20181114Comments.pdf

f,[: l\-rIDEDWARD JEWELL
DEPUTY ATTORNEY GENERAL
IDAHO PUBLIC UTILITIES COMMISSION
PO BOX 83720
BOISE, IDAHO 83720-0074
[phone]
IDAHO BAR NO. 10446
Street Address for Express Mail
472 W. WASHINGTON
BOISE, IDAHO 83702-5918
Attorney for the Commission Staff
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
lq,l Inhi
IN THE MATTER OF THE AGRE,EMENT FOR
PURCHASE AND SALE OF THE CHENEY AND
FOUR LAKES TAP LINES AND THE
TRANSFER OF OWNERSHIP AGREEMENT
BETWEEN AVISTA AND BONNEVILLE
POWER ADMINISTRATION
CASE NO. AVU.E.18-09
COMMENTS OF THE
COMMISSION STAFF
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COMES NOW the Staff of the Idaho Public Utilities Commission, by and through its
attorney of record, Edward Jewell, Deputy Attorney General, and in response to the Notice of
Application, Notice of Modified Procedure, and Notice of Telephonic Hearing issued in Order
No. 34172 on October 16,2018, in Case No. AVU-E-I8-09, submits the following comments.
BACKGROUND
On August 29,2018, Avista Corporation ("Avista") filed an Application requesting
approval of an "Agreement for the Purchase and Sale of the Cheney and Four Lakes Tap Lines"
and a "Transfer of Ownership Agreement" (collectively "Agreements") between Avista and
Bonneville Power Administration ("BPA"). Avista requests Commission approval of the
Agreements pursuant to ldaho Code $ 6l-328.
ISTAFF COMMENTS NOVEMBER 14,2018
I i'][ !i I i] F;4 12: 0 7
If approved, the Agreements would transfer about 15 miles of 1 15 kV BPA tap lines and
easements to Avista in exchange for Avista transferring a230 kV power breaker to BPA. Avista
explains that these BPA tap lines are transmission assets in Avista's Balancing Authority Area
that are physically and electrically separate from BPA's main transmission network and
surrounded by Avista's transmission system. Avista's power breaker, on the other hand, is in a
BPA substation.
Avista states that the equipment to be transferred under the Agreements has posed
administrative, maintenance, and North American Electric Reliability Corporation compliance
challenges for both entities. Avista explains that no money would change hands under the
Agreements, and that they are merely intended to simplify administrative, operational, and
maintenance responsibilities for both BPA and Avista.
STAFF REVIEW
Staff reviewed Avista's Application requesting Commission approval of the asset transfer
between Avista and BPA. Staff believes the asset transfer is consistent with the requirements of
Idaho Code $ 61-328. This code requires the following criteria be met:
l. The transaction is consistent with the public interest;
2. The cost of and rates for supplying service will not be increased by reason of such
transaction; and
3. The Applicant for such acquisition or transfer has the bona fide intent and financial
ability to operate and maintain said property in the public service.
First, Staff believes the transfer of assets between the two Companies is consistent with
the public interest because the cost to operate and maintain BPA's transmission assets will likely
be less than the cost to operate and maintain Avista's power breaker. The Avista-owned power
breaker is located within BPA's Hatwai switchyard while BPA's transmission assets are
contained entirely within Avista's balancing area and are interconnected to other Avista-owned
assets. Swapping ownership will locate each utility's assets closer to other assets they are
currently required to maintain and operate, resulting in a more efficient use of resources and less
cost for both utilities. In addition, the acquisition of additional transmission and rights of way
can provide Avista with additional transmission routing options that could enhance reliability to
meet future growth in loads.
2STAFF COMMENTS NOVEMBER 14,2018
Second, Staff agrees with Avista that there should be no increase to customer rates as a
result of these transactions. Any actual reduced operation and maintenance expense will be
reflected in the operating expenses in Avista's next general rate case. The two utilities have
agreed to a non-monetary exchange for the value of the assets, which results in no change in rate
base or depreciation expense.
The net book value of the assets Avista will receive from BPA is $460,900. The net book
value of the assets Avista will transfer to BPA is $747,219.93. The difference in book value
between the transferred assets and acquired assets is $286,3 19.93. Avista will account for this
amount as a purchased acquisition adjustment, which will be used to create a regulatory asset.
Combining this regulatory asset with the net book value of the assets received from BPA totals
$747,219.93. This regulatory asset will be amortized over the remaining life of the exchanged
assets using a composite depreciation rate applicable to the assets being transferred to BPA.
Rate base and depreciation/amortization expense will not change as a result of the transactions,
thus there will be no increase in costs or retail rates due to this transaction.
Finally, Staff recognizes that both entities, given their financial capabilities and
operational history, reflect a bona hde intent and financial capability to operate and maintain the
assets in public service.
In its Application, Avista provided a narrative description that the transactions are in the
public interest and comply with ldqho Code $ 6l-328. In Production Request No. 3, Staff
requested that Avista provide an analysis showing how the asset transfers fulfill the requirements
under ldaho Code $ 6l-328. Staff believes that the information provided was suffrcient to
determine the reasonableness of the transaction in this case, due to the small scope of the transfer
and relatively small dollars involved. However, Staff recommends that in future filings Avista
provide with its Application a cost/benefit analysis as an aid to illustrate that customer rates will
not increase as a result ofthe proposed transactions.
STAFF RECOMMENDATION
Staff recommends that the Commission approve the Application for the asset ownership
transfers between Avista and BPA identified within the Agreements. Staff also recommends that
the Commission approve the establishment of the regulatory asset to be amortized over the
current remaining life of the assets.
JSTAFF COMMENTS NOVEMBER 14, 2018
Respectfully submitted this LLI
Technical Staff: Richard Keller
Johan Kalala-Kasanda
Kevin Keyt
i : umisc: comments/avue 1 S.9ejkskjkrk comments
day of November 2018.
Deputy General
4STAFF COMMENTS NOVEMBER 14, 2018
CERTIFICATE OF SERVICE
I HEREBY CERTIFY THAT I HAVE THIS I4TH DAY OF NOVEMBER 2018,
SERVED THE FOREGOING COMMENTS OF THE COMMISSION STAFF, IN
CASE NO. AVU-E-18-09, BY MAILING A COPY THEREOF, POSTAGE PREPAID,
TO THE FOLLOWING:
PATRICK EHRBAR
DIRECTOR REGULATORY AFFAIRS
AVISTA CORPORATION
PO BOX 3727
SPoKANE W A 99220-3727
E-mail: [e-mail]
avi stadockets@ avi stacorp.com
CERTIFICATE OF SERVICE