20160526Morris 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-16-03
OF AVISTA CORPORATION FOR THE )
AUTHORITY TO INCREASE ITS RATES )
AND CHARGES FOR ELECTRIC SERVICE ) DIRECT TESTIMONY
TO ELECTRIC CUSTOMERS IN THE ) OF
STATE OF IDAHO ) SCOTT L. MORRIS
)

FOR AVISTA CORPORATION

(ELECTRIC)

Morris, Di 1
Avista Corporation
I. INTRODUCTION 1
Q. Please state your name, employer and business 2
address. 3
A. My name is Scott L. Morris and I am employed as
the Chairman of the Board, President and Chief Executive
Officer of Avista Corporation (Company or Avista), at 1411
East Mission Avenue, Spokane, Washington.
Q. Would you please briefly describe your educational 8
background and professional experience? 9
A. Yes. I am a graduate of Gonzaga University with
a Bachelors degree and a Masters degree in organizational
leadership. I have also attended the Kidder Peabody School
of Financial Management. 13
I joined the Company in 1981 and have served in a number
of roles including customer service manager. In 1991, I was
appointed general manager for Avista Utilities’ Oregon and 16
California natural gas utility business. I was appointed
President and General Manager of Avista Utilities, an
operating division of Avista Corporation, in August 2000.
In February 2003, I was appointed Senior Vice-President of
Avista Corporation, and in May 2006, I was appointed as
President and Chief Operating Officer. Effective January 1,
2008, I assumed the position of Chairman of the Board,
President, and Chief Executive Officer.
Morris, Di 2
Avista Corporation
I am a member of the Gonzaga University board of
trustees, a member of Edison Electric Institute board of
directors, a member of the American Gas Association, and
immediate past chair of the Washington Roundtable. On
January 1, 2011, I was appointed to the Federal Reserve Bank
of San Francisco, Seattle Branch board of directors and
currently serve as chair. I also serve on the board of
trustees of Greater Spokane Incorporated.
Q. What is the scope of your testimony in this 9
proceeding? 10
A. I will summarize the Company’s rate request in this 11
filing, and provide some context for why there is a continuing
need for retail rate increases, not just for Avista, but for
the electric utility industry in general. I will provide an
overview of changes underway at Avista which are designed to
meet current and future customer expectations, our
communications initiatives to help customers better
understand the changes in costs that are causing rates to
increase, and briefly explain the Company's customer support
programs in place to assist our customers. Finally, I will
introduce each of the other witnesses providing testimony on
the Company’s behalf.
Morris, Di 3
Avista Corporation
A table of contents for my testimony is as follows:
Description Page
I. Introduction 1
II. Summary of Electric Rate Request 4
III. This Case Reflects Purposeful Changes Designed
To Meet Current and Future Customer Needs and
Expectations 6
IV. Communications with Customers 24
V. Customer Satisfaction 25
VI. Customer Support Programs 26
VII. Other Company Witnesses 28
12
Q. Are you sponsoring any Exhibits in this 13
proceeding? 14
A. Yes. I am sponsoring Exhibit No. 1 which is
comprised of two schedules. Schedule 1 includes an overview
of Avista and its utility and subsidiary operations, as well
as a diagram of Avista’s corporate structure. Schedule 2
includes a map showing Avista’s electric and natural gas
service areas.
Morris, Di 4
Avista Corporation
II. SUMMARY OF ELECTRIC RATE REQUESTS 1
Q. What are the primary factors driving the Company’s 2
need for its requested electric increase in 2017?
A. The primary factor (approximately 77%) driving the
Company’s proposed electric revenue increase in 2017 is an
increase in net plant investment. As an example, we are
currently in the process of upgrading the Company’s 100 year 7
old hydroelectric facilities along the Spokane River (i.e.,
Nine Mile Falls, Post Falls and Little Falls generating
facilities), as discussed by Company witness Mr. Kinney.
Later in my testimony I will introduce other Company
witnesses that explain the continuing investment in
transmission, distribution, technology and our office
facilities, among other things.
Net power supply expenses also contribute
(approximately 12%) to the proposed revenue increase in
2017, mainly due to the expiration of a capacity sales
agreement with Portland General Electric on December 31,
2016, and the inclusion of the Palouse Wind Project in base
rates, as discussed by Company witness Mr. Johnson.
Finally, a portion of the proposed increase
(approximately 11%) is related to net increases in operation
and maintenance (O&M) and administrative and general (A&G)
expenses for Avista’s electric operations compared to 24
Morris, Di 5
Avista Corporation
Rate Schedule
Increase
in Base
Rates
Increase in
Billing
Rates
Residential Schedule 1 7.8%7.7%
General Service Schedules 11/12 4.6%4.5%
Large General Service Schedules 21/22 5.7%5.6%
Ex. Lrg. General Service Schedule 25 4.8%4.7%
Clearwater Paper Schedule 25P 4.5%4.5%
Pumping Service Schedules 31/32 7.6%7.5%
Street & Area Lights Schedules 41-49 8.3%8.2%
Overall 6.3%6.3%
current authorized levels, mainly due to increased labor and
benefits.
Q. Please provide an overview of Avista’s electric 3
rate request in this filing. 4
A. Avista is proposing an overall increase in
electric revenue of $15.4 million or 6.3% on a base and
billed basis. The Company’s request is based on a proposed
rate of return of 7.78% with a common equity ratio of 50.0%
and a 9.9% return on equity. Details of the changes in
costs related to the proposed revenue increase are
summarized by Company witness Ms. Andrews. Mr. Ehrbar will
provide details of the proposed rate spread and rate design
for each electric rate schedule. A summary of the proposed
increase by rate schedule is shown in Table No. 1.
Table No. 1 – Electric Rate Increase by Rate Schedule 15
16
17
18
19
20
21
22
Morris, Di 6
Avista Corporation
III. THIS CASE REFLECTS PURPOSEFUL CHANGES DESIGNED 1
TO MEET CURRENT AND FUTURE CUSTOMER NEEDS AND EXPECTATIONS 2
Q. What steps is Avista taking to meet the needs and 3
expectations of its customers, both now and into the future? 4
A. Avista continues to partner with its customers and
other stakeholders to change and adapt its operations, and
its utility infrastructure, to meet the needs and
expectations of not only our customers, but all of our
stakeholders. We are continuing to build on the recent
advancements in products, services and changes in our
operations.
As we progress through 2016 and into 2017 and beyond,
we will continue to transition from the more traditional
electric and natural gas utility selling kilowatt-hours and
therms at a price, to a utility that increasingly partners
with its customers and other industry stakeholders to
provide more energy-related services and information.
Avista’s 2015 Electric Integrated Resource Plan 18
includes a preferred energy resource strategy of energy
efficiency, upgrades to our existing generation facilities,
and new natural gas-fired generation. Our future also
includes increased emphasis on new renewable energy
resources such as solar and demand response.
Morris, Di 7
Avista Corporation
Since 2002 we have offered customers the opportunity to
purchase blocks of power from wind, solar and biomass
renewable resources. Today, we have added access to
information about solar installation for homes and
businesses. We have developed a “solar concierge” page on 5
our website that helps customers determine if solar is a
cost-effective alternative for them.
In developing our 2015 Electric IRP, Avista retained a
consultant to study the near-term and long-term potential
for commercial and industrial demand response through means
such as direct load control, curtailment of energy by
customer choice, and critical peak pricing. Our utility
future will involve an increased partnership with our
customers behind the meter on energy efficiency, distributed
generation at the customer’s premise, and demand response 15
programs, among others.
However, to enable this future we must have the
foundational tools and technology in place to facilitate it.
Part of this foundation is the recently completed customer
care and billing system (Project Compass) that went into
service in February 2015.1 This new system will enable
timely access to information for the Company as well as our

