20190215Stipulation and Settlement.pdf

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,fi3 l5 All 9' llDavid J. Meyer, Esq.
Vice President and Chief Counsel of
Regulatory and Governmental Affairs
Avista Corporation
141I E. Mission Avenue
P.O.Box3727
Spokane, Washington 99220
Phone: [phone], Fax: [phone]
Sean Costello
Deputy Attorney General
Idaho Public Utilities Commission Staff
P.O. Box 83720
Boise, lD 83720-0074
Phone: [phone], F ax: (208) 334-37 62
IN THE MATTER OF THE APPLICATION )
oF AVTSTA CORPORATION DBA )
AVISTA UTILITIES REQUESTING )
AUTHORITY TO REVISE ITS ELECTRIC )
AND NATURAL GAS BOOK )
DEPRECIATION RATES )
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
CASE NO.
CASE NO.
AVU-E-18-03
AVU-G-18-02
STIPULATION AND SETTLEMENT
This Stipulation is entered into by and among Avista 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 ("ldaho Forest"), Sierra
Club, and the Idaho Conservation League ("Conservation League"). 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 ldaho Public Utilities Commission
("IPUC" or the "Commission").
STIPULATION AND SETTLEMENT - AVU-E-I 8-03 and AVU-G-1 8-02 Page I
i)ii iU l i
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. See IDAPA 31.01.01.274
II. BACKGROUND
2. On February 23,2018, Avista filed an application requesting authority to revise its
book depreciation rates. The Company requested authorization to revise its book depreciation
rates consistent with the results of the depreciation study undertaken by the Company.l That study
showed that the ldaho share of annual depreciation expense recorded to O&M and A&G expense
on the Company's books should be increased by approximately 51,275,324 for electric plant and
decreased by approximately $487,632 for natural gas plant, based on the average service life rates
of plant in service as of December 31, 2016.2
3. Because Avista is a utility that also provides service to electric and natural gas
customers in eastern Washington and natural gas in Oregon, it also filed depreciation studies in its
otherjurisdictions under Docket Nos. UE-180167 and UG-180168 in Washington, and Docket No.
UM 1933 in Oregon. The Washington depreciation study is still being reviewed, whereas a
settlement of new depreciation rates has been approved by the Oregon Public Utility Commission.
' Avista hired Cannett Fleming, Inc. to undertake a depreciation study of its depreciable electric, gas and common plant in service.
The study was completed n 2017 . The objective of this assignment was to recommend depreciation rates to be utilized by Avista
for accounting and ratemaking purposes.
2 These balances reflect corrected amounts from that shown in the Company's originally filed application as discussed
further on page 5.
STIPULATION AND SETTLEMENT - AVU-E-I8-03 and AVU-G-l 8-02 Page2
4. Recognizing the need for sufficient time for Staff and interested Parties to complete
their review of the Company's depreciation study, on August 22, 2018 the Company, filed an
"Agreed-Upon Motion to Revise Schedule," which included an extension of the implementation
date for new depreciation rates from January 1,2019 to April 1,2019. That request was approved
by the Commission in Order No. 34133 on August 30, 2018.
5. On December 11,2018 and January 22,2019, settlement conferences were held
and attended by the Parties. The Parties ultimately reached agreement on revisions to the
Company's book depreciation rates. If ultimately approved by the Commission, in accordance with
this Stipulation, such rates would constitute revised depreciation rates, which would become
effective for accounting purposes on April 1,2019, for both Idaho direct and common plant.
Customer rates, however, to reflect the revised depreciation rates would not change until inclusion
in the Company's next general rate case, as discussed below.
6. Approval of this Stipulation by April 1,2019 would provide for the opportunity to
simultaneously implement new depreciation rates for accounting purposes for common plant in all
three jurisdictions in which Avista serves: Idaho, Washington, and Oregon.3 Allowing Idaho
common depreciation rate changes to be effective for accounting purposes at the same time as the
other two jurisdictions will synchronize the timing of the Company's common depreciation
accounting changes for the three States, simplifuing future accounting and audits of depreciation
expense, if the same rates and methodology are in effect for all jurisdictions.
