20190610Kensok Direct.pdf

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DAVID J. MEYER
VICE PRESIDENT AND CHIEF COUNSEL FOR
REGULATORY & GOVERNMENTAL AFFAIRS
AVISTA CORPORATION
P.O.BOX3727
141I EAST MISSION AVENUE
SPOKANE, WASH INGTON 99220.37 27
TELEPHONE: [phone]'1 6
FACSIMILE: [phone]
DAV [e-mail]
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BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE APPLICATION
OF AVISTA CORPORATION FOR THE
AUTHORITY TO TNCREASE ITS RATES
AND CHARGES FOR ELECTRIC
SERVICE TO ELECTRIC CUSTOMERS IN
THE STATE OF IDAHO
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CASE NO. AVU-E-19-04
DIRECT TESTIMONY
OF
JAMES M. KENSOK
FOR AVISTA CORPORATION
(ELECTRIC)
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I I. INTRODUCTION
2 Q. Please state your name, employer and business address.
3 A. My name is James M. Kensok. I am employed by Avista Corporation as the
4 Vice-President and Chief Information and Security Officer. My business address is l41l E.
5 Mission Avenue, Spokane, Washington.
6 Q. Mr. Kensok, please provide information pertaining to your educational
7 background and professional experience?
8 A. I am a graduate of Eastern Washington University with a Bachelor of Arts
9 Degree in Business Administration, majoring in Management Information Systems and from
10 Washington State University with an Executive MBA. I have experience through direct
1l application and management of Information Services over the course of my 34-year
12 information technology career. I joined Avista in June of 1996. I have been in the Information
13 Services Deparlment for approximately 22 years in a variety of management roles directing
14 and leading information systems, infrastructure technology and security strategy, system
l5 delivery and operations, complex communication networks, cyber security, applications
16 development, outsourcing agreements, contract negotiations, technical support, cost
17 management, and data management. I was appointed Vice-President and Chief Information
18 Officer in January of 2007 and Chief Security Officer in January of 2013.
19 a. What is the scope of your testimony in this proceeding?
20 A. I will provide an overview of and discuss costs associated with the Company's
21 Security, Information Service/lnformation Technology (lS/lT) programs and projects. These
22 costs are comprised of the capital investments for a range of IS/IT and security projects that
23 support systems used by the Company, including security and technology refresh/expansion,
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Avista Corporation
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1 customer facing technology such as myavista.com and our outage mobile application, among
2 several other applications. I will explain why our information technology investments are
3 necessary in the time frames indicated and why investments in technology are necessary in
4 order to perform in a safe, secure, reliable, and efficient manner. A table of contents for my
5 testimony is as follows:
6 Table of Contents
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I. INTRODUCTION
II. IS/IT OVERVIEW
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III. IS/IT CAPITAL PROJECTS......7
IV. IS/IT OPERATING AND MAINTENANCE EXPENSES.....21
a. Are you sponsoring any exhibits in this proceeding?
A. Yes. I am sponsoring Exhibit No.9, Schedule 1, which includes the
Information Technology Capital Project Business Cases.
II. IS/IT OVERVIEW
a. What is Avista's approach to information technology?
A. Avista's technology investment is driven by the need to provide energy to our
customers in a manner that is safe, secure, and reliable. Avista's overall information
technology investment strategy is generally driven by the need for technology systems to
protect our customer data and critical utility operations, meet our legal and regulatory
requirements, optimize cost effective replacement of assets, manage technology obsolescence,
improve efficiency and cost effective work processes, and train people on new skillsets.
Making investments in technology in the utility industry is not new - networks, data
and analytics, mobile transactions, security and technology refresh/expansion have been
around for decades - but these areas are experiencing significant change as a result ofnew
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Avista Corporation
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1 enabling technology (e.g., cloud storage and compute), increases in volume and velocity of
2 data, and the sophistication ofcyber-attacks.
3 Q. You mention above "the sophistication of cyber-attacks". Is Avista
4 continuing to do all that it reasonably can to protect its utility systems, and customer
5 information, from such attacks?
6 A. Yes. Security technologies in the electric and natural gas utility industry are
7 critical to the protection of the energy infrastructure and of Avista's sensitive customerdata,
8 employee data, operating data and financial data. Investments are necessary to protect Avista's
9 utility assets and to prepare for the appropriate response and recovery when there is a security
I 0 incident, a data breach, or when a disaster event takes place. Avista's security program focuses
I I on protecting its physical and cyber assets, including protecting against a data breach.