1 Avista received the “Expanding Excellence Award” for best customer
information system implementation from CS Week in April 2016.
Morris, Di 8
Avista Corporation
customers, and will facilitate the offering of future
products, services and pricing options for our customers,
and will enable and support future utility operations that
have less impact on our environment.
Some of the recent advancements and improvements for
our customers are summarized below. These are just the
beginning of what is to come as we partner with our customers
and our other stakeholders in developing an energy future
where we use energy efficiently and minimize the impact on
our environment.
Proposed Payment by Bank Card Without a Per-Transaction 11
Fee: The Company received approval of a program in all
of its jurisdictions (Idaho, Washington and Oregon) to
allow all residential customers to pay their electric
and natural gas bills with a bank card without a per-
transaction fee. Currently when customers use a debit
card or credit card to pay their bill, they are charged
a transaction fee by the payment vendor of $3.50 for
each payment. Under the program, all residential
customers will have the opportunity to pay their
monthly bills by debit card or credit card without the
individual per-transaction fee. Additional payment
options such as these generally lead to fewer credit
collections and fewer calls to our customer service
call center for assistance. Customers that self-serve,
pay on time, and are satisfied with the options they
have are the least expensive to serve, which is a
benefit to all customers. Giving customers options to
pay by the method of their choice without incurring
additional fees will lead to more satisfied customers
and ultimately savings for all customers. We expect to
implement this payment opportunity in October 2016.

