20190319final_order_no_34276.pdf

Office of the Secretary
Service Date
March 19,2019
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE APPLICATION )CASE NOS.AVU-E-18-03
OF AVISTA CORPORATION DBA AVISTA )AVU-G-18-02
UTILITIES FOR AUTHORITY TO REVISE )ITS ELECTRIC AND NATURAL GAS )ORDER NO.34276
DEPRECIATION RATES )
On February 23,2018,Avista Corporation dba Avista Utilities ("Avista"or the
"Company")filed an Application requesting the Commission approve changes to the Company's
depreciation rates for electric and natural gas property.The Application asked the Commission to
determine and approve proper and adequate rates for depreciation of the Company's property used
in providing retail electric and natural gas service,according to Idaho Code §61-525.Id.at 2.
The Commission now has before it the Motion for Approval of Stipulation and
Settlement (the "Motion")in which all parties recommend the Commission approve their
Stipulation and Settlement (the "Stipulation")to resolve the issues in this case.Having reviewed
the record,the Commission finds it reasonable to grant the Motion and approve the Stipulation in
the public interest,as further described below.
BACKGROUND
For financial and ratemaking purposes,Avista periodically studies the appropriate
depreciation rates for each plant account,by functional group.See Application at 2-4.The
Company's most recent depreciation study was included as Attachment C to the Company's
Application.Id.at 3.According to the Company,the study showed that "the Idaho share of annual
depreciation expense recorded to O&M and A&G expense on the Company's books should be
increased by approximately $1,275,324 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."See Comments of Avista at 1-2.The Commission last approved the
Company's depreciation rates in Idaho in January and April of 2013.See Application at 2;Order
No.32769.Avista initially asked for an effective date of January 1,2019.Application at 2.
After receiving the Application,the Commission issued a Notice of Application and
set an intervention deadline of April 23,2018.Order No.34014.Clearwater Paper,Idaho
Conservation League ("ICL"),Idaho Forest Group,and the Sierra Club intervened as parties.
Order Nos.34016,34049.The parties agreed on,and the Commission approved,a procedural
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schedule.Order Nos.34116,34133.The Commission also approved the Company's request to
change its proposed effective date to April 1,2019.Id.
The parties held settlement meetings on December 11,2018,and January 22,2019.On
February 15,2019,Avista filed a Stipulation signed by all parties,and a corresponding Motion
that recommended the Commission approve the Stipulation in the public interest.The
Commission issued a Notice of Settlement Stipulation setting deadlines for interested persons to
comment on the Stipulation.See Order No.34243.The Company,Commission Staff,the ICL
and Sierra Club commented in support of the Stipulation.See generallyComments of Avista in
Support of Stipulation;Comments of the Commission Staff in Support of the Settlement
Stipulation;and ICL and Sierra Club Comments.No one opposed it.The Stipulation and
supporting comments are summarized below.
THE STIPULATION
In the Stipulation,the parties agree the settlement is a "fair,just and reasonable
compromise of all the issues,"is in the public interest,and would reasonably resolve "the multiple
issues identified in this case."Stipulation at 1.The Stipulation included the agreed-upon
depreciation rates as Stipulation Attachments A and C.Attachment A represents the parties'
agreements on affected plant accounts,depreciation rates,and the allocated Idaho expense impact.
Attachment C represents the agreed-upon depreciation rates for Colstrip Units 3 and 4.The
Stipulation states that the Commission's approval of the Stipulation by April 1,2019,would allow
the Company to simultaneously implement "new depreciation rates for accounting purposes for
common plant in all three jurisdictionsin which Avista serves:Idaho,Washington,and Oregon."
This will simplify future accounting records,charges and audits of deprecation expenses in these
jurisdictions.Id.at 3.
The Stipulation states that the Company's future rate case would reflect
depreciation/amortization expense for its Idaho electric assets increasing by about $679,000,and
depreciation/amortization expense for its Idaho natural gas assets decreasing by about $488,000.
Comments of Avista at 10.As detailed in Table l to the Stipulation,these agreed-upon changes
would effectivelyincrease the Company's annual depreciation expense for its electric and natural
gas system by about $191,000.Id.at 9.The Company would absorb the Idaho depreciation
expense changes until customer base rates change,provided the Company has filed its next general
rate case before the effective date of its 2019 Purchased Gas Adjustment.Id.
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The Stipulation further details that the Company would:(1)change its book
depreciationrates effective April 1,2019;(2)change the end-of-life for Colstrip Units 3 and 4 to
December 31,2027,(for depreciation purposes);(3)create a Colstrip Regulatory Asset to be
amortized over the plant's 34.75-year ARAM period,resulting in an annual Idaho amortization
expense of $780,090;(4)starting April 1,2019,use Tariff Schedule 74 to return to customers
$5.766 million in temporary tax benefits the Company received under the Tax Cuts and Jobs Act
("TCJA")from January 1,2018 -May 1,2018;and (5)use vintage year accounting for Federal
Energy Regulatory Commission ("FERC")Account No.397 -Communications Equipment.See
Stipulation at 5-8;and Staff Comments in Support at 7-8.
THE COMMENTS
Avista,Staff,ICL and Sierra Club commented to support the Stipulation.The
comments are summarized below.
A.Avista Comments.
