20170914Ehrbar Exhibit 7.pdf

ON BETIAI.E OE AVISTA CORPORATION
DAV]D J. MEYER
VICE PRESIDENT AND CHIEF COUNSEL FOR
REGULATORY & GOVERNMENTAL AFFATRS
P.O. BOX 3121
141-1. EAST MTSSION AVENUE
SPoKANE, WASHTNGTON 99220-3121
TELEPHONE: [phone]
FACSIMILE: [phone]
DAV] D . MEYERGAV] STACORP . COM
ON BETIATF OF HYDRO ONE I.IMITED
EL]ZABETH THOMAS, PARTNER
KARI VANDER STOEP, PARTNER
K&L GATES LLP
925 EOURTH AVENUE, SUrTE 2900
SEATTLE, WA 981014-1158
TELEPHONE: [phone]
FACSIMILE: [phone]
LI Z . THOMASGKLGATES . COM
KARI . VANDERSTOEPGKLGATES . COM
BEEORE THE IDAHO PT'BLIC UTII,ITIES COMMISSION
rN THE MATTER OF THE JO]NT
APPLICATION OF HYDRO ONE LTM]TED
(ACTING THROUGH ]TS INDIRECT
SUBSIDIARY, OLYMPUS EQUITY LLC)
AND
AVISTA CORPORATION
FOR AN ORDER AUTHORIZING PROPOSED
TRANSACTION
CASE
CASE
NO.
NO.
AVU-E- 17 -_q_?
AVU-G-17-OE
EXHTBIT NO. 7
PATRICK D. EHRBAR
FOR AVISTA CORPORATION
(ELECTRIC AND NATURAL GAS)
Avista Utilities
Utility Allocator for CD AA (7)
Four Factor Allocation for Electric & All Gas
For the Twelve Months Ended December 31, 2016
Total Electric Gas North oreson---- Notesl
Direct Non-Labor
O&M (Accts 500-894)
A&G - ED & GD (Accts 901-935)
A&G - CD (Accts 901-935)
$72,715,941
43,334,872
4,567,936
$61,020,528
29,783,317
3,141,860
$7,373,519
9,075,029
1,426,076
$4,321,894
4,476,526
(1,2)
(2)
(2)
Adjustments
Adjustments
Total $120,618,749
100.000%
$93,945,705
77.887%
$17,874,624
14.819%
$8,798,420
7.294%Percentage
Direct Labor
O&M (Accts 500-894)
A&G - ED & GD (Accts 901-935)
A&G - CD (Accts 901-935)
Total
$74,847 ,276 $5s,802,150 $13,705,913 $5,339,2135,876,743 3,640,91 1 291,467 1,944,36511,494,963 7,690,233 3,804,730 -
$92,218,982 $67,133,294 $17,802,1 10 $7,283,578
100.000% 72.7980/o 19.304% 7.8980/oPercentage
Year End Customers a|12131116
Washington
ldaho
Oregon
Total
406,454
210,653
100,472
247,777
129,508
158,677
81,145
100,472
Percentage
717,579
100.000%
377,285
52.577%
239,822
(5,562.00)
33.421%
100,472
14.002o/o
Net Direct Plant (Ending Balance at 12131116)Amount $3,243,965,315 $2,531 ,901,896
78.050%
$46'r,825,314
14.2360/o
$250,238,105
7.714o/oPercentage100.000%
Four Factor
Total 400.000%281.312%81.780%36.908%
(1) Excludes Resource Costs: Electric - 501 , 547 , 555,557, 565 & Gas 804, 805, 808, 81 1
(2) Excludes Labor
Exhibit No. 7
Case Nos. AVU-E-17-_ and AVU-G-17--
P.Ehrbar, Avista
Schedule 1, Page 1 of 3
100Ave
Avista Utilities
Factor No. 4 - Allocation for Electric
For the Twelve Months Ended December 31, 2016
Direct Non-Labor
O&M (Accts 500-894)
A&G - ED & GD (Accts 901-935)
A&G - CD (Accts 901-935)
Net
Percentage
Direct Labor
O&M (Accts 500-894)
A&G - ED & GD (Accts 901-935)
A&G - CD (Accts 901-935)
Net
Percentage
Year End Customers a|12131116
Amount
Washington ldaho NotesTotal
Electric
$19,878,625
25,456,934
1,706,431
$13,041 ,456
18,532,681
1,240,806
$6,837,169
6,924,253
465,625
(1,2)
(2)
(2)
$47,041,990
100.000%
$1 3,1 00, 1 58
674,582
5,657,439
$32,814,943
69.757%
$8,869,997
436,117
4,543,331
$14,227,047