3 In Oregon, the Commission approved a Stipulation that will adjust common plant deprecation items on April 1,2019.
The Company's request is still pending before the Washington Commission, with a proposed April 1, 2019 effective
date.
STIPULATION AND SETTLEMENT - AVU-E-l 8-03 and AVU-G-18-02 Page 3
III. TERMS OF THE STIPULATION AND SETTLEMENT
7. This Stipulation resolves all issues regarding proposed changes to the Company's
depreciation rates as set forth in the filed depreciation study.
8. The Parties have agreed to book depreciation rates on directly assigned and
common plant effective April 1.2019. The agreed-upon depreciation rates are shown in
Attachments A and C. Attachment A provides detail of the affected plant accounts, specified
depreciation rates, and the Idaho allocated share of the depreciation expense impact on December
31,2016 plant balances. Attachment C provides the agreed-upon depreciation rates specific to the
Colstrip Units 3 and 4 assets, as discussed further below in Paragraph 13.
9. Before reflecting the agreed-upon depreciation rates for the Colstrip generating
plant (discussed later in Paragraph 13), the change in all other electric depreciation rate changes
(based upon plant balances at December 31, 2016) results in an annual reduction to electric
depreciation expense of $101,656. After reflecting the agreed-upon revisions to Colstrip Units 3
and 4 to reflect an earlier 2027 depreciable date for depreciation purposesa (resulting in an annual
Colstrip regulatory amortization expense of $780,090 as discussed in Paragraph 13), results in an
annual overall electric increase in depreciation and amortization expense of $678,434. See Table
I on page 5, column Electric, lines I I - 13.
10. Reflecting the agreed-upon depreciation rates for natural gas operations, based
upon plant balances at December 31,2016, results in an annual overall decrease in depreciation
expense of approximately $487,780. See Table I on page 5, column Gas, line 13.
a Colstrip units 3 & 4, as shown in in the filed depreciation study, previously had a scheduled depreciable life of 2034
& 2036, respectively.
STIPULATION AND SETTLEMENT - AVU-E-18-03 and AVU-G-18-02 Page 4
1 1. Summary Table I below captures the agreed-upon results:
Table I - Summary of Imnact on Depreciation Expense with and without Colstrins
Line Electric Gas
I Depreciation study net impact per filings
2 Inadvertent reduction included in petition in error
3 Revised depreciation study net impact
4 Remove Colstrip
5 Net impact excluding Colstrip
6 Agreed upon changes
7 Common-Transportation
8 Common - Transmission
9 ID Electric Distribution
10 Total Idaho Adjustments
11 New impact excluding Colstrip
l2 Proposed Colstrip Amortization
l3 Net Impact includinq Colstrip
1,275,324 (487,632)
(735,171)
540,153 (487,632)
(e7e)
(126,304)
(514,526)
$978,934 S
29639o
(542,802)
55,170
(148)
(641,809)(148)
(101,656) (487,780)
780,090
$ 678,434 $ (487,780)
The following describes each of the agreed-upon adjustments:
Line 2 "Inadvertent reduction included in petition in error" reflects a benefit, or
reduction in depreciation expense, inadvertently included in the Company's
original petition balances, which showed a larger reduction in overall depreciation
expense for natural gas and a smaller increase in electric overall depreciation than
will actually occur.6 Line 3 provides the depreciation study net impact balance per
the filed depreciation study.
a Line 7 "Common - Transportation" reflects the Idaho share of the Parties accepting
the change agreed to by the Company in the Company's Oregon depreciation
settlement agreement, that included a change to the salvage percent for certain
common gas transportation assets. Transportation assets are common assets to all
5 Line 4, column Electric of Table I above "Remove Colstrip" of $735,171, reflects the impact of revised Colstrip
depreciation as filed, which reflects a 2034-2036 depreciable life. This line removes the impact of Colstrip
depreciation for informational purposes to show the as filed change in depreciation excluding the impact of Colstrip
(or $540,153).