HVAC Filter Replacement Program: This program is
designed to educate customers on the value of replacing
filters, and offer choices to customers to make it more
convenient for them to remember to replace their
Morris, Di 9
Avista Corporation
filters. In addition to extending the life of a
furnace, improved operating performance results in
reduced energy usage, which results in lower energy
bills. This program was launched in August of 2015,
and it is available to all Avista customers in Idaho,
Washington, and Oregon. Through the filter program,
customers have three convenience options: 1) Receiving
an e-mail reminder from Avista on a periodic basis to
replace their filter, 2) receiving an e-mail reminder
with promotional codes from manufacturers and vendors
for discounts on filter purchases, and 3) the
opportunity to order filters directly from a vendor,
for delivery to their home or business on a schedule
chosen by the customer. In the first five months of
the program, 1,447 customers signed up for this
program.2
17
Solar Concierge Web Page: Avista’s solar concierge web
page on avistautilities.com is dedicated to assist
customers who may be interested in generating renewable
energy from the sun. This page provides information to
help guide customers through the process, starting by
using the Company’s “solar estimator.” By using the
solar estimator, customers can take the first step
toward understanding solar savings potential, based on
their rooftop characteristics, electricity use and
available tax credits and incentives. They can then
compare options side-by-side to understand how
different scenarios impact costs in the near-term and
long-term. Ultimately, this page will help them make
an informed decision.

Battery Electricity Storage at Schweitzer Engineering 33
Laboratories: Avista’s Energy Storage project is part 34
of the Company’s investment into research that will 35
improve power system reliability by addressing one of
the biggest challenges facing the energy industry – how
to integrate power generated from intermittent
renewable sources such as wind and solar into the
electrical grid. The 1 MW, 3.2 MWh large-scale battery
storage system uses batteries in a real-world setting
at Schweitzer Engineering Laboratories in Pullman and
went online in 2015. Batteries such as this one provide

2 As of April 2016, 733 customers have requested an email reminder
without coupons, 676 customers requested email reminders with coupons
and 38 customers have signed up to receive filters direct from the
vendor. (733+676+38=1,447)
Morris, Di 10
Avista Corporation
the capability to store power generated by renewable
sources when it’s abundant, for example when the wind 2
is blowing, and distribute energy when it’s needed, 3
regardless of weather patterns. 4
Electric Vehicle (EV)Charging Equipment Pilot: In April
2016, the Washington Commission approved Avista’s two-
year pilot program making funding available to install
AC Level 2 Electric Vehicle Supply Equipment (EVSE) as
a means to better understand Electric Vehicle (EV)
charging at home, at work and in public areas, i.e.,
what is needed, what is effective, and how it may affect
the grid in the future. The pilot will help Avista
better understand how to maximize the benefits of EVs
for all our customers in the years ahead, as well as
supporting a cleaner environment through the increased
use of EVs. By installing a limited number of EVSE in
beneficial workplace and public areas, we will also
help support greater EV adoption in our service
territory and pave the way for effective long-term
programs. In addition to the Level 2 EVSE
installations, Avista will install DC Fast Charging
EVSE at seven locations as part of the pilot program.

Mobile Outreach Van: Avista offers many opportunities
throughout the year for customers to attend energy
fairs and workshops to learn more about energy
assistance, energy efficiency and the resources
available to them. But some of our more vulnerable
customers have a hard time getting to an event to access
these resources. So to ensure that we are reaching as
many customers who need our help as we can, Avista
created the Energy Resource Team van. The van is fully
loaded with energy efficiency items such as rope caulk,
V-seals and coil cleaners, as well as informational
materials about bill options, assistance and
efficiency. A laptop resides with the van, so employees
can demonstrate our many online tools in action. In
2015 the van expanded outreach efforts to 6,596
individuals through 69 events throughout our North
Idaho and Eastern Washington service territory.