l2 Avista is a member ofthe AGA/EEI cyber security task force thatanalyzes and follows
13 best security practices for protecting the utility industry using the National Institute of
14 Standards and Technology (NIST) framework. Avista is an active participant in additional
l5 industry security groups, such as Downstream Natural Gas Information Sharing and Analysis
l6 Center (DNG-ISAC) that serves natural gas utility (distribution) companies, Electricity
17 Information Sharing and Analysis Center (E-ISAC) that serves electric utilities, EEI Cyber
l8 Mutual Assistance that serves electric and natural gas utilities, and the use of Transportation
19 Security Administration's (TSA) Pipeline Security Guidelines, as well as others.
20 In addition to being an active participant in protecting U.S. critical infrastructure and
2l following best practices in security, Avista appropriately invests in its business continuity
22 program, following the industry standard NIST framework which focuses on the following:
23 Identify, Protect, Detect, Respond, and Recover. Avista also follows the Federal Emergency
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1 Management Administration (FEMA) Incident Command System (lCS) for planning,
2 response and recovery efforts. Continuous investment in security and business continuity
3 programs and technologies is a technology investment priority to maintain a safe and reliable
4 energy infrastructure and to protect sensitive customer data, employee data, operating data and
5 financial data.
6 Q. Please describe any material changes that impacted Avista's technology
7 programs since your last rate filing.
8 A. Generally, Avista's technology investments have fallen under Technology
9 Refresh and Expansion programs. However, to provide more line of sight to specific drivers
l0 behind each technology investment, Avista began sun-setting the Technology Refresh and
I 1 Expansion programs in 2017- 1 8, and instead created multiple technology business cases that
12 describe the investment driver, governance structure, reason behind each investment,
l3 alternatives considered, and the risk of doing nothing. This initiative, resulted in more clear
14 visibility to the overall technology portfolio.
l5 a. What was the timeline for the completion of the technology programs?
16 A. Avista's technology programs are ongoing, but generally the timeline for
17 moving from technology expansion/refresh programs to multiple technology business cases
l8 was from 2017 to 2018. However, some projects are still in the process of sun-setting under
l9 these programs during 2019. Under th is new approach, periodic technology planning sessions,
20 comprised of Vice Presidents, Directors and Managers from various business units, are held
21 to review and discuss initiatives and guide project prioritization. Decisions based on the
22 discussions in these planning sessions are documented in more formal business cases that
23 guide future technology investments.
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o 1 Q. Did Avista consider alternatives to technology investments?
2 A. Alternatives are considered to determine if opportunities are available using
3 existing technology, changes to business processes andlor new technology options. For
4 example, a growing alternative to the traditional "buy or build" approach has been Software
5 as a Service (SaaS), whereby the software asset that once was in Avista's data center on
6 premise, is now in the technology vendor's data center (cloud environment). SaaS assessments
7 are performed by the Company case-by-case to determine how the benefits might outweigh
8 the costs and/or other risks.
9 Q. Describe the alternatives evaluated and how the solutions were chosen.
l0 A. Technology evolves in short cycles, as new and sometime more improved
1l technologies can perform more efficiently than older ones. Therefore, Avista's technology
12 leadership teams continuously re-evaluate alternatives in technology investments,
13 recommending to the Technology Planning Group (TPG) the best sets of technology
14 investments to set priority across the technology investment portfolio, balancing business
l5 value and customer benefits.
16 Through our technology programs, Avista evaluates and plans the direction of its
17 information technology portfolio. A team of IT professionals, managers, and directors guide
18 technology programs by analyzing the benefits and costs of investing in new technology and
19 maintaining existing technology. The team considers whether the current technology
20 environment is stable and secure, so that it is in Avista's and its customers' best interests to
2l maintain it, and if so, for how long. If not, other options that may better suit the technology
22 needs of Avista and its customers are discussed. The technology programs also evaluate the
23 risks of not making an immediate technology change or delaying a change to a later date.
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1 Technology business cases are governed under the TPG and Executive Technology
2 Steering Committee (ETSC). The TPG sets priority across the technology investment
3 portfolio, balancing business value and customer benefits, and based on the ETSC's guidance.
4 An additional filter is applied following this vetting by the TPG and respective business case
5 owners considering resource capacity, risk assessment criteria, and alternatives. Alternative
6 criteria can include cost to implement, operate, and maintain; complexity of system or
7 technology; economies of scale and scope to leverage previous technology investments;
8 available skillsets, and long-term technology roadmaps that enable safe and reliable energy to
9 our customers.
l0 a. Describe Avista's project management process that was used to manage
I I technology projects.
12 A. Avista's Project Delivery Process (APDP) Framework, in alignment with
13 industry best practice (Project Management Institute@ framework), was developed to
l4 establish a standardized practice in project management at Avista across all areas of capital
15 investment. Avista's technology department has a Project Management Office, congruent with
16 the APDP Framework, which acts as a center of excellence to maintain project management
17 standards for project delivery. Each technology investment is overseen by a project manager
18 to monitor scope, schedule and budget, governed by a steering committee for proper oversight.
