20161024Stipulation and Settlement.pdf

F. ··cEIV ED
David J. Meyer, Esq.
Vice President and Chief Counsel of
Regulatory and Governmental Affairs
A vista Corporation
zuto l::T 24 ; 9: Ld
1411 E. Mission Avenue
P.O. Box 3727
Spokane, Washington 99220
Phone: [phone], Fax: [phone]
Brandon Karpen
Deputy Attorney General
Idaho Public Utilities Commission Staff
P.O. Box 83720
Boise, ID 83720-0074
Phone:[phone], Fax :[phone]
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE APPLICATION )
OF A VISTA CORPORATION DBA A VISTA ) CASE NO. A VU-E-16-03
UTILITIES FOR AUTHORITY TO )
INCREASE ITS RA TES AND CHARGES )
FOR ELECTRIC SERVICE IN IDAHO )
) STIPULATION AND SETTLEMENT
This Stipulation is entered into by and among A vista Corporation, doing business as
Avista Utilities ("Avista" or "Company"), the Staff of the Idaho Public Utilities Commission
("Staff'), Clearwater Paper Corporation ("Clearwater"), Idaho Forest Group, LLC ("Idaho
Forest"), the Community Action Partnership Association of Idaho ("CAPAI"), and the Snake
River Alliance ("Snake River"). These entities are collectively referred to as the "Parties," and
represent all of the parties in the above-referenced cases. The Parties understand this Stipulation
is subject to approval by the Idaho Public Utilities Commission ("IPUC" or the "Commission").
STIPULATION AND SETTLEMENT-AVU-E-16-03 Page 1
I. INTRODUCTION
1. The terms and conditions of this Stipulation are set forth herein. The Parties agree
that this Stipulation represents a fair, just and reasonable compromise of all the issues raised in
the proceeding, is in the public interest and its acceptance by the Commission represents a
reasonable resolution of the multiple issues identified in this case. The Parties, therefore,
recommend that the Commission, in accordance with RP 274, approve the Stipulation and all of
its terms and conditions without material change or condition.
II. BACKGROUND
2. On May 26, 2016, Avista filed an Application with the Commission for authority
to increase revenue effective January I, 2017 for electric service in Idaho by 6.3%. If approved,
the Company's 2017 revenues for electric base retail rates would have increased by $15.4 million
annually. By Order No. 33536, dated June 7, 2016, the Commission suspended the proposed
schedules of rates and charges for electric service.
3. Petitions to intervene in this proceeding were filed by Clearwater, Idaho Forest,
CAPAI, and Snake River. The Commission granted these interventions through !PUC Order
Nos. 33539, 33542, 33549 and 33550.
4. A settlement conference was noticed and held in the Commission offices on
October 3, 2016, and was attended by parties to this case.1 As a compromise of positions in this
case, and for other consideration as set forth below, the Parties agree to the following terms:
1 Clearwater and Snake River were unable to attend the settlement conference, but are supportive of the Stipulation
and Settlement.
STIPULATION AND SETTLEMENT-AVU-E-16-03 Page 2
III. TERMS OF THE STIPULATION AND SETTLEMENT
5. Overview of Settlement and Revenue Requirement. The Parties agree that A vista
should be allowed to implement revised tariff schedules designed to recover $6.25 million in
additional annual electric revenue, which represents a 2.6% increase in electric annual base tariff
revenues. New electric rates would become effective January I, 2017.
6. Cost of Capital. The Settling Parties agree to a 9.5 percent return on equity, with
a 50.0 percent common equity ratio. The capital structure and resulting rate of return is as set
forth below:
Capital
Component Structure Cost Weighted Cost
Debt 50% 5.67% 2.83%
Common Equity 50% 9.50% 4.75%
Total 100% 7.58%
A. ELECTRIC REVENUE REQUIREMENT
7. Overview of Electric Revenue Requirement. Below is a summary table and
descriptions of the electric revenue requirement components agreed to by the Parties:
SUMMARY TABLE OF ADJUSTMENTS TO ELECTRIC REVENUE REQUIREMENT
EFFECTIVE JANUARY I, 2017
(OOOs of Dollars)
Amount as Filed:
Adjustments:
a.) Cost of Capital
b.) Revise Net Rate Base
c.) Revise Deferred Debits and Credits to Reflect Corrected 2016 Balances
d.) Remove 2017 Non-Union Labor Expenses
e.) Update 2016 Employee Benefit Costs
t:) Add Nine Mile Investment Tax Credit
g.) Remove Officer Incentives
h.) Remove 2015 Storm Costs
i.) Include Palouse Wind in PCA
j.) MisceUaneous A&G Adjustments: Board of Director Expenses, Reallocation of
Legal Expenses, Expired Leases and Inclusion ofO&M Savings
Adjusted Amounts Effective January I, 2017
STIPULATION AND SETTLEMENT -A VU-E-16-03
Revenue
Requirement Rate Base
$ 15,433 $ 754,636
$ (2,471)
$ (1 ,329) $ (740)
$ (62) $ 107
$ (310)
$ 1,221
$ (162)
$ ( 171)
$ (1,057)
$ (4,509)
$ (333)
$ 6,250 $ 754,003
Page 3
a. Cost of Capital. As previously described (see Paragraph 6 above). This adjustment
reduces the overall revenue requirement by $2.471 million.