Q. As Avista invests in new technology and develops 42
new programs to enable new products, services and 43
Morris, Di 11
Avista Corporation
opportunities for its customers to the future, how will this 1
affect investment in the existing utility infrastructure? 2
A. The Company will continue to invest in the
facilities we use every day to deliver energy to our
customers in order to maintain reliable service. In some
instances we have what we refer to as asset management plans,
which are designed to determine the efficient life cycle of
the assets. These asset management plans assess the useful
life of the particular assets and the appropriate time to
replace the assets, balanced against the operations and
maintenance costs associated with maintaining assets that
are toward the end of their useful life. These asset
management plans allow the Company to systematically replace
the assets over time in a manner that optimizes the value of
the assets, while still maintaining reliable service to
customers. Company witness Ms. Rosentrater describes some
of these asset management plans in more detail.
We believe the current reliability of our system is
satisfactory and is meeting the needs and expectations of
our customers and other stakeholders. Much of our continuing
investment in utility infrastructure is related to
maintaining the current level of reliability, through
maintaining and upgrading our existing facilities.
Morris, Di 12
Avista Corporation
As we systematically replace our utility assets over
time we are replacing structures and equipment that were
installed many years ago (in many cases 50 to 70 years ago),
when the cost of installation was very low as compared to
the cost to replace them today. And the cost to customers
of these older facilities embedded in retail rates is very
low.
The retail rates set by the Commission for customers
are cost-based, i.e., the retail rates reflect the actual
costs associated with the assets serving customers, whether
they were installed last year, or 70 years ago. The new
facilities replacing the old ones, in many cases, provide a
continuation of the same service, such as an old wood pole
and transformer being replaced with a new pole and
transformer. Therefore, as utility structures and equipment
are replaced, retail rates must go up to reflect today’s 16
higher costs of the new facilities.
At the same time our costs of facilities are increasing,
our sales of electricity year-over-year are growing at a
relatively slow pace. This low load growth is due, at least
in part, to continuing advancements in the efficiency of
end-use equipment, appliances and other devices, which
results in lower energy usage by customers. In addition,
Avista continues to run its successful energy efficiency
Morris, Di 13
Avista Corporation
programs, which encourage and assist our customers to use
less energy in their homes and businesses. Avista’s energy 2
efficiency programs include not only our direct incentive
programs that help fund energy efficiency measures for
customers, and engineering assistance to help design and
implement energy efficient measures, but also extensive
education and information to encourage customers to take
steps to use energy more efficiently.
In the long-term, this investment in energy efficiency
is absolutely the right thing to do and will allow us to
avoid building or acquiring new, higher-cost generating
resources in the future. However, it also contributes to
lower revenue growth to cover the investments necessary to
maintain a safe, reliable utility system to serve our
customers.
Avista’s annual customer growth, and total sales 16
growth, is currently approximately 1%, and it is expected to
continue at or near this level for the foreseeable future.
Net plant investment and operating expenses, however, are
growing at a faster pace. Avista’s obligation to serve all 20
customers with safe, reliable service, and maintain a high
level of customer satisfaction, demands continued investment
in facilities, as well as utility operating expenses
necessary to accomplish these objectives.
Morris, Di 14
Avista Corporation
-20%
0%
20%
40%
60%
80%
100%
120%
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Av
g
.

%

C
h
a
n
g
e

f
r
o
m

2
0
0
6

B
a
s
e
l
i
n
e
Net Plant Investment Non-Fuel O&M/A&G Retail kWh Sales Retail Therm Sales
Actual
Forecast
Q. How does Avista’s growth in net plant investment 1
and operating expenses compare with the growth in sales, 2
both for the recent historical period as well as expectations 3
for the future? 4
A. The graph in Illustration No. 1 below shows actual
information for the period 2006 to 2015, and forecast
information for 2016 to 2019.
Illustration No. 1 8

The red line on the graph shows the actual growth in
net utility plant investment (electric and natural gas
combined) through 2015, and the expected growth for 2016
through 2019. The purple and blue lines on the graph show
the changes in retail kilowatt-hour (kWh) sales and retail
Morris, Di 15
Avista Corporation
therm sales, respectively, for the same time period. The
graph shows that net plant investment is growing at a much
faster pace than sales. The green line on the graph shows
that non-fuel operations and maintenance (O&M) expenses and
administrative and general (A&G) expenses are also growing
at a faster pace than sales.
Because annual costs are growing at a faster pace than
sales, it is necessary to increase retail rates over time so
that total revenues are sufficient to cover operating costs
and provide a fair rate of return on investment for
investors. These are the circumstances facing not just
Avista, but many investor-owned and consumer-owned utilities
across the country, and it is the primary reason Avista has
requested an electric revenue increase through this filing.
Q. Does the Company critically evaluate the need for 15
new plant investment to ensure that the investments are 16
necessary? 17
A. Yes. Each year the departments across the Company
assess the near-term needs to maintain and upgrade the
utility infrastructure and technology necessary to continue
to provide safe, reliable service to customers, as well as
maintain a high level of customer satisfaction. The
departments develop business cases for specific projects and
programs that explain and support the need for the capital
Morris, Di 16
Avista Corporation
investment. These business cases are submitted to a Capital
Planning Group that meets on a regular basis to review and
prioritize all proposed utility capital investment projects.
After taking into consideration a number of factors,
senior management of Avista establishes a proposed capital
budget amount for each year of the next five years, which is
presented to the Finance Committee of the Board of
Directors3. These factors include, but are not limited to,
the total capital investment requests of the departments
submitted to the Capital Planning Group, the urgency of the
projects, the opportunities and risks associated with
delaying the projects to a later date, and the overall bill
impact to customers associated with the annual capital
budgets ultimately approved. These five-year capital budget
amounts are revisited each year to ensure that capital
dollars are dedicated to the highest priority projects.
In recent years Avista has chosen to not fund all of
the capital investment projects proposed by the various
departments in the Company, driven, in part, by the Company’s 19
desire to mitigate the retail rate impacts to customers.
The decision to delay funding certain projects is made only