30.243%
$4,230,161
238,465
1,114,108
$19,432,179
100.000%
377,285
100.000%
$13,849,445
71.271o/o
247,777
65.674%
$5,582,734
28.7290/o
129,508
34.3260/oPercentage
Net Direct Plant (Ending Balance at12131116)Amount $1,072,965,542 $712,213,744 $360,751,798
Total
Percentage
$1,072,965,542
100.000%
$712,213,744
66.378%
$360,751,798
33.622%
Four Factor
Total 400.000%273.080o/o 126.920o/o
31.7.27
(1) Excludes Resource Costs: Accounts 501, 547,555 & 557
(2) Excludes Labor
Exhibit No. 7
Case Nos. AVU-E-17-_ and AVU-G-17--
P.Ehrbar, Avista
Schedule 1, Page 2 of 3
Avista Utilities
Factor No. 4 - Allocation for Gas North
For the Twelve Months Ended December 31, 2016
Direct Non-Labor
O&M (Accts 500-894)
A&G - ED & GD (Accts 901-935)
A&G - CD (Accts 901-935)
Net
Percentage
Direct Labor
O&M (Accts 500-894)
A&G - ED & GD (Accts 901-935)
A&G - CD (Accts 901-935)
Net
Percentage
Year End Customers a112131116
Percentage
Net Direct Plant (Ending Balance a|12131116
Net Direct Plant After Adjustments
Percentage
Four Factor
Total
Total
Gas North
Washington ldaho
$5,323,361 $3,454,6s9 $1,868,7028,599,184 7,310,016 1,289,168817,261 624,408 192,853
$14,739,806 $11,389,083 $3,350,723
100.000%77.268%22.732o/o
Notes
1,2)
(2)
(2)
$9,086,688
225,934
3,013,024
$6,100,791
183,994
2,445,792
$2,985,897
41,940
567,232
$12,325,646
100.000%
239,822
100.000%
$428,218,603
$8,730,577
70.833%o
158,677
66.1640/o
$286,411,181
$3,595,069
29.167%
81,145
33.836%
$141,807,422
$428,218,603
100.000%
$286,411,181
66.884%
$141,807,422
33.116%
400.000%281.149%118.851%
(1) Excludes Resource Costs: Accounts 804, 805, 808, 81 1
(2) Excludes Labor
Exhibit No. 7
Case Nos. AVU-E-17-_ and AVU-G-17-_
P.Ehrbar, Avista
Schedule 1, Page 3 of 3
Derivation of Rate Credit Applicable to Services and Jurisdictions
Rate Credit s2,650,000
WA, OR,ID Operations
l. Spread based on Factor 7 - Allocation of Common Costs for all Services and Jurisdictions
Factor 7
Electric Operations
Natural Gas Operations (WA & ID)
Natural Gas Operations (Oregon)
Total
70.328%
20.44s%
9.227%
100.000%
sl,863,692
$541,793
$244,5r5
$2,650,000
Electric Operations (Electric Factor 4)
Washington Electric
Idaho Electric
Total
68.270%
3r.730%
100.000%
sL,272,343
$591,349
$1,863,692
Natural Gas Operations (WA & ID) (Gas Factor 4)
Washington Natural Gas 70.287%
Idaho Natural Gas 29.713%
Total 100.000%
$380,810
$ 160,983
$541,793
Exhibit No. 7
Case Nos. AVU-E-17-_ and AVU-G-17-_
P.Ehrbar, Avista
Schedule 2, Page 7 of 2
WA Electric
ID Electric
WA Natural Gas
Total
sl,272,343
$591,349
$380,810
$160,983
$244,5t5
Natural Gas
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l.P.U.C. No.28
lssued by
By
Sheet 73
Kelly O. Norwood, Vice-President, State & Federal Regulation
Exhibit No. 7
Case Nos. AVU-E-17-_ & AVU-G-17-_
P.Ehrbar, Avista
Schedule 4,Page1 ol2
AVISTA CORPORATION
d/b/a Avista Utilities
SCHEDULE 73
MERGER RATE CREDIT - IDAHO
APPLICABLE:
To Customers in the State of ldaho where the Company has electric service available.