b. Revise Net Rate Base. Reflects adjustments to net rate base to: 1) update information
related to 2016 capital additions; 2) remove adjustments proposed by the Company
for Plant Held For Future Use and 2017 capital additions, including related
depreciation expense, as well as the impact on Accumulated Depreciation and
Accumulated Deferred Federal Income Taxes; and 3) remove agreed-upon amount
related to Asset Management Transmission project. This adjustment reduces the
overall revenue requirement by $1.329 million and reduces net rate base by $740,000.
c. Revise Deferred Debits and Credits. Revises the deferred debits and credits
regulatory balances to reflect corrected balances as of December 2016, rather than the
2017 balances as proposed by the Company. This adjustment decreases the overall
revenue requirement by $62,000 and increases rate base by $107,000.
d. Remove 2017 Non-Union Labor Expenses -This adjustment reduces the overall
revenue requirement by $310,000, by removing 2017 incremental non-union labor
expenses.
e. Update 2016 Employee Benefit Costs. Reflects updated information related to 2016
incremental pension and medical costs. This adjustment increases the overall revenue
requirement by $1.221 million.
f. Add Nine Mile Investment Tax Credit. Reflects the amortization of the investment
tax credit benefit associated with the Nine Mile Redevelopment upgrade project on
Units I and 2.
g. Remove Officer Incentives. Reflects the removal of all officer incentives. This
adjustment decreases the overall revenue requirement by $171,000.
STIPULATION AND SETTLEMENT-AVU-E-16-03 Page 4
h. Remove 2015 Storm Costs. Removes 2015 storm-related expenses included in the
Company's historical test period beyond the 6-year average (2009-2014) of storm
expenses. Includes $210,000 of amortization expense representing the customer
portion ($630,000) to recover for regulatory purposes over the period 2017-2019.
This adjustment reduces the overall revenue requirement by $1.057 million.
i. Include Palouse Wind in PCA. Reflects the removal of the Palouse Wind Power
Purchase Agreement net expenses from base power supply expense. The Parties
agree that, for purposes of this case, the recovery of costs related to the Palouse Wind
Power Purchase Agreement ("PPA") will continue to be included in the PCA, subject
to the current sharing (90% customer, 10% Company). This adjustment decreases the
overall revenue requirement by $4.509 million.
j. Miscellaneous A&G Adjustments. Reflects the net change in administrative and
general (A&G) expenses related to: 1) removing additional Board of Director
expenses included in 2015 ($159,000); 2) removing legal expenses allocated to Idaho
electric in error ($33,000); 3) removing expenses associated with certain expired
leases in 2015 ($62,000); and 4) inclusion of the O&M savings associated with the
Company's Street & Area Light project ($79,000). This adjustment decreases the
overall revenue requirement by $333,000.
B. OTHER SETTLEMENT COMPONENTS
8. PCA Authorized Level of Expense. The new level of power supply revenues,
expenses, retail load and Load Change Adjustment Rate resulting from the January I, 2017
settlement revenue requirement for purposes of the monthly PCA mechanism calculations are
detailed in Appendix A.
STIPULATION AND SETTLEMENT - A VU-E-16-03 Page 5
9. Electric Fixed Cost Adjustment Mechanism Authorized Base. The new level of
baseline values for the electric fixed cost adjustment mechanism resulting from the January I,
2017 settlement revenue requirement are detailed in Appendix B.
C. COST OF SERVICE/RATE SPREAD/RATE DESIGN/LOW INCOME
I 0. Cost of Service. For electric operations, the Company prepared an analysis using
a system load factor peak credit method of classifying production costs, allocating I 00% of
transmission costs to demand, and allocating transmission costs on a twelve-month coincident
peak allocation factor. For settlement purposes, the Parties agreed to use a pro-rata allocation
based on the Company's proposed 25% move towards unity for purposes of spreading the
revised electric revenue requirement, while not agreeing to any particular cost of service
methodology.
11. Rate Spread/Rate Design (Base Rate Changes). As indicated above, the Parties
agreed that the increase in base revenues would be spread to all electric rate schedules on a pro­
rata allocation of the Company's rate spread percentages from its original filing.