3 The Finance Committee is presented with a five-year plan, but approves
the plan for only the next operating year.
Morris, Di 17
Avista Corporation
in cases where the Company believes the amount of risk
associated with the delay is reasonable and prudent.
As a result of this constrained capital spend level,
capital projects must be prioritized so that the dollars
flow where they are most needed. As unexpected, high-
priority capital projects arise, the capital projects for
the year must be reprioritized to limit the total spend to
the amount established by the Company and approved by the
Finance Committee of the Board. This can cause some projects
to be delayed so that higher-priority projects can be
completed.
In addition, some scheduled capital projects will
encounter unexpected delays due to such things as permitting
issues, delays in receipt of materials and equipment, etc.
A delay in one project may allow another project to be
accelerated in time as part of managing the availability of
our workforce and to continue to make progress on projects
next in the “queue” that need to be done. This
reprioritization occurs within the Capital Planning Group,
which is charged with ensuring that the total capital spend
Morris, Di 18
Avista Corporation
for the year stays within the limit approved by the Finance
Committee of the Board.4
Q. Is Avista continuing to take steps to manage the 3
growth in its operating costs? 4
A. Yes. Avista is continuing to identify and
implement measures to control its costs. With regard to
utility operating expenses, following the elimination of the
defined benefit pension plan for non-union new hires
beginning in 2014, and the transition away from providing
medical coverage for non-union retirees,5 the Company
continues to monitor its compensation and benefits practices
to ensure that they are competitive with those offered by
other similar utilities. Avista continues to design a
portion of all employees’ compensation as pay-at-risk, which
is dependent on achieving cost-saving targets each year for
O&M and A&G. In addition, Avista’s asset management 16
programs, that I mentioned earlier, are designed, in part,
to focus on capital projects that will decrease O&M costs.
As Avista continues to work to control costs, it is
also experiencing a continuing increase in various