6 This was a calculation prepared by the Company's depreciation consultant for excess theoretical depreciation balance
reseryes for informational purposes. The Company determined that the actual reserve (accumulated depreciation) is
properly stated, as it included previously-approved depreciation rates by the Company's State Commissions. The
excess theoretical reserve, however, does not reduce fufure annual depreciation expense, and will reverse over time.
As such, it should not have been included in the estimated depreciation change in balances as stated in the Company's
original petition. This correction has no impact on depreciation rates proposed in the filed depreciation study.
STIPULATION AND SETTLEMENT - AVU-E-18-03 and AVU-G-18-02 Page 5
a
a
a
jurisdictions due to the pooling of the Company's depreciation expense. Therefore,
these changes are also being proposed in Washington and Idaho. The impact to
Idaho Electric and Natural Gas is a $979 reduction and a $148 reduction,
respectively, as shown on line 7.
Line 8, "Common Transmission" reflects the Parties agreement to change Common
Transmission account 356 Overhead Conductor and Devices from a curve life of
65-R3 to a 70-R3, which changes the depreciation rate from2.l4%o to 1.90%. The
overall impact of this agreement reduces Idaho Electric depreciation expense by
approximately $ I 26,304.
Line 9, "ldaho Electric Distribution" reflects the Parties agreement to change Idaho
Electric Distribution account 365 Overhead Conductors and Devices, from a curve
life of 60-R3 to a 65-R3.5, which changes the depreciation rate from 2.82Yo to
2.45%. The overall impact of this adjustment reduces Idaho Electric depreciation
expense by approximately $223,358. In addition, the Parties agreed to change
Idaho Electric Distribution account 367 Underground Conductors and Devices,
from a salvage percent of -30 to a salvage percent of -20, which changes the
depreciation rate from 3.44yo to 2.99%o. The overall impact of this adjustment
further reduces Idaho Electric depreciation expense by approximately $291,168.
The effect of both of these distribution adjustments decreases depreciation expense
by approximately $514,526 as shown on line 9.
12. Vintage Year Accounting - As described on Page VI-17 of the depreciation study,
FERC AR-15 allows utilities to utilize vintage year accounting for general plant assets, including
FERC Account Nos. 391 through 399, as long as certain requirements are met.7 Avista has utilized
vintage year accounting for all general plant accounts, except FERC Account No. 397 -
Communication Equipment. In the depreciation study, Avista proposed utilizing vintage year
accounting for its communication equipment (FERC Account No. 397). The Company meets the
requirements as detailed in the FERC Accounting Release (FERC AR-15). The Parties accept this
proposed accounting treatment of Account No. 397 per FERC AR-15. Avista therefore, per FERC
AR-l5, will retire fully depreciated vintages of communication equipment with the
7 FERC AR-15 Vintage year accounting for general plant accounts, permits public utilities to adopt a vintage year
accounting method for general plant accounts, which would eliminate the unitization and record keeping requirements
associated with individual items of property and allow companies to record only the total cost of plant additions for
the year as a vintage group for each account.
STIPULATION AND SETTLEMENT - AVU-E-I8-03 and AVU-G-18-02 Page 6
implementation of depreciation rates with this Study, and will utilize vintage year accounting
going forward for all of its general plant accounts.
13. Colstrip Depreciation - Avista owns a 15% share of two coal-fired generation
facilities located in Colstrip, Montana, known as Colstrip Units 3 and 4, which have a combined
capacity of about 1,480 MW. These two facilities were placed in service in 1984 and 1986. No
decommissioning date has been established for these assets. Current rates include depreciation
expense on Colstrip Units 3 and 4 with assumed remaining useful lives of these units through
December 31,2034 and December 31, 2036, respectively. Per this Settlement agreement, the
Parties agree to the following treatment of Colstrip Units 3 and 4 for depreciation purposes. See
also Attachment B for further detail.
