20181203Updated Exhibits.pdf

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Avista Corp.
141 1 East Mission P.O. Box 3727
Spokane. Washington 99220-0500
Telephone [phone]
Toll Free 800-721-9170
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Via Electronic and Overnight Mail
November 30, 2018
Commission Secretary
Idaho Public Utilities Commission
472W. Washington St.
Boise,ID 83702
RE: Case Nos. AVU -E-17 -09 and AVU-G- I 7-05
Enclosed for filing in the above-referenced Case Nos. are an original and 7 copies of the
following documents:
Exhibit 7, Schedule 5 - Direct Assignment Protocol updated on August 2,2018.
Morris, Supplemental Testimony - Page 6 revisions, striking Q & A regarding Idaho
Code 561-327.
Exhibit 20, Schedule I - Page 63 of the 2017 Avista/Hydro One Proxy regarding the
potential change of control payments to executive officers.
A service list is attached, with the parties receiving a complete copy of this filing. If you have
any questions, please do not hesitate to contact David Meyer at 509-495-4316 or
david.me)[e-mail] or Paul Kimball at 509-495-4584 or
Patrick D. Ehrbar
Director of Regulatory Affairs
Enclosures
CERTIFICATE OF SERVICE
IHEREBY CERTIFY that !have this 30th day of November,2018, served revised
documents in the Merger Case Nos. AVU-E-17-09/AVU-G-17-05, upon the following
parties, by mailing a copy thereof, properly addressed with postage prepaid to
Diane Hanian, Secretary
ldaho Public Utilities Commission
472 W. Washington Street
Boise, lD 83720-5983
diane. hanian@puc. idaho.qov
Brandon Karpen
Deputy Attorneys General
ldaho Public Utilities Commission
472W. Washington
Boise, lD 83720-0074
brandon. karpen@puc. idaho.qov
Norman M. Semanko
Parsons Behle & Latimer
800 West Main Street, Suite 1300
Boise, lD 83702
NSemanko@parsonsbehle. com
ecf@ pa rso nsbeh le. coi[
Larry Crowley
The Energy Strategies lnstitute, lnc.
PO Box 5146
Boise, lD 83705
[e-mail]
Dr. Don Reading
6070 Hill Road
Boise, lD 83703
[e-mail]
Brad M. Purdy
Attorney at Law
2019 N 17th Street
Boise, lD 83702
[e-mail]
Peter J. Richardson
Richardson Adams PLLC
515 N. 27th Street
Boise, lD 83702
Leter@ ri ch a rd so n ad am s. co m
Ronald L. Williams
Williams Bradbury, P.C.
P. O. Box 388
802 W. Bannock, Suite LP 100
Boise, lD 83702
ron@wi I I iam sbradbu ry. com
Ben Otto
ldaho Conservation League
710 N. 6th St.
Boise, lD 83702
botto@idahoconservation. org
Dean Miller
3620 E Warm Springs Ave
Boise, lD 83716
Deanimiller@cableone. net
/
Paul Kimball
Mgr. Compliance and Discovery
---)
Aiitrsra
DATE:
TO:
FROM:
SUBJECT:
August 2,2018
AllEmployees
Ryan Krasselt, VP & Controller
Accounting Policy for Direct Assignment of Costs Associated with the Merger of Avista
Corporation and Hydro One
Avista is required to record costs associated with the Merger in accordance with the Merger Commitments
made in the various states and in the FERC order approving the merger as well as regulatory accounting
requirements. The following policy defines the merger cost categories and how each category should be
recorded. For questions regarding this accounting policy, please contact:
Adam Munson, Director of Accounting ext.247L, or
Jennifer Smith, Senior State and Federal Regulatory Analyst at ext. 2098
!. Accounting for Costs lncurred to Facilitate the Transaction (Transaction Costs) - Proiect 77705315
Allcosts associated with activities incurred to facilitate the closing of the transaction are required to
be recorded below the line to a non-utility account (FERC account No, 425500).
The following Project and Task will be used for such expenses:
Project #Project Description Task
777053L6 Hydro One Avista Acquisition 426500
11. Accounting for Transition Costs (!ncluding Costs lncurred to ldentifv and Develop Strategic
Benefits with Hvdro One) - Proiect 77705331
All costs directly incurred to identify and develop strategic benefits with Hydro One and any other
transition costs are required to be recorded below the line to a non-utility account (FERC account
No. 426500). Broadly, transition costs refer to all costs necessary post-transaction, to meld or find
synergies in corporate cultures and processes.