4 If circumstances indicate the capital spend for a year will exceed the
level previously approved by the Finance Committee of the Board, the
additional capital spend is presented to the Finance Committee for
approval.
5 These changes for the bargaining unit will be subject to future
negotiations.
Morris, Di 19
Avista Corporation
compliance and reporting requirements. These requirements
involve, among other things, monitoring, inspecting,
testing, reporting, adding redundancy, and increasing
security – both physical security and cyber security. The
requirements are driven by, among other things, North
America Electric Reliability Corporation (NERC) requirements
related to electric reliability, Federal Energy Regulatory
Commission (FERC) requirements related to assuring the
existence of competitive wholesale markets, environmental
requirements to ensure we are being good stewards of the
environment, and requirements to ensure full and fair
disclosure of financial and accounting information.
Compliance with these important requirements involve people
and systems, which is putting upward pressure on our O&M
costs.
Q. Is Avista mindful of the impact on retail rates 16
for customers as it maintains its existing utility 17
infrastructure, manages its operating costs, and moves 18
forward to provide more energy-related services and 19
information to meet the future needs and expectations of its 20
customers? 21
A. Yes. As we operate our utility business we are
mindful of how increasing costs affect our retail rates, and
the effects that can have on our retail customers. All of
Morris, Di 20
Avista Corporation
the stakeholders in our utility business, whether it be
customers, investors, regulators and other stakeholders,
hold the same core interests in common, which include the
provision of safe, reliable energy service at the lowest
reasonable cost, while providing a fair rate of return on
investment for shareholders. Our decision-making
incorporates a balancing of the competing interests of
maintaining a reliable system, preparing for the future, and
limiting price increases to customers.
Unlike other businesses, Avista has a legal obligation
to provide safe and reliable service to every customer that
requests service from the Company. When a new customer
requests service, we must hook them up even if the cost to
serve that customer results in increased costs to all other
customers. Likewise, if the facilities serving an existing
customer are deteriorating and need repair, we must repair
or replace them so that the customer continues to receive
safe, reliable service.
Without the obligation to serve, we could consider
refusing to hook up new customers in order to avoid increased
costs to our existing customers, or no longer serve some of
the more remote, more costly areas to provide service, which
would allow us to avoid further investment, and reduce labor
and other operating costs.
Morris, Di 21
Avista Corporation
Unregulated businesses have the opportunity to shut
down aging facilities or under-producing retail outlets,
eliminate product lines, and cut back on investment and
maintenance. As an example, on January 14, 2016 Walmart
announced plans to close 269 underperforming retail stores
of which 154 stores are in the United States. In their news
release they explained that:
Closing stores is never an easy decision, but it
is necessary to keep the company strong and
positioned for the future, Doug McMillon,
Walmart’s president and chief executive, said in 11
a statement.
It’s important to remember that we’ll open well 13
more than 300 stores around the world next year,
he said. So we are committed to growing, but we
are being disciplined about it.
On January 6, 2016, Macy’s Department store announced 17
the closure of its downtown Spokane Washington store. The
historic Macy’s store in Spokane, the largest retailer in 19
downtown, closed in March this year. The Cincinnati-based
Macy’s announced plans in September to close 35 to 40 21
underperforming stores.
In contrast, Avista has an obligation to continue to
serve all existing customers with safe, reliable service, as
well as hook up new customers that request service.
Q. How do Avista’s retail rates compare to other 26
utilities in the Northwest and across the country? 27
Morris, Di 22
Avista Corporation
A. Edison Electric Institute periodically prepares a
comparison of residential electric bills for investor-owned
utilities across the country. Illustration No. 2 below
provides a comparison of an Avista residential customer’s 4
monthly bill in Idaho and Washington with utility bills in
other states. The chart shows that Avista’s residential 6
customers’ rates are among the lowest in the Country.

Morris, Di 23
Avista Corporation
82.8
86.57
92.34
94.64
95.98
96.05
102.77
103.71
104.81
105.16
105.82
107.43
108.32
108.83
109.36
112.32
114.23
115.04
117.34
118.28
119.37
120.05
120.6
120.83
122.17
122.22
122.66
123.65
124.36
124.74
125.35
127.19
130.77
132.98
133.66
136.11
136.6
136.76
137.29
140.17
141.87
143.1
152.88
156.19
158.75
160.31
166.53
191.9
195.53
197.6
249.23
323.86
345.72
0 50 100 150 200 250 300 350 400
Tennessee
Avista Washington
Avista Idaho
Washington
Kentucky
Montana
Oklahoma
Louisiana
North Dakota
West Virginia
Arkansas
Idaho
Virginia
Texas
South Dakota
Oregon
Minnesota
North Carolina
Arizona
Utah
Indiana
Wyoming
Illinois
Florida
Nevada
Mississippi
South Carolina
Kansas
Delaware
District of Columbia
Iowa
New Mexico
Alabama
Wisconsin
Missouri
Colorado
Ohio
Georgia
USA Average
Michigan
Pennsylvania
Maryland
New Hampshire
New York
Maine
Vermont
New Jersey
Rhode Island
Connecticut
Massachusetts
California
Alaska
Hawaii
Illustration No. 2 – Average Residential Monthly Electric 1
Bill 2

Our relatively low retail rates are due in large part
to a history of our Company aggressively pursuing the
acquisition and preservation of a diversified portfolio of
Source: Edison Electric
Institute
Investor-Owned Utilities
Based on 1,000 kWh of use
per month
as of July 1, 2015

(i)The difference between Idaho and
Washington monthly bills at 1,000 kWhs is
due, in part, to the rate design differences for
residential customers. In Washington, the rate
design for residential has three energy blocks
and an inclining rate structure, while the rate
design in Idaho has only two energy blocks
with an inclining rate structure. (i)
(i)
Morris, Di 24
Avista Corporation
low cost resources for the benefit of our customers. This
portfolio includes hydroelectric, wood-waste fired, gas-
fired baseload, gas-fired peakers, and coal-fired
generation, together with long-term purchases of power and
an aggressive energy efficiency program. Our low rates are
also a result of Avista’s efforts to control its operating
costs in order to keep retail rates as low as reasonably
possible.