(a) The Company agrees to adopt a depreciation schedule for Colstrip Units 3
and 4 that assumes a remaining useful life for depreciation purposes of December 31,2027.
The Parties also acknowledge that there presently is no plan to close Colstrip Units 3 and
4by a specific date, nor has Avista agreed to do so.
(b) The Colstrip Units 3 and 4 generation and transmission asset balances at
December 31, 2017, offset by accumulated depreciation through March 31, 2019, as well
as estimated asset retirement obligations (ARO) previously not included in rates, produces
an undepreciated balance for Colstrip Units 3 and 4 as of March 31,2019 of approximately
$55.1 8 million. This undepreciated balance of $55.18 million will be recovered as follows:
1) Use of $6.41 million (lD share) of "temporary" tax credits will be used as an offset.
These tax credits were described in Avista's "Report on Impact of Federal Tax
Code Revisions on Utility Costs and Ratemaking" (Case No. GNR-U-18-01);8
8 Per order No.34070, in Case No. GNR-U-18-01 "In the Matter of the Investigation into the Impact of Federal Tax
Code Revisions on Utility costs and Ratemaking," approving the all-party Stipulation and Settlement proposed in that
proceeding, the Commission approved the set-aside of electric temporary tax benefits of approximately $12.0 million
to offset costs associated with accelerated depreciation of Colstrip Units 3 and 4, or other purposes.
STIPULATIONANDSETTLEMENT-AVU-E-18-03andAVU-G-18-02 PageT
2) Annual Colstrip depreciation expense will remain at the current depreciation level
of $2.475 million per yeare, over the remaining 8.75 years, totaling $21 .66 million;
3) The remaining balance of $27.1I million will be recovered through the
amortization of a Regulatory Asset (FERC Account No. 183.3). The amortization
schedule of the Regulatory Asset will be structured to match the amortization
schedule of protected Excess Deferred Federal Income Taxes (DFIT) benefit that
began being returned to customers on June I ,2018 (as described in Case No. GNR-
U-18-01). Using a34.75 year amortization, consistent with the remaining protected
Excess DFIT schedule, results in an annual amortization of approximately
$780,000 per year - ID share. The amortization of the Regulatory Asset over time,
therefore, would be recovered from customers over the same time period as the
amortization of protected Excess DFIT is returned to customers, offsetting the
entire remaining Colstrip Regulatory Asset over the 34.75 years. This figure is also
shown at Column Electric, Line 12 of Table I above. The Regulatory Asset, net of
accumulated deferred federal income taxes, will be included in rate base and will
earn Avista's rate of return.lo
4) Starting April l, 2019, Colstrip capital additions will be depreciated at the revised
depreciation rates reflecting a2027 depreciable life (see Attachment C for specific
revised Colstrip depreciation rates). Prudency of any capital additions not yet in
current rates (beyond December 31, 2017) are subject to review in future rate
proceedings.
5) The Parties agree that the remaining deferred tax benefit of $5.766 millionlr, not
used to offset the Colstrip balance of $55.18 million shown in Table I above,
associated with Idaho electric tax benefits deferred January 1,2018 through May
30, 2018, will be returned to customers in a separate Tariff Sch edule 7 4 over a one
year period beginning April 1 ,2019. The annual bill impact to customers is a
overallreduction of 2.23 percent. The monthly residential bill impact is a reduction
of 2.38 percent or $2.04 based on an average 910 kWhs.l2 These tax credits were
described in Avista's "Report on Impact of Federal Tax Code Revisions on Utility
Costs and Ratemaking" (Case No. GNR-U-18-01).
e Annual depreciation expense is approximately $7.0 million on a system-basis.
t0 The Colstrip related accounts included as rate base include the following: FERC Account No. I 0l .0 - Plant Cost,
FERC Account No. 108.0 - Accumulated Depreciation, FERC Account No. 182.3 - Regulatory Asset ARO, FERC
Account No. 182.3 - Regulatory Asset Colstrip, FERC Account No. 230.0 - Colstrip ARO, and FERC Account No.