19 Additionally, Avista's technology department uses a Project and Portfolio Management tool
20 (CA Technologies) to manage portfolios, programs and hundreds of parallel inflight projects.
21 Our technology teams also perform their work assignments using 'waterfall' and 'agile'
22 methodologies.
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Avista Corporation
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III. IS/IT CAPITAL PROJECTS
The IS/lT capital projects planned to be transferred to plant in service during 2019 are
shown in Table No. I below. An explanation of each of the projects follows the table.
Table No. I IS/IT Capital Additionsr:
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Enterprise Technology Capital Projects (System) ln $(000's)
2019
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I Information Technologr Refresh Progam
I Enterprise Brsiness Continuity
I enterp.lse Secu'ity
I Endpoint Conpuile and Productivity Systems
I Enerry Delivery Modemization
I en.rry Delivery Operational Effcierrcy & Shared Services
I EnerW Resources Modernization & Operational Effciency
Enterprise & Control Network lnfrastructure
Enterprise Conrmunication Systems
Environnrenlal Control & Monitoring Systems
ET Modemization & Operational Effciency - Technolory
Fiber Network trase Service Rephcenrent
Finarrcial & Accourting Technohry
Hunnn Resources Technolory
Land Mobih Radio & Real Time Connnurication Svstenx
l*gl & Conrpliarrce Technolory
Securiff Systems
Facilities and Storage Locations Secwity
GeneratiorL Substation & Gas Location Security
Teleconnnnication & Network Distribution Security
Facilities Driven Technolory Inprovenrcnts
Infasffuctu'e Technolory Failed Assets
Microwave Replacenrent with Fiber
High Voltage Protectbn Upgrade
Project Aths (Avista Facilities Managenrent Rephcenrent)
C ustonrer F acing Techrnbry
Paynrent Card Industry
Critical Infastructure Protection v5 Transition - Cyber Asset Electronic Access
Critical Infrastructure Protection l4vl - High Inpact Assets
Data Center Conrpute and Storage Systems
Digital Grid Network Expansbn
Total Planned Enterprise Technolory Capital Pmjects
$ 3,s50
523
3,647
10,324
2,160
3,276
1,634
7,608
2,499
283
2,288
253
1,789
401
2,596
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1,245
330
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557
261
265
944
11,344
730
1,239
750
3,289
752
Technology Refresh to Sustain Business Process -2019: $3,550,000
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I The Technology Expansion business case transfers to plant for 2019 have been included with the Endpoint
Compute and Productivity Systems business case. The full Technology Expansion business case is included in
Exhibit 9, Schedule l.
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The Technology Refresh to Sustain Business Processes program is in place to provide for
technology refresh of existing technology in alignment with the roadmaps for application and
technology lifecycles. Aging technology is the driving factor behind this project. As
technology ages, it presents a risk to Avista in the form of increased failure rate, inefficient
work practice, and/or employee/public safety incident due to system failures.
The continuation of technology refresh programs provides benefits by providing a stable and
reliable application and computing platform to allow for the safe and reliable operation of our
electric and natural gas infrastructures. This program is a collection of sub-programs, which
are described individually below:
Distributed Systems
This program addresses the replacement of distributed technology beyond the planned
life cycle, such as desktop computers, mobile computers, printers, faxes, scanners, and
multi-purpose devices. It also includes upgrades to operating systems, email systems,
and standard personal productivity applications. It includes such devices as desktop
computers for Customer Service Representatives, rugged mobile computers used by
field personnel who respond to service calls, and software such as MS Office and other
productivity software applications. During this period, the program is replacing its
Endpoint Configuration Management System, which has reached end of life. The
System Center Configuration Manager (SCCM) is a tool that provides remote control,
patch management, software distribution, operating system deployment, network
access protection and hardware and software inventory. SCCM requires complex
technology architecture and advanced configuration to manage thousands of
computers. Additionally, existing rugged mobile computers have also reached end of
life and available parts, maintenance and support, thus requiring a full replacement of
all rugged mobile computers and their truck mounts, docking stations and cabling in
all existing fleet vehicles.
Communication Systems
This program addresses the replacement of communication technology beyond the
planned life cycle such as mobile radios, cell phones, desktop phones and supporting
systems, communication cable, and fiber. It includes PBX phone systems and mobile
radios used by field personnel. During this period, Avista's Enterprise Call Recording
System must be replaced, to meet Federal regulatory compliance requirements for a
vertically integrated utility, as the current licenses and recorders are at end of life. The
system supports Credit Dispatch, Distribution Dispatch, Power Supply, System
Operations, Generation Control Center, Claims and the Technology Service Center.