12. Electric Rate Design. With the exception of the Residential Basic Charge, the
Parties agree to the rate design changes proposed by the Company in Mr. Ehrbar's direct
testimony. For the electric Residential Basic Charge (Schedule I), the Parties agreed that it will
increase from $5.25 per month to $5.75 per month, an increase of $0.50 per month. Appendix C
provides a summary of the current and revised rates and charges (as per the Settlement) for
electric service.
13. Resulting Percentage Increase by Electric Service Schedule. The following tables
reflect the agreed-upon percentage increase by schedule for electric service:
STIPULATION AND SETTLEMENT - A VU-E-16-03 Page 6
Increase in Increase in
Rate Schedule Base Rates Billing Rates
Residential Schedule I 3.2% 3.1%
General Service Schedules l l /12 1.9% 1.8%
Large General Service Schedules 21 /22 2.3% 2.3%
Extra Large General Service Schedule 25 1.9% 1.9%
Clearwater Paper Schedule 25P 1.8% 1.8%
Pumping Service Schedules 31 /32 3.1% 3.0%
Street & Area Lights Schedules 41-48 3.4% 3.3%
Overall 2.6% 2.5%
14. Electric Cost of Service Workshop. The Parties agreed, prior to the Company's
next general rate case filing, to meet and confer regarding the Company's electric cost of service
study. Included in the workshop(s) would be discussion related to the methodologies used by
A vista to classify and allocate its costs, as well as a review of the changes that occurred between
the cost of service study results from the Company's 2015 general rate case filing and its 2016
general rate case filing.
The Company will provide available information, studies and data requested by a Party
so as to enable meaningful workshop participation and discussion of issues.
Unless it decides to do so, a Party shall not be bound by workshop discussions and may
contest cost of service and rate spread issues in subsequent proceedings.
15. Collaboration on Low Income Issues. The Company and interested parties will
meet and confer prior to the Company's next general rate filing in order to assess the Low
Income Weatherization and Low Income Energy Conservation Education Programs to explore
policy goals and program structures that may enhance or improve Avista's low-income program.
STIPULATION AND SETTLEMENT -A VU-E-16-03 Page 7
IV. OTHER GENERAL PROVISIONS
16. The Parties agree that this Stipulation represents a compromise of the positions of
the Parties in this case. As provided in RP 272, other than any testimony filed in support of the
approval of this Stipulation, and except to the extent necessary for a Party to explain before the
Commission its own statements and positions with respect to the Stipulation, all statements made
and positions taken in negotiations relating to this Stipulation shall be confidential and will not
be admissible in evidence in this or any other proceeding.
17. The Parties submit this Stipulation to the Commission and recommend approval
in its entirety pursuant to RP 274. Parties shall support this Stipulation before the Commission,
and no Party shall appeal a Commission Order approving the Stipulation or an issue resolved by
the Stipulation. If this Stipulation is challenged by any person not a party to the Stipulation, the
Parties to this Stipulation reserve the right to file testimony, cross-examine witnesses and put on
such case as they deem appropriate to respond fully to the issues presented, including the right to
raise issues that are incorporated in the settlement terms embodied in this Stipulation.
Notwithstanding this reservation of rights, the Parties to this Stipulation agree that they will
continue to support the Commission's adoption of the terms of this Stipulation.
18. If the Commission rejects any part or all of this Stipulation or imposes any
additional material conditions on approval of this Stipulation, each Party reserves the right, upon
written notice to the Commission and the other Parties to this proceeding, within 14 days of the
date of such action by the Commission, to withdraw from this Stipulation. In such case, no Party
shall be bound or prejudiced by the terms of this Stipulation, and each Party shall be entitled to
seek reconsideration of the Commission's order, file testimony as it chooses, cross-examine
witnesses, and do all other things necessary to put on such case as it deems appropriate. In such
case, the Parties immediately will request the prompt reconvening of a prehearing conference for
STIPULATION AND SETTLEMENT - A VU-E-16-03 Page 8
purposes of establishing a procedural schedule for the completion of the case. The Parties agree
to cooperate in development of a schedule that concludes the proceeding on the earliest possible
date, taking into account the needs of the Parties in participating in hearings and preparing
testimony and briefs.
19. The Parties agree that this Stipulation is in the public interest and that all of its
terms and conditions are fair, just and reasonable.
20. No Party shall be bound, benefited or prejudiced by any position asserted in the
negotiation of this Stipulation, except to the extent expressly stated herein, nor shall this
Stipulation be construed as a waiver of the rights of any Party unless such rights are expressly
waived herein. Execution of this Stipulation shall not be deemed to constitute an
acknowledgment by any Party of the validity or invalidity of any particular method, theory or
principle of regulation or cost recovery. No Party shall be deemed to have agreed that any
method, theory or principle of regulation or cost recovery employed in arriving at this Stipulation
is appropriate for resolving any issues in any other proceeding in the future. No findings of fact
or conclusions of law other than those stated herein shall be deemed to be implicit in this
Stipulation.