242.0 - Colstrip Accounts Payable.
11 See footnote I 0. The set-aside of electric temporary tax benefits totaling $ 12.175 million in Case No. GNR-U- l 8-
01, less the $6.409 million used to offset Colstrip accelerated depreciation, results in remaining tax benefit due to
customers of $5.766 million.
l2 Included as Attachment D is a summary of the net amortization and depreciation expense ($645,000) agreed to in
this Settlement, including the bill impact to customers of this change, effective with the Company's next general rate
case. Also summarized is the annual tax credit benefit ($5.766 million) retumed to customers, as well as the bill
impact (benefit) to customers effective April l, 20'i,9 - March 30, 2020.
STIPULATION AND SETTLEMENT - AVU-E-I 8-03 and AVU-G-I 8-02 Page 8
14. Effective Date -Under this Stipulation depreciation rates will change effective
April I ,2019 within the Company's books of record. Customer rates, however, will not reflect this
change until the Company's next general rate case. Until that time, the Company will absorb any
differences in depreciationlamortization expense. On an annual basis, the net decrease of $487,780
for natural gas depreciation expense, versus the net increase of $678,434 for electric
depreciation/amortization expense results in an annual increase in expense overall of
approximately $191,000, which will be absorbed by the Company. The Company will only be
allowed to absorb the natural gas reduction to depreciation expense, to offset the electric increase
in depreciation/amortization expense, until a change in rates as a result of the Company's next
general rate case, provided that the Company has filed its next general rate case prior to the
effective date of its 2019 Purchased Gas Adjustment (PGA).
IV. GENERAL PROVISIONS
15. 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 or comments filed in
support of the approval ofthis 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. See IDAPA 31.01.01.274.
16. 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
STIPULATION AND SETTLEMENT - AVU-E-I8-03 and AVU-G-18-02 Page 9
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.
17. 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 Parfy
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
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.
18. The Parties agree that this Stipulation is in the public interest and that all of its terms
and conditions are fair, just and reasonable.
19. 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
STIPULATION AND SETTLEMENT - AVU-E- I 8-03 and AVU-G- I 8-02 Page l0
regutation 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 shallbe deemed to be implicit in this Stipulation.
20. 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.
21. This Stipulation may be executed in counterparts and each signed counterpart shall
constitute an original document.
rLl
DATED ni, /t{' day of Fcbruary,20l9
B
Avista Corporation
David . Meyer
Attorney for Avista Corporation
Clearwater Paper Corporation
Peter Richardson
Attorney for Clearwater Paper
Sierra Club
By
Matt Gerhart
Attorney for Sierra Club
Idaho Public Utilities Commission Staff
By
Sean Costello
Deputy Attorney General
Idaho Forest Croup
By
Ronald L. Williams
Attorney for ldaho Forest Group LLC
ldaho Conservation League
By
Benjamin Otto
Idaho Conservation League
STIPULATION AND SETTLEMENT - AVU-E-l 8-03 and AVU-G-l 8-02 Page I I
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.
2A. The obligations of the Pades 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.
21. This Stipulation may be executed in counterparts and each signed counterpart shall
constitute an original document.
DATED this _ day of February,2Al9.
Avista Corporation Idaho Commission Staff
David J. Meyer
Attorney for Avista Corporation
Clearwater Paper Corporation
Peter Richardson
Attorney for Clearwater Paper
Siena Club
Matt Cerhart
Attorney for Sierra Club
Costello
Deputy Attomey Ceneral
Idaho Forest Group
Ronald L. Williams
Attomey for Idaho Forest Group LLC
Idaho Conservation League
Benjamin Otto
Idaho Conservation League
STIPULATION AND SETTLEMENT - AVU-E-18-03 and AVU-G-18-02 Page I I
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.
