20170721Decision Memo.pdf

DECISION MEMORANDUM
TO COMMISSIONER KJELLANDER
COMMISSIONER RAPER
COMMISSIONER AI\DERSON
COMMISSION SECRETARY
COMMISSION STAFF
LEGAL
FROM:BRANDON KARPEN
DEPUTY ATTORNEY GENERAL
DATE: JULY 17,2017
SUBJECT: AVISTA,S APPLICATION FOR APPROVAL OF ELECTRIC AND
NATURAL GAS DEPRECTATION RATES, CASE NOS. AVU-E-17-03
AND AVU-C,.17.02
On May 19,2017, Avista Corporation dba Avista Utilities filed an Application
requesting that the Commission approve changes to the Company's depreciation rates for electric
and natural gas property (software). Avista serves customers in Washington, Idaho and a small
portion of Oregon. While the Company does not seek a specific effective date for the proposed
changes, it has requested that the Commission make a determination on the matter before the end
of August, and requests that the Commission process the Application under Modified Ppocedure.
BACKGROUND
Avista implemented its current customer software information system in February
2015 for both electric and natural gas service. The system supports several functions including
billing, payment processing, collections, and customer service orders. The Company plans to
implement a Meter Data Management (MDM) system in the second half of 2017. The Company
has proposed to depreciate the software investment associated with the MDM system over a 12.5
year time frame to align with the remaining useful life of its current customer software
information system. See Order No. 33130. For the MDM implementation, current estimates
indicate that the Idaho share of the MDM system represents approximately $1.5 million of
hardware and approximately $5.9 million of software.
Idaho Code $ 6l-525 gives the Commission authority to determine the proper and
adequate rates of depreciation of property used by a public service company. In furtherance of
DECISION MEMORANDLM I
this authority, the Commission may ascertain and by order fix the proper and adequate rates of
depreciation of utility property. Id. Likewise, each utility must conform its depreciation
accounts to the rates ordered by the Commission. Id.
PROPOSED DEPRECIATION RATES
In this case, the Company has estimated that the remaining useful life of its customer
information system is approximately 12.5 years. See Order No. 33130. Because the customer
information system and the MDM system are interrelated, the Company has proposed an 8o/o
depreciation ratel for the MDM system that will correspond to that of the customer information
system's depreciation rate.
STAFF RECOMMENDATION
Staff concurs that Modified Procedure is an appropriate means to process Avista's
depreciation Application. Staff further recommends that the Commission establish an August
22,2017.
COMMISSION DECISION
Does the Commission wish to process Avista's Applications through Modified
Procedure and order a comment deadline of August 22,2017?
Attorney General
M:AVU-E- I 7-03_AVU-G- I 7-02_bk
t 8% is a rate of 12.5 years.
2DECISION MEMORANDTA4