IV. COMMUNICATIONS WITH CUSTOMERS 10
Q. How is Avista communicating with its customers to 11
explain what is driving increased costs for the Company? 12
A. The Company proactively communicates with its
customers in a number of ways: customer forums, one-on-one
customer interactions through field personnel and account
representatives, bill inserts, social media, media contacts,
group presentations, and through our employees’ involvement 17
in community, business and civic organizations, to name a
few. We believe our communications are helping our
customers, and the communities we serve, better understand
the issues faced by the Company, such as increased
infrastructure investment, environmental mitigation and
security, all of which have led to higher costs for our
customers.
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Avista Corporation
Our employees provide excellent customer service, and
this focus on communicating with our customers includes
providing our employees with new tools and training to make
it easier to communicate with friends, family and customers.
We find that once a customer talks with our employees, and
voices their concerns and receives answers to their
questions, their satisfaction level increases.
We are also continuing our focus on informing customers
of the many programs we offer to provide assistance in
managing their energy bills, and ensuring that our employees
are equipped to engage in these conversations.

V. CUSTOMER SATISFACTION 13
Q. What kind of feedback are you receiving from 14
customers related to customer satisfaction? 15
A. While we continue to maintain controls on O&M/A&G
budgets, our customer service surveys indicate that customer
satisfaction remains high. Our overall customer
satisfaction from our voice-of-the-customer (VOC) surveys in
the first quarter of 2016 was 93% in our Idaho, Washington
and Oregon operating divisions. During calendar year 2015,
overall customer satisfaction from VOC was 96%. The purpose
of the VOC Survey is to measure and track customer
satisfaction for Avista Utilities’ “contact” customers –
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Avista Corporation
i.e., customers who have contact with Avista through the
Contact Center and/or work performed through an Avista
construction office. This rating reflects a positive
experience for customers who have contacted Avista related
to the customer service or field service they received.
These results can be achieved only with very committed and
competent employees.

VI. CUSTOMER SUPPORT PROGRAMS 9
Q. Please summarize briefly the customer support 10
programs that Avista provides for its customers in Idaho. 11
A. Avista Utilities offers a number of programs for
its Idaho customers, such as energy efficiency programs,
Project Share for emergency assistance to customers, the
Customer Assistance Referral and Evaluation Service (CARES)
program, level pay plans, and payment arrangements. Some of
these programs will serve to mitigate the impact on customers
of the proposed rate increases.
In the 2014/2015 heating season, 9,177 Idaho customers
received approximately $2,287,424 in various forms of energy
assistance (Federal LIHEAP program, Project Share, and local
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Avista Corporation
community funds).6 Some of the key programs that we offer
or support are as follows:

1. Project Share. Project Share is a voluntary program
allowing customers to donate funds that are
distributed through community action agencies to
customers in need. In the 2015/2016 heating season,
Avista Utilities’ customers, employees and Avista 8
Corp donated $458,405 on a system-wide basis, of
which $143,573 was directed to Idaho Community Action
Agencies. 11

2. Comfort Level Billing. The Company offers the option
for all customers to pay the same bill amount each
month of the year by averaging their annual usage.
Under this program, customers can avoid
unpredictable winter heating bills.

3. CARES Program. CARES provides assistance to
customers through access to specially trained
(CARES) representatives who provide referrals to
area agencies and churches for help with, among other
things, housing, utilities, and medical assistance.

These programs and the partnerships we have formed with
community action agencies have been invaluable to customers
who often have nowhere else to go for help. Company witness
Ms. Rosentrater provides additional detail in her testimony
related to these and other programs designed to assist
customers.