20. 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.
21. This Stipulation may be executed in counterparts and each signed counterpart shall
constitute an original document.
DATED thi, &^yof February ,zotg
Avista Corporation
David J. Meyer
Attorney for Avista Corporation
Clearwater Paper Corporation
Idaho Public Utilities Commission Staff
Sean Costello
Deputy Attorney General
Idaho Forest Group
B
By:
By:
Sierra Club
Peter
Attorney for Clearwater Paper
Ronald L. Williams
Attorney for Idaho Forest Group LLC
Idaho Conservation League
B
Benjamin Otto
ldaho Conservation League
By:
Matt Gerhart
Attomey for Sierra Club
STIPULATION AND SETTLEMENT - AVU-E-I8-03 and AVU-G-I8-02 Page I 1
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.
20. The obligations ofthe Parties underthis 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.
21. This Stipulation may be executed in counterparts and each signed counterpart shall
constitute an original document.
utr'-lDATEDthis I I dayofFebruary,Z}l9.
Avista Corporation
David J. Meyer
Attorney for Avista Corporation
C learwater Paper Corporation
Peter Richardson
Attorney for Clearwater Paper
Siena Club
B
Matt Gerhart
Attorney for Sierra Club
Idaho Public Utilities Commission Staff
Sean Costello
Deputy Attorney General
ldaho Forest Group
f,,a J. u-//,;*
Ronald L. Williams
Attorney for Idaho Forest Group LLC
Idaho Conservation League
Benjamin Otto
Idaho Conservation League
STIPULATION AND SETTLEMENT - AVU-E-18-03 and AVU-G-18-02 Page I I
Clearwater Paper Corporation Idaho Forest Group
Ronald L. Williams
Attomey for Idaho Forest Group LLC
Idaho Conservation League
Benjamin Otto
Idaho Conservation League
Peter Richardson
Attorney for Clearwater Paper
Sierra Club
Gerhart
Attorney for Sierra Club
STIPITLATION AND SETTLEMENT - AVtr-E-18-03 and AW-c-18-02 Page 12
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Attachment B
Docket AW-E-f8-03
Colstrip Summarv and Description
Avista owns a 15olo share of two coal-fired generation facilities located in Colstrip, Montana, known as
Colstrip Units 3 & 4, which have a combined capacity of about 1,480 MW. These two facilities were placed
in service in 1984 and 1986. No decommissioning date has been established for these assets. Current rates
include depreciation expense on Colstrip Units 3 & 4 with assumed remaining useful lives of these units
through December 31,2034 and December 37,2036, respectively.
The Parties acknowledge that there presently is no plan to close Colstrip Units 3 & 4by a specific date, nor
has Avista agreed to do so. The parties to the Settlement Stipulation in this docket (the "Parties") agree,
however, to a depreciation schedule for Colstrip Units 3 & 4 that assumes a remaining useful life of those
units through December 31, 2027 . The Parties agree to set depreciation rates for Colstrip Units 3 & 4 at
amounts that will yield an annual depreciation expense of approxim ately $2.47 5 million (ID Share)' for the
remaining depreciable lives of those units, which is the current level of annual depreciation expense.
ThePartiesagreetoadoptadepreciablebalanceofColstripUnits3 &4of$55.18million(ldahoshare).
This includes the currently recognized unrecovered plant balance, as well as estimated asset retirement
obligations previously not included in rates2. Nothing in this Settlement will preclude Avista from seeking
recovery of additional future asset retirement costs, based on a showing of prudency in future generalrate
cases.