This Merger Rate Credit shall be applicable to all retail customers for charges for electric
energy sold and to the flat rate charges for Company-owned or Customer-owned Street
Lighting and Area Lighting Service.
This rate credit is designed to reflect benefits attributable to the merger between Hydro
One and Avista.
MONTHLY RATE:
The energy charges of the individual rate schedules are to be decreased by the
following amounts::-.:3
i"rt
Schedules'l
Schedules 11 & 12
Schedules 21 &22
Schedules 25
Schedules 25P
Schedules 31 &32
Schedules 41 - 48
0.0220, per kWh
O.O24O, per kWh
0.0190 per kWh
0.0120, per kWh
0.0110 per kWh
0.0220, per kWh
0.0890 per kWh
./l
ifi::.E
C:)
TERM:
The Merger Rate Credit will be in effect for a ten-year period as provided for in the
Joint Application filed in Case No. AVU-E-17-_, but is subject to change upon
Commission approval.
SPECIAL TERMS AND CONDITIONS:
Service under this schedule is subject to the Rules and Regulations contained in this
tariff.
The above Rate is subject to increases as set forth in Tax Adjustment Schedule 58.
Effective (Upon CommissionApproval)lssued TBD
Avista
AVISTA CORPORATION
d/b/a Avista Utilities
SCHEDULE 173
MERGER RATE CREDIT - IDAHO
APPLICABLE:
To Customers in the State of ldaho where the Company has natural
gas service available. This Merger Rate Credit shall be applicable to all retail
customers taking service under Schedules 101, 111, 112, 131, 132, and 146.
This rate credit is designed to reflect benefits attributable to the merger between
Hydro One and Avista.
MONTHLY RATE:
The energy charges of the individual rate schedules are to be decreased by the
following amounts:
Schedule 101 & 102
Schedule 111 & 112
Schedule 131 & 132
Schedule 146
$0.00225 per Therm
$0.00116 per Therm
$0.00116 per Therm
$0.00054 per Therm
TERM:
The Merger Rate Credit will be in effect for a ten-year period as provided for in
the Joint Application filed in Case No. AVU-G-17--, but is subject to change
upon Commission approval.
SPECIAL TERMS AND CONDITIONS:
Service under this schedule is subject to the Rules and Regulations
contained in this tariff.
The above Rate is subject to increases as set forth in Tax Adjustment Schedule
1 58.
Effective (Upon CommissionApproval)lssued TBD
l.P.U.C. No.27 al Sheet 173
,Vice-President, State & Federal Regulation
Exhibit No. 7
Case Nos. AVU-E-17-_ & AVU-G-17-_
P.Ehrbar, Avista
Schedule 4,Page2of 2
By
Avista Utilities
Kelly O. Norwood
Date: September 7,2017
To:
From:
All Employees
Kelly Norwood
Subject: Protocol for Direct Assignment of Costs Associated with Hydro One's Acquisition of
Avista Corp.
