with Project Compass duri-ng 201,5, beginning
the month the Project qoes into service, would be
deferred, without a carrying charge, for recovery in a
future proceeding. The B0? figure was arrived at through
negotiation for calendar year 20L5 only. The deferral
was due, in part, to the uncertainty of the timing of the
in-service date for the project. This project was moved
into service on February 2, 2015.
In the Company's direct filed case the Company
proposed a two-year amortization of the deferred electric
and natural gas revenue requirement amounts associated
with Project Compass for calendar year 201,5.This
T9Andrews, DiAvista CorporatJ-on
I
2
3
4
5
6
7
8
9
l0
ll
t2
l3
t4
l5
t6
t7
18
t9
20
2l
22
23
24
adjustment revises the
Compass Deferral over
adjustment reduced the
$669,000 and reduced the
by $168,000.
amortization of the Project
a four-year period. This
electric revenue requirement by
natural- gas revenue requirement
Include Four-Year Amortization of Lake Spokane
Deferral (Table 1", Iine j. ) In Case No. AVU-E-13-05
(see Order No. 329L7), the Company sought, and received
approval of an Accounting Order to defer the costs
related to the improvement of dissolved oxygen Ievels in
Lake Spokane. Order No. 329L7 authorized the Company to
defer and transfer Idaho's share of these cosLs
(approximately $473,000) to FERC account L82.3 (Other
Regulatory Assets) for later recovery, with no carrying
charge.
fn the Company's direct filed case the Company
proposed a two-year amortizatlon of the Lake Spokane
Deferral-. This adjustment revises the amortization of
the Lake Spokane Deferral over a four-year period. This
adjustment reduced the electrlc revenue requirement by
$119,000.
Include Palouse Wind in Power Cost Adjustment
("PCA") Mechanism (Tabl-e 7, l-ine k. ) The Parties agree
that, for purposes of this case, the recovery of costs
Andrews, Di 20Avista Corporation
1
2
J
4
5
6
7
8
9
l0
11
t2
l3
t4
l5
t6
t7
18
t9
20
2t
22
23
related to the Palouse Vflind Power Purchase Agreement
(*PPA") wil-I continue to be included in the PCA, subject
to the current sharing (908 customer, l0% Company). This
adjustment removes the Palouse Wind PPA expenses from the
pro forma power supply adjustment included in the
Company's original fiJ-ing. This adjustment reduced the
electrj-c revenue requirement by $3.5 million.
Miscellaneous Adjustments (Table L, line l- and
Table 2, line j. ) The Company adopted, for settlement
purposes, Staff's proposal to adjust or remove various
administrat j-ve and general (A&G) expenses including: 1)
removing an additional 40* of Idaho electric Director and
Of f icer j-nsurance expense ($114, 000 electrj-c / $29, 000
naturaf gas); 2) removing 1ega1 expenses allocated to
Idaho in error ($5,000 electric / $trOOO natural 9as); 3)
removj-ng two-thirds of environmental cleanup expenses
incurred in 20L4 ($322,000 electric) ; 4) removing
miscellaneous expenses as agreed to ($65r000 electric /
$79r 000 natural 9as) ; and removing additional Board of
Director expenses included in 201,4 ($74,000 efectric /
$19,000)This adjustment reduced the electric revenue
requirement by $580r 000 and reduced the natural gas
revenue requirement by $128,000.
Andrews, Di 27Avista Corporation
I
2
aJ
4
5
6
7
8
9
10
1l
t2
l3
l4
l5
t6
t7
l8
t9
20
2l
22
23
24
A. P1ease sumarize ttre iupact of theee
adjustnents on the electric and natural. gas lc:venue
requirenents agrreed to by the Parties.
A. The adjustments discussed above, and agreed to
by the Parties, reduce Avista's electric revenue
requirement request of $13.23 million to $1.7 million,
and its natural gas revenue requirement request of $3.205
mlllion to $2.5 mil-llon, resultlng in a 0.'7% el-ectric and
3. 5? natura.I gas base rate increase. Net rate base f or
electric and natural gas is $735.02 million and $131.925
mi11ion, respectively, effective January 1, 2076.
IV. CONCI,USION
O. In conclusion, rhy is this StipuJ.ation in the
pubJ.ic interest?
A. This Stj-pulation strikes a reasonable balance
between the interests of the Company and its customers,
incJ-uding its low-income customers. As such, it
represents a reasonabl-e compromise among differing
interests and points of view.
The terms of the Stipulation represent base rate
increases designed to provide necessary retail- revenues.
The Parties have agreed that the Company has
demonstrated the need for revenue requirement increases
Andrews, Di 22Avista Corporation
I
2
3
4
5
6
7
8
9
l0
lt
t2
f or both its electri-c
providing recovery of
period.
and natural gas operations, thus
its costs over the 2016 rate
In the fj-naI analysis, however, any settlement
reflects a compromise in the give-and-take of
negotiations.The Commission has before it a
Stipulation that is supported by sound analysis and
supporting evidence, the approval of which is in the
public interest.
A. Does this conclude
testimony?
A. Yes, it does.
youa pre-fiJ.ed .li rect
Andrews, Di 23Avista Corporation