The $55.18 million balance will be recovered as follows:
$6.41 million (lD share) of "temporary" tax credits associated with Non-Plant Excess
ADFIT. These tax credits were described in Avista's "Report on Impact of Federal Tax
Code Revisions on Utility Costs and Ratemaking" (Case No. GNR-U-18-01).3
O
$21.66 million, through an annual depreciation expense of approximately $2.475 million
(ID Share), which is the current level of annual depreciation expense.
$2T.ll million,throughtheamortizationofaRegulatoryAsset(FERCAccountNo. 183.3).
The amortization schedule of the Regulatory Asset will be structured to match the
amortization schedule of protected Excess DFIT that began being returned to customers on
June 1, 2018. Using a 34.75 year amortization, consistent with the remaining protected
Excess DFIT schedule, results in an annual amortization of approximately $780,000 per
year - ID share. The amortization of the Regulatory Asset over time, therefore, would be
recovered from customers over the same time period as the amortization of protected Excess
DFIT is returned to customers, offsetting the entire remaining Colstrip Regulatory Asset
over the 34.75 years.
I Annual depreciation expense is approximately $7.0 million on a system-basis.
2 The asset retirement obligations are currently estimated at approximately $20.3 million (ID share). These costs
include cost of removal, decommissioning and remediation costs.
3 The tax credits were the result of H.R.1 - Tax Cuts and Jobs Act signed into law in December 2017.
a
a
Page I of2
Attachment B
Docket AVU-E-I8-03
Nothing in this Seftlement will preclude Avista from seeking recovery of routine future capital maintenance
costs incurred in the normal course of business beyond January 1, 20 1 8 not intended to extend operational
life, based on a showing of prudency in future general rate cases.
The Regulatory Asseta, net of accumulated deferred federal income taxes, will be included in rate base and
will earn Avista's rate of return.
Effective April 1, 2019, Avista will begin amortizing the Colstrip Regulatory Asset at an annual amount of
approximately $780,000. Also effective April 1, 2019, Avista will revise its depreciation rates for all its
assets as agreed to per this Settlement Stipulation, resulting in a decrease in depreciation expense of
$135,000. Avista further agrees to absorb the net impact of depreciation/amortization expense (net increase
of $645,424), until such time these balances are reflected in base rates.5
A summary of the agreement described above is as follows:
Summary of Colstrip Costs (lD Share)
Total Amount
Amortization
Period (Years) Annual Amount
Net Book Value of Colstrip Units 3 & 4, including
transmission assets, at December 3t,2077
Esti mated a sset reti rement obl i gati ons
Undepreciated Balance
5 34,847,436
20,333,91_9
55,175,355
Future depreciation expense recovered April 1,2019 -
December 31.,2027
Tempora ry Tax Credits
Net Colstrip Costs Recorded as Regulatory Asset
(21,5s8,238)
(6,409,000)
5 27,1-08,1.t7 34.7s s 780,090
Effect of agreed upon changes to depreciation expense (excludi ng Colstrip)
Overall net increase to depreciation/amortization expense (Company will absorb)
5 (134,666)
S aqs,qzq
*lncludes accumulated depreciation through March 31,2019 on Colstrip plant balances at December 31,2077
The Parties agree that the remaining deferred taxes, not used to offbet the Colstrip balance of $55.18 million
shown in the table above, which are associated with Idaho electric tax benefits deferred January 1,2018
through May 30,2018 of $5.766 million, will be returned to customers in a separate Tariff Schedule 74
over a one-year period beginning April 1,2019. These tax credits were described in Avista's "Report on
Impact of Federal Tax Code Revisions on Utility Costs and Ratemaking" (Case No. GNR-U-18-01).6
4 The Colstrip accounts included as rate base include the following: FERC Account No. 101.0 - Plant Cost, FERC
Account No. 108.0 - Accumulated Depreciation, FERC Account No. 182.3 - Regulatory Asset ARO, FERC Account
No. 182.3 - Regulatory Asset Colstrip, FERC Account No. 230.0 - Colstrip ARO, and FERC Account No. 242.0 -
Colstrip Accounts Payable.
s The Company's original filed Depreciation Study resulted in an increase to depreciation expense of $1.28 million
(corrected balance). In comparison, the revised net increase in depreciation/amortization of $645,424 shown above
for settlement purposes, reflects an agreed-upon reduction in depreciationJamortization expense of $635,000 from that
originally filed.