Accountine for Costs Related to Hvdro One Prior to Closins
Prior to the date of closing of the Hydro One's acquisition of Avista Corp, presently anticipated
to be in the second half of 2018, all costs associated with due diligence and other activities will
continue to be recorded below the line to a non-utility account (FERC Account No. 426500).
The following table summarizes the accounting for such expenses:
FERC Acct Senice Jurisdicition FERC Acct Descriotion
Project
Number Pmiect Description Dcbit
426500 ZZ ZZ Miscelhneous Income Deduction 77705316 Hydro One Avista Acquisition XXXX
Direct Assienment of Costs to Hvdro One Post-Closinq
Following the date of closing, to the extent Avista employees dedicate time and incr.r costs
supporting the operation of Hydro One, those costs would be separately tracked and directly
assigned to Hydro One.l/ 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 &om specialized expertise or to
achieve efficiencies, the following situations may arise whereby Administrative Services may be
provided between and among the Company and its Utilities, 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
I Time 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 compliancc services, legal services, audit services, information and technolog;r services, treasury services,
investor relations services, governmental and regulatory services, human resources services, communications services, payroll
processing services,
employee benefits participation, procurement and fleet managemenq tax and related services, contract negotiation and
adminishation 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 tlydro One employees were to provide support fot Avista's utility operations, such costs would be directly
assigred 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-17- & AVU-G-17-
llPage P.Ehrbar, Avista
Schedule 3, Page I of2
^/i)liy.lsta
corporate or administrative services from a Utility or the Utilities for the Company's benefit, or
c) the Companies may procwe any corporate or administrative services from each other or agree
to directly assign or allocate common costs to each other.3
With regard to the accounting process for assigning and billing corporate or administrative costs,
these employee costs would be charged to suspense accounts (Defened Debit Account No. 186),
loaded for benefits, and would then be established as a receivable (FERC Account No. 146) when
billed to Hydro One. If other resources are expended during the course of this work, such as
travel or consulting services, these costs are also charged to suspense accounts and billed to
Hydro One. All colporate services provided, and costs incurred, would 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 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.
A summary of the accounting for post-closing costs directly assigned to Hydro One is provided
below.
Hvdro One Transactions
To record transaction when employee charges time or incurs costs related to Hydro One:
FERC Pmject
llumbcr Preiecl Dc$riplionAcct Scnice .turivlicition t'f.R(l Acct Dcrcription Debit Crcditr86xxx zz ZZ Miscellmeous Defened Debits 777XXXX Sub Billing - Hydro One xxxx
To record transaction to establish a receivable from Hvdro One:
FERC pmjcct
Actt Seraicc .Iurhdicition ff,RC Acc! Dcrcriplion Number Pmiccl Dcscripllon Dcbit Crcdil
I46XXX Zz ZZ Accouts Receivable Assoc Compmy - Hydro One 777xfr>< Sub Billing - Hydro One XXXXI86XXX ZZ ZZ Miscellaneous Defened Debits 777ffX)< Sub Billing - Hydro One XXXX
To record transaction of a payment made to Avista Corp from Hvdro One:
FERC
Accl Serrice Jurisdicition Ff,BC Accl Dcrcriplion
Prcject
Number Ptriccl Dcscrintiqn Ihbil (lrcdil
l3 t)o(x
l46XXX
7,7.
7":/.
ZZ
7.2
Croh
AccouB Rcceivsblc Assoc Computy - Hydro Onc 777XX)O< Sub Billing. Hydm Onc
xxxx xxxx
For questions regarding direct assignment of costs associated with Hydro One or any other
subsidiary costs, please contact Jeanne Pluth, Manager of Regulatory Accounting 495-2204, or
Jennifer Smith, Senior State and Federal Regulatory Analyst at 495-2098.
3 The Company would file proposals with the Commission as required. Exhibit No. 7
Case Nos. AVU-E-17-_ & AVU-G-17-_
2lP a ge P.Ehrbar, Avista
Schedule 3, Page2 of2