Examples of transition costs include, but are not limited to:
. consolidation of technology,. optimization of purchasing,. broad deployment of resources and technologies, and. activities to make the aggregated corporation more efficient and effective.
The following Project and Task will be used for such expenses:
Avista Corporation
Page 1
Exhibit No. 7
-0g/AVU-G-17-05
P. Ehrbar, Avista
Schedule 5, Page 1 of 3
Revised 81212018
Project #Project Description Task
7770533L Hydro One Transition Costs 426500
Revised November 28, 2018
This project and task will be used for activities which are general in nature and are not identifiable to
a specific potentialstrategic benefit. Once a potentialstrategic benefit is identified and defined, a
specific project and/or task shall be established for the purpose of recording cost to achieve, and
approved by the Strategic Benefits Core Team.
All transition costs will remain below the line unless approved for recovery by the appropriate
regulatory authority. General transition costs will be considered for allocation to specific Strategic
Benefits tasks as approved for recovery by the appropriate regulatory authority.
lll. Sharing of Best Practices
lf time and/or expenses are related to general sharing of best practices, costs are required to be
charged "below the line". Please direct any questions regarding accounting for best practices to the
contacts listed above.
The following Project and Task will be used for such expenses:
Project #Project Description Task
77t0533L Hydro One Transition Costs 425500
lV. Direct Assignment of Costs to Hvdro One Post-Closins
Following the date of closing, to the extent Avista employees dedicate time and incur costs supporting
the operation of Hydro One, those costs will be directly assigned to Hydro One.lf 2
ln the future, if opportunities arise for the consolidation of certain Avista and Hydro One utility
functions, where the utilities have an opportunity to benefit from specialized expertise or to achieve
efficiencies, a) the Companies may directly assign or allocate any corporate or administrative costs,
common costs, or costs incurred for the benefit of the Utility or Utilities, to a Utility or the Utilities, b)
the Companies may procure any corporate or administrative services from a Utility or the Utilities for
the Company's benefit, or c) the Companies may procure any corporate or administrative services
from each other or agree to directly assign or allocate common costs to each other (Avista would file
proposals with the Commission as required).
All corporate services provided, and costs incurred, will be direct billed to Hydro One at cost and no
margin or profit shall be included and no assets allocated, provided that any amount billed to Hydro
lTime and costs incurred include, but are not limited to activities for the following: a) services by the Board of Directors, and executive,
management, professional, technical and clerical employees; b) financial and accounting services, corporate governance and compliance services,
legal services, audit services, information and technology services, treasury services, investor relations services, governmental and regulatory
services, human resources services, communications services, payroll processing services, employee benefits participation, procurement and
fleet management, tax and related services, contract negotiation and administration services, insurance and risk management services,
environmental services and engineering and technical services; c) the use of office facilities, including but not limited to office space, furniture,
equipment, machinery, supplies, computers and computer software, communications equipment, insurance policies and other personal property;
d) the use of automobiles, airplanes, other vehicles and equipment;
2 Likewise, if Hydro One employees were to provide support for Avista's utility operations, such costs would be directly assigned to Avista. The
Company expects such assignment of costs, both to Hydro One and from Hydro One, to be relatively small since Avista will continue to operate
as a standalone utility. Exhibit No. 7
Case Nos. AVU-E-1 7-0g/AVU-G-1 7-05
Avista Corporation p. Ehrbar, Avista
Page 2 Schedule 5, Page 2 of 3
Revised 81212018
Revised November 28, 2018
One shall be adjusted to the extent necessary to comply with any U.S. federal or Canadian transfer
pricing or similar tax law. Avista will use the same methodology for direct assignment of costs to the
proposed Hydro One subsidiary operations, as we currently do for existing subsidiary operations.
The following Project and Task will be used for the accounting of such expenses
Project #Project Description Task
777xxxxx Sub Billing - Hydro One 185200
Avista corporation
Page 3
Exhibit No. 7
Case Nos. AVU-E-1 7-09/AVU-G-1 7-05
P. Ehrbar, Avista
Schedule 5, Page 3 of3
Revised 81212018
1
2
3
4
5
6
1
9
REVISED November 27, 2018
copy of which is included as Exhibit No. 14, Schedule 1.)
This is indicative of Avista's will-ingness to work with all
affected parties.