6 The tax credits were the result of H.R.l - Tax Cuts and Jobs Act signed into law in December 2017.
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ATTACHMENT C
Colstrip Proposed Rates for a2027 Depreciable Life
Docket No. AVU-E-18-03
ED.C3.311000
ED.C3.312000
ED.C3.313000
ED.C3.314000
ED.C3.315000
ED.C3.316000
ED.C4.311000
ED.C4.312000
ED.C4.313000
ED.C4.314000
ED.C4.315000
ED.C4.316000
Proposed
Depreciation
Rate
1,.99%
2.67%
9.22%
8.34%
2.97%
4.21%
2.95'/o
4.79%
9.34%
7.59%
3.72%
4.74%
Generation Assets
STEAM PROD PLT-STR & IMPR
STM PROD-BOILER PLANT EQ
STEAM PROD PLT-GENERATORS
STM PROD PLT-TURBOGEN ERAT
STM PROD PLT-ACCESSORY EQ
STEAM PROD PLT-MISC EQUIP
STEAM PROD PLT-STR & IMPR
STM PROD-BOILER PLANT EQ
STEAM PROD PLT-GEN ERATORS
STM PROD PLT-TURBOGENERAT
STM PROD PLT-ACCESSORY EQ
STEAM PROD PLT-MISC EQUIP
Plant Acct Transmission Assets
REMOVING PROPERTY OF OTHERS
STRUCTURES AND IM PROVEM ENTS
STATION EQUIPMENT
TOWERS AND FIXTURES
POLES AND FIXTURES
OVERHEAD CONDUCTORS
ROADS AND TRAILS
Proposed
Depreciation
Rate
6.O2%
1,7.19%
s.69%
6.75%
8.O7%
8.25%
5.62%
350
352
353
354
355
356
3s9
Avista
Attachment C - Colstrip 2027 detail by FERC.xlsx
Colstrip Page 1 of 1
Attachment D
Docket AVU-E-18-03
Idaho Electric
Bil! Impact of Colstrip Amoftization and Tax Benefits
Use of Tax Dollars (Non-plant ADFIT)$ 6,409,000
Colstrip Amoftization over 34.75 years
Proposed Incrementa ! Depreciation
Net Amoft ization/ Depreciation
780,000
(135,000)
51,306 0.260/o
49,246 0.260/o
544,448
$645,000 0.25o/o
0.23 0.270/o
$
$$ 645,000
Billed impact to customers next GRC (assumed 1/1/2020):
Schedule 25
Schedule 25P
All other schedules
$
$
$
Monthly Residential Bill impact @ 910 kwhs $
Refund Tax Credit Dollars (Deferred Jan-May 2018)
Bill impact of Tax credit returned Effective IIJLNIj|.: *
Schedule 25
Schedule 25P
All other schedules
Total Returned to customers over 1-Year
Monthly Residential Bill impact @ 910 kwhs
$ (5,766,000)
$ (458,657) -2.32o/o
$ (440,240) -2.32o/o
$ (4,867,109)
_$__lilgqp9u -2.23o/o
$ (2.04) -2.38o/o
*The Parties agree to spread the temporary portions of the Rate Credits on a uniform percent of base revenue basis. The
Company chose this method because it generally matches how costs are presently being recovered from customers. For the
spread of the Rate Credit within each seruice schedule (i.e., rate design), the Company will apply a uniform cents per kwh to
the volumetric block rates by rate schedule. The temporary poftion will be passed back to customers through rate schedule 74
and will be in effect for a one-year period beginning April 1, 2019.
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