6 The 2015/2016 heating season runs through September 30, 2016.
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Avista Corporation
VII. OTHER COMPANY WITNESSES 1
Q. Would you please provide a brief summary of the 2
testimony of the other witnesses representing Avista in this 3
proceeding? 4
A. Yes. The following additional witnesses are
presenting direct testimony on behalf of Avista:
Mr. Mark Thies, Senior Vice President and Chief
Financial Officer, will provide a financial overview of the
Company and will explain the proposed capital structure,
overall rate of return, and Avista’s credit ratings.
Additionally, he will summarize Avista’s capital 11
expenditures program.
Mr. Adrien McKenzie, as Vice President of Financial
Concepts and Applications (FINCAP), Inc., has been retained
to present testimony with respect to the Company’s cost of
common equity. He concludes that:
 In order to reflect the risks and prospects
associated with Avista’s jurisdictional utility 18
operations, his analyses focused on a proxy group of
16 other utilities with comparable investment risks;
 Because investors’ required return on equity is 21
unobservable and no single method should be viewed
in isolation, he applied the DCF, CAPM, ECAPM, and
risk premium methods to estimate a fair ROE for
Avista, as well as referencing the expected earnings
approach;
 Based on the results of these analyses, and giving
less weight to extremes at the high and low ends of
the range, he concluded that the cost of equity for
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Avista Corporation
the proxy group of utilities is in the 9.5 percent
to 10.7 percent range, or 9.62 percent to 10.82
percent after incorporating an adjustment to account
for the impact of common equity flotation costs; and,
 As reflected in the testimony of Mr. Thies, Avista
is requesting a fair ROE of 9.9 percent, which falls
below the 10.22 percent midpoint of his recommended
range. Considering capital market expectations, the
exposures faced by Avista, and the economic
requirements necessary to maintain financial
integrity and support additional capital investment
even under adverse circumstances, it is his opinion
that 9.9 percent represents a reasonable ROE for
Avista.
Mr. Scott Kinney, Director of Power Supply, will
provide an overview of Avista’s resource planning and power 16
supply operations. This includes summaries of the Company’s 17
generation resources, the current and future load and
resource position, and future resource plans. He will
provide an overview of the Company’s risk management policy.
Mr. Kinney will address hydroelectric and thermal project
upgrades, followed by an update on recent developments
regarding hydro licensing.
Mr. Clint Kalich, Manager of Resource Planning & Power
Supply Analyses, will describe the Company’s use of the 25
AURORAXMP dispatch model, or “Dispatch Model.” He will
explain the key assumptions driving the Dispatch Model’s 27
market forecast of electricity prices. The discussion
includes the variables of natural gas, Western Interconnect
loads and resources, and hydroelectric conditions. Further,
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Avista Corporation
he will describe how the model dispatches its resources and
contracts to maximize customer benefit and tracks their
values for use in pro forma calculations. Finally, Mr.
Kalich will present the modeling results provided to Company
witness Mr. Johnson for his power supply pro forma adjustment
calculations.
Mr. William Johnson, Wholesale Marketing Manager, will
identify and explain the proposed normalizing and pro forma
adjustments to the 2015 test period power supply revenues
and expenses, and describe the proposed level of expense and
Load Change Adjustment Rate (LCAR) for Power Cost Adjustment
(PCA) purposes, using the pro forma costs proposed by the
Company in this filing.
Ms. Heather Rosentrater, Vice President of Energy
Delivery, will provide an overview of the Company’s electric 15
energy delivery facilities, the Company’s distribution
capital investment for the period January 2016 through the
2017 rate year, as well as various Asset Management programs.
Finally, she will summarize Avista’s customer support 19
programs in Idaho.
Mr. Bryan Cox, Director, Transmission Operations,
describes Avista’s transmission revenues and expenses for the 22
2017 rate year. Mr. Cox will also discuss Avista’s 23
Morris, Di 31
Avista Corporation
transmission capital expenditures for the period January 2016
through the 2017 rate year.
Mr. Jim Kensok, Vice President and Chief Information
and Security Officer, will describe the costs associated
with Avista’s Information Service/Information Technology 5
(“IS/IT”) programs and projects. These costs include the
capital investments for a range of systems used by the
Company, including Next Generation Radio Refresh, Technology
Refresh to Sustain Business process, Avistautilities.com WEB
replacement, and several more important applications.
Ms. Karen Schuh, Senior Regulatory Analyst, will
summarize Avista’s planned capital investments in utility
plant for the 2016 and 2017 time period, and explain the
Company’s planned investment in general plant (e.g., office 14
facilities).
Ms. Elizabeth Andrews, Senior Manager of Revenue
Requirements, will cover accounting and financial data in
support of the Company's electric rate request and the need
for the proposed increase in rates for 2017. She will
explain pro formed operating results, including expense and
rate base adjustments made to actual operating results and
rate base. In addition, Ms. Andrews incorporates the Idaho
share of the proposed adjustments of other witnesses in this
case.
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Avista Corporation
Ms. Tara Knox, Senior Regulatory Analyst, will cover
the Company’s electric revenue normalization adjustment to
the test year results of operations, the proposed Load Change
Adjustment Rate to be used in the Power Cost Adjustment
mechanism, and the electric cost of service study performed
for this proceeding.
Mr. Patrick Ehrbar, Senior Manager of Rates and
Tariffs, discusses the spread of the proposed electric
revenue increases among the Company’s electric general 9
service schedules. In addition, his testimony will also
describe the changes to the rates within the Company’s 11
electric service schedules, and discuss the proposed change
to the residential basic charge.
Q. Does this conclude your pre-filed direct testimony? 14
A. Yes it does.