20180316Decision Memo.pdf

DECISION MEMORANDUM
TO:COMMISSIONER KJELLANDER
COMMISSIONER RAPER
COMMISSIONER ANDERSON
COMMISSION SECRETARY
COMMISSION STAFF
FROM:BRANDON KARPEN
DEPUTY ATTORI\EY GENERAL
DATE: MARCH 12,2018
SUBJECT: AVISTA,S APPLICATION FOR A CHANGE IN ITS ELECTRIC AND
NATURAL GAS DEPRECIATION RATES, CASE NOS. AVU-E-18-03
AND AVU.G.18.O2
On February 23,2018, Avista Corporation dba Avista Utilities filed an Application
requesting that the Commission approve changes to the Company's book depreciation rates for
electric and natural gas property. Avista serves customers in Washington, Idaho, and Oregon.
The Company seeks a January 7,2019, effective date. Avista last changed its book depreciation
rates in Idaho in January and April 2013. Order No. 32769.
BACKGROUND
The Company hired Gannett Fleming to undertake a depreciation study of its
depreciable electric, gas, and common plant as of December 2016. The objective of this study
was to attain depreciation rates to be utilized by Avista going forward. As a result of this study,
the Company filed the above-captioned matter. According to the Company, the annual accrual
rates proposed in this filing were calculated using "straight-line method of depreciation, using
the average service life procedures and the remaining life basis, based on estimates which reflect
considerations of historical evidence and expected future conditions." Application at 3.
PROPOSED CHANGES IN DEPRECIATION RATES
The Company's request, if approved, will increase the depreciation rate for electric
service by approximately $ I million, and decrease the depreciation rate for natural gas by
approximately $500,000. Id. at 5. According to the Company, the change is necessary to update
asset lives and existing depreciation accrual rates from the 2012levels. 1d.
DECISION MEMORANDUM 1
The following table shows a summary of the change in depreciation expense for
Idaho electric service:
Production Plant:Total
Steam Production Plant $1,111,689
Hydraulic Production Plant $593,852
Other Production Plant $319,151
Transmission Plant $700,017
Distribution Plant s(|,273,916)
General Plant $(222,558)
Transportation $(249,301)
Total Electric PIant $978,934
Id. at 6. The following table shows a summary of the change in depreciation expense for Idaho
natural gas service:
Production Plant:Total
General Plant $(1 50,536)
Underground Storage Plant $(53,962)
Distribution Plant $(247,3t5)
Transportation $(91,025)
Total Gas Plant $(542,802)
Id. atl.ln addition to electric and natural gas depreciation rates, the Company also provided an
updated estimate for the remaining useful life of Colstrip Units 3 and 4, of which Avista is a 15
percent owner. Id. at 7-8. In sum, the Company proposed no change to its previous useful life
estimates, and proposed to continue to operate the coal facilities under 2034,2036 end-of-life
estimates. Id. The Company also proposed an additional component in its Colstrip deprecation:
asset retirement obligations, an expense relating to coal waste. Id.
Approval of the new depreciation rates would be for accounting purposes only and
the Company does not seek a change in customer service rates at this time. If approved, the new
depreciation rates would become effective January 7,2019, and will be concurrently updated in
Washington and Oregon.
2DECISION MEMORANDUM
The Company requested that the Commission process its depreciation application
under Modified Procedure.
STAFF RECOMMENDATION
Staff concurs that Modified Procedure is an appropriate means to process Avista's
depreciation application. Staff recommends that the Commission issue a Notice of Application
and establish a 21-day deadline for intervention. Once intervention has passed, the parties may
informally meet to review the Company's proposed changes in depreciation rates.
COMMISSION DECISION
Does the Commission find that Modified Procedure with a Zl-dav deadline for
intervention is an appropriate means to process this case?
Deputy Attorney General
I:\Lcgal\ELECTRIC\AVU-E- I 8-03\lr4emos\AVUE I 803_AVUG I 802-bkl.doc
JDECISION MEMORANDUM