21. The obligations of the Parties under this Stipulation are subject to the
Commission's approval of this Stipulation in accordance with its terms and conditions and upon
such approval being upheld on appeal, if any, by a court of competent jurisdiction.
22. This Stipulation may be executed in counterparts and each signed counterpart
shall constitute an original document.
STIPULA TJON AND SETTLEMENT - A VU-E-16-03 Page 9
Q,~. DA TED this __ day of October, 2016.
A vista Corporation
By: rQMey:,
Attorney for A vista Corporation
Clearwater Paper Corporation
By: _____________ _
Peter Richardson
Attorney for Clearwater Paper
Community Action Partnership Association
of Idaho
By: _____________ _
Brad Purdy
Attorney for CAP AI
Idaho Public Utilities Commission Staff
By: _____________ _
Brandon Karpen
Deputy Attorney General
Idaho Forest Group
By: _____________ _
Dean J. Miller
Attorney for Idaho Forest Group LLC
Snake River Alliance
By: _____________ _
Ken Miller
Snake River Alliance
STIPULATION AND SETTLEMENT-AVU-E-16-03 Page 10
DATED this'll~ day of October, 2016.
A vista Corporation
By: ____________ _
David J. Meyer
Attorney for A vista Corporation
Clearwater Paper Corporation
By: __________ _
Peter Richardson
Attorney for Clearwater Paper
Community Action Partnership Association
ofldaho
By: ____________ _
Brad Purdy
Attorney for CAP Al
Idaho Forest Group
By: __________ _
Dean J. Miller
Attorney for Idaho Forest Group LLC
Snake River Alliance
By: ____________ _
Ken Miller
Snake River Alliance
STIPULATION AND SETTLEMENT -A VU-E-16-03 Page 10
. . ,,~
DATED ttys 9 day @£:October, io 16.
Ayista .CotP<Jration
David J. Meyer
Atto,Jfriey for Avi~ta Corporation
;· • ··J; •
Cl:E. • 7;i!i/j. :er.· Co.rp~.~tion ·.
By: . '~ · B~ter Richardson
Attorney for .Clearwater Paper
CommuniJy Aetian Rartnership Association
ofldaho · ' .
. By: __ . ------,.--;:--------
Brad Purdy
A~qmey for ~AP'.AI
By:__;_____,,__.;,----:------~*""=-~~
Brandon Karpen
Deputy A:«o@eY General-
ldap.o Forest Group
By: _________ __,_.------:
Dean J. Miller , <VW-"-' .
Attorney 'ft>r Idaho F
By: --=------=-----=_.;;;::;!..-..;...-,-_!
Ken Mil!er
Snake ~ve.r A.Ilianc»
DATED this __ day of October, 2016.
A vista Corporation
By: _____________ _
David J. Meyer
Attorney for A vista Corporation
Clearwater Paper Corporation
By: ___________ _
Peter Richardson
Attorney for Clearwater Paper
Community Action Partnership Association
of Idaho
By: _____________ _
Brad Purdy
Attorney for CAPAI
Idaho Public Utilities Commission Staff
By: __________ _
Brandon Karpen
Deputy Attorney General
~~~
Dean J. Miller
Attorney for Idaho Forest Group LLC
Snake River Alliance
By: ___________ _
Ken Miller
Snake River Alliance
STIPULATION AND SETTLEMENT-AVU-E-16-03 Page 10
DATED this __ day of October, 2016.
A vista Corporation Idaho Public Utilities Commission Staff
By: ___________ _ By: ___________ _
David J. Meyer Brandon Karpen
Attorney for A vista Corporation Deputy Attorney General
Clearwater Paper Corporation Idaho Forest Group
By: _____________ _ By: _____________ _
Peter Richardson Dean J. Miller
Attorney for Clearwater Paper Attorney for Idaho Forest Group LLC
Community Action Partnership Association
ofldaho /.
B~e~/
Brad Purdy ..
Attorn~
Snake River Alliance
By: _____________ _
Ken Miller
Snake River Alliance
STIPULATION AND SETTLEMENT-AVU-E-16-03 Page 10
DATED this __ day of October, 2016.
A vista Corporation
By: ___________ _
David J. Meyer
Attorney for A vista Corporation
Clearwater Paper Corporation
By: _____________ _
Peter Richardson
Attorney for Clearwater Paper
Community Action Partnership Association
ofldaho
By: _____________ _
Brad Purdy
Attorney for CAP AI
Idaho Public Utilities Commission Staff
By: _____________ _
Brandon Karpen
Deputy Attorney General
Idaho Forest Group
By: ___________ _
Dean J. Miller
Attorney for Idaho Forest Group LLC
Snake ~er Alliance
By:~~~
Ken Miller
Snake River Alliance
STIPULATION AND SETTLEMENT -A VU-E-16-03 Page 10