Cede 561 327 Ee t*ti-s Era*saeEieni as iE relaEes Ee Ehe
Eransfer ef preperEies Ee any publie ageney EhaE is erganized
oE exisEs under Ehe laws ef any oEher sEaEe, Avista wiEness
GevernmerE RelaEiensi will presenE EesE*menl'' explaining Ehe
leqislaEive hisEery ef Eh*s provts*eni iEs pt*rpesei and why
itr deesrr- E apply in Ehis ease,
trn sherEi Ehe IegislaEive hisEery mal<es iE abundanEly
10
11
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13
74
15 Eo prewent Eublie UEiliElr BisErieEs in Washinqten frem
76 aequiring Ehe preperties ef Ehe WashingEon WaEer Fovrer
l'l i-s--an
1B invesEor ewned uEiliEy and neE a munieipal uEiliEyi se even
79 *f Ehe ]egislatien semehew reaehed €anadian enEiEies it
20 weuld nef apply Ee Plrdre ene -
21 A. Have Avista and Hydro One responded to other
22 issues?
23 A. Yes. Avista and Hydro One have explained recent
24 events in Ontario and how there are sufficient protections
Morris, Supp. 6Avista Corporation
Table of Contents
Fora nanative description ofthe terms and conditions applicable to the payments quantified in the table below, see the sections entitled"-Pa))ments to
Executive Officers in Respect of Equitv Awards" and "-Change of Control Agreements" above.
Potential Change o.fControl Payrnents to Executive Officers
The tables below show (i) the compensation that may be paid or may become payable in connection with, or following, the consummation of the merger to
each ofthe Company's named executive olficers identified in the most recent proxy statement with respect to the 20 I 7 annual meeting ofCompany
shareholders and (ii) the aggregate colnpensation that may be paid or may become payable in connection with, or following, the consummation ofthe merger
to the Company's eight other executive oflicers.
Named Executive Officer
Scott L. Morris,
Chuirman, President & CEO
Mark T. Thics.
Senior Vice President, CFO & Treusurer
Dennis P. Vemrillion.
Senior Vice President & ECO
Marian M. Durkin,
Senior Vic'e President, General Counsel, CCO &
Corporate Setretan
Karen S. Feltes,
Senior Vice President & CHRO
Other Executive Officers
Severance (l)
$ 6,392,751
s 2,478,889
$ 1,502,909
$ 2,143,597
$ 2,020,932
Severance
valuc of
Accelerated
Equity (2)
$ s,8s 1,960
$ r.860"008
$ r,894,636
$ r,453,399
$ l,453,399
Health
Benclits (l)
$ 32.949
s 43,760
$ 43.760
$ 32,520
s 32,s20
Outplacement
(1)
$ 2 5,000
$ 25.000
$ 2s.000
25,000
2s,000
Outplecement
(4)$ 200,000
Section 280G
Groslup (5)
s 4,692,976
s r,ss8,s49
s0
$ 1,280,965
$ 1,239,266
Section 280G
GrosyUp (5)
$ 905.204
Total (6)
$ 16,995,636
$ 5,966,206
$ 3,466,30s
$ 4,935,481
s 4,771,tt7
Total$ 1438rp0t
$
$
Value of
Accelerated
Equit)'(2)
$ 5.505.892
Health
Benefits (3)
s 324.554Aggregate for Eight Other Executive Officers $ 7 ,445,3s1
(l ) Severance. The estimated amounts listed in this column represent the aggregate value ofcash severance eaclr executive officer would be entitled to
receive under his or her Change ofControl Agreement in connection with a qualifying termination at any time prior to the third anniversary ofthe
effective time. Specifically, the executive officerwould be entitled to a lump-sum payment equal to the sum of(i) an amount (the "Base and Bonus
Severance") equal to three times (for Messrs. Morris and Thies and Mmes. Durkin and Feltes) or two times (for Mr. Vermillion) the sum of the executive
officer's (A) annual base salary as in effect immediately prior to the qual iSing termination, and (B) "highest annual bonus" (which means the greater of
(x) the highest annual bonus paid in the last three full fiscal years prior to the effective time (annualized for partial years ofemployment) and (y) the
bonus paid for the most recently completed fiscal year (annualized for partial years ofemployment)): and (ii) an amount (the "Pro-Rata Bonus") equal
to the executive officer's pro-rata highest annual bonus for the tennination year (prorated based upon the number ofdays ofemployment with the
Company until the tennination date). Severance payments are "double+rigger" in that they would be paid to the executive officer only ifsuch
executive omcer experiences a qualifuing termination at any tin're prior to the third anniversary of the effective time. As noted above in " Change of
Control Agreenrents." the Company will arncnd the Change of Control Agrccmcnts forMessrs. Morris, Thics and Vcrmillion and Mrncs. Durkin and
Fcltcs to providc that cach such individual
63
Exhibit No. 20
Case Nos. AVU-E- I 7 -09 I AYU -G- I 7-05
M. Thies, Avista
Schedule l, Page 1 of 1