Avista summarized the Stipulation and how the TCJA affected accumulated Deferred
Federal Income Tax.Avista Comments at 7-9.Generally,Avista concluded that the Stipulation
is in the public interest because the Stipulation balances "the interests of Avista and its customers
on depreciation rates and depreciation expense...."Avista Comments at 9.Avista noted that the
parties agreed to the Stipulation after they conducted informal and formal discovery,and a review
of the Company's filings and audits of the books and records.Id.Further,while Avista would
implement new electric and natural gas depreciation rates beginning April 1,2019,customer rates
would not change unless the Commission approved such a change in the Company's next general
rate case.The Stipulation also takes advantage of temporary tax credits associated with the TCJA
as an offset,"representing a unique opportunity to resolve the intergenerational inequities of
accelerating the depreciation of these units to 2027 from 2034 and 2036,respectively."Id.at 10.
B.Staff Comments.
Staff also summarized the agreed-upon rates and adjustments.See Staff Comments at
2-7.Staff concurred with the stipulated depreciation rates and adjustments and recommended the
Commission approve the Stipulation as just,fair,reasonable,and in the public interest.Id.at 1.
C.Joint Comments -ICL and Sierra Club.
The ICL and Sierra Club filed joint comments to support the Stipulation.Their interest
centered mainlyon the Colstrip plant,and they characterized the Stipulation as "an elegant solution
ORDER NO.34276 3
that balances the need to address Colstrip's uncertain future with possible electric rate impacts to
Idahoans."ICL and Sierra Comments at 1.
DISCUSSION AND FINDINGS
The Commission has jurisdiction over Avista,an electric and gas utility,and the
Application in this matter under Title 61,Idaho Code,and the Commission's Rules of Procedure,
IDAPA 31.01.01.000,et seq.We are empowered to ascertain and determine the proper and
adequate rates of depreciation under Idaho Code §61-525.Each utility under the Commission's
jurisdiction must conform its depreciation accounts to the rates ascertained and determined by the
Commission.The Commission may change the depreciation rates from time-to-time as it finds
necessary.
The Commission considers settlement stipulations under Procedural Rules 271-
277.IDAPA 31.01.01.271-277.When a settlement is presented to the Commission,the
Commission will prescribe appropriate procedures for considering the settlement given its
nature.IDAPA 31.01.01.274.A settlement's proponents must show the settlement is reasonable,
in the public interest,or otherwise in accordance with law or regulatory policy.IDAPA
31.01.01.275.The Commission is not bound by the settlement but "will independently ...
determine whether the settlement is just,fair and reasonable,in the public interest,or otherwise in
accordance with law or regulatory policy."IDAPA 31.01.01.276.
Here,we have reviewed the record,including the Company's initial Application and
attachments,the Stipulation,and the supporting comments filed by Avista,Staff,and ICL and
Sierra Club.We note all parties signed and support the Stipulation,and that no one opposes it.
Further,the parties represent that the Stipulation reasonably resolves the case,and that it is in the
public interest for the Commission to approve it.We agree.
In particular we find the Stipulation is reasonable and in the public interest because it
would require the Company to use about $6.4 million in Idaho electric temporary tax benefits to
offset costs associated with the accelerated depreciation of Colstrip Units 3 and 4.Using the tax
benefits to offset accelerated depreciation costs would help stabilize customer rates without
harming the Company's cash flow.The offset also would allow customers to recover,over one
year,the remaining $5.766 million deferral of temporary tax benefits that the Company enjoyed
when its annual revenue requirement decreased due to its lower federal tax rate.We further
emphasize the reasonableness of the parties'agreement to decrease the remaining useful life for
Colstrip Units 3 and 4 to December 31,2027,since the actual useful life of those units is uncertain.
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Based upon the record before us,and to aid "in securing a just,speedy and economical
determination of the issues presented to the Commission,"we find it reasonable and appropriate
to approve the depreciationrates reflected in the Stipulation and accept the Stipulation in the public
interest.IDAPA 31.01.01.273-.276.
ORDER
IT IS HEREBY ORDERED that the parties'Motion is granted,and the associated
Stipulation is approved.The Commission adopts the revised depreciation accrual rates contained
in the Stipulation and its attachments.
IT IS FURTHER ORDERED that the depreciation accrual rates approved by this Order
shall become effective April 1,2019.
IT IS FURTHER ORDERED that starting April 1,2019,the Company will use Tariff
Schedule 74 to return to customers $5.766 million in temporary tax benefits the Company received
under the TCJA from January 1 -May 1,2018,according to the Stipulation.
IT IS FURTHER ORDERED the Company will use vintage year accounting for FERC
Account No.397 -Communications Equipment,according to the Stipulation.
THIS IS A FINAL ORDER.Any person interested in this Order may petition for
reconsideration within twenty-one (21)days of the service date of this Order.Within seven (7)
days after any person has petitioned for reconsideration,any other person may cross-petition for
reconsideration.See Idaho Code §61-626.
ORDER NO.34276 5
DONE by Order of the Idaho Public Utilities Commission at Boise,Idaho this
day of March 2019.
PAUL KJ LANDE PRESIDENT
KRIS INE RAP CO SIONER
ERIC ANDERSON,COMMISSIONER
AT
Diane M.Hanian
Commission Secretary
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