Network Systems
This program addresses the replacement of network equipment beyond the planned
life cycle, such as routers and switches. It includes networks for moving data between
offices, from field devices back to offices and supports data transport for SCADA and
other operation systems. Avista leverages various network transpor"ts (Campus
Network, Data Center, Local Area Network, Wide Area Network, and Field Area
Network) in its architecture to maximize efficiency, reliability and resiliency. Network
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equipment replacement aligns with Avista's Enterprise Network Communications
Strategy, which outlines the need to meet various use cases across our service territory
utility infrastructure, business, operations, and services. During this period, Avista will
replace network equipment at the Medford, Klamath Falls, and Roseburg offices.
Central Svstems
This program addresses the replacement of data center servers and storage equipment
beyond the planned life cycle. It includes data processing and storage for systems, such
as outage management and construction design. Specifically, during this period, a
major upgrade was conducted on the Windows Server Operating System, as updates
and patches are no longer suppofted by the vendor, to protect and maintain Avista's
data center infrastructure. Additionally, a portion of data center storage equipment was
replaced in accordance with life cycle planning.
Environmental Svstems
This program addresses the replacement of systems that support multiple other
systems. The program covers heating and cooling systems and back-up generators, and
uninterruptable power supply systems that are beyond the planned life cycle. It
includes back-up power supply systems in offices to assure that the systems will
function during power outages.
Business Applications
This program addresses the upgrading of software that has reached the end of support
for the given version. It includes upgrades to systems such as Outage Management
System (OMS), Customer Care and Billing (CC&B), Maximo, Mobile Work
Management (MWM) system, energy trading settlement system and financial and
operations systems. Regular upgrades are required as part of the software life cycle
and are required for vendor supplied maintenance and suppon, including patches, bug
fixes, or interim releases.
Enterprise Business Continuity PIan - 2019: $523,000
Avista has developed and maintains an Enterprise Business Continuity Program to support
Avista's emergency response, and to ensure the continuity of its critical business systems
under crisis conditions. The framework includes the key areas of technology recovery,
alternate facilities, and overall business processes. The effort of developing and continuously
improving the program ensures the readiness of systems, procedures, processes, and people
required to support our customers and our communities any time we are required to operate
under critical emergency conditions. A Business Impact Assessment (BIA) typically drives
the need for improvement projects, however some projects are funded based on quality issues
with existing infrastructure following an annual exercise or actual event. Projects within this
business case may also support regulatory requirements. The decision to make this technology
investment now is based on the continued need for reliable emergency and business continuity
systems to protect Avista's critical technology and ensure continued operations. If we delay
or cancel this technology investment, Avista risks a potential shut-down of critical operations
and communications in the event of an emergency.
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Avista Corporation
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Enterprise Security - 2019: 53,647,000
There are three primary drivers of the increasing costs for Enterprise Security: cyber security,
physical security and regulatory standards. Each plays a critical role in supporting our delivery
of safe and reliable energy to our customers.
Cyber Securit),
The security of ourelectric and natural gas infrastructure is a significant priority at a
national and state level, and is of critical importance to Avista. Threats from cyber
space, including viruses, phishing, and spyware, continue to test our industry's
capabilities. And while these malicious intentions are often unknown, it is clear the
methods are becoming more advanced and the attacks more persistent. In addition to
these threats, the vulnerabilities of hardware and software systems continue to
increase, especially with industrial control systems such as those supporting the
delivery of energy. The decision to make this technology investment now is based on
Avista's need to advance its cyber security program and invest in security controls to
prevent, detect, and respond to increasingly frequent and sophisticated cyberattacks.
Physical Security
While considerable attention is focused on cyber security, physical security also
remains a concern for our industry. Physical security encompasses the aspects of
employee safety and the protective security of our facilities and critical infrastructure.
Acts of theft, vandalism, and sabotage of critical infrastructure not only result in
property losses, but can also directly impact our ability to serve customers. Securing
remote unmanned or unmonitored critical infrastructure is difficult, especially when
traditional tools such as perimeter fencing by itself are not adequate. In response to
these challenges, Avista is investing in additional physical security equipment,
expertise and technology. The decision to make this technology investment now is
based on the need to protect our utility assets from theft and vandalism and employees
from acts of terror or violence through additional physical security protection
measures (i.e., lighting and crash barriers), remote detection and response technology.
Resulatory Obliqations
Advancing cyber threats continue to drive change in the regulatory landscape faced by
Avista and the utility industry. Early in 2013, President Obama issued the Executive
Order "lmproving Critical Infrastructure Cyber Security." The Order directed the
National Institute of Standards and Technology (NIST) to work with stakeholders in
developing a voluntary framework for reducing cyber risks to critical infrastructure.
The framework consists of standards, guidelines, and best practices to promote the
protection of critical infrastructure. On May 11,2017, a new Executive Order
"Strengthening the Cybersecurity of Federal Networks and Critical Infrastructure" was
issued that builds upon the 2013 Executive Order and addresses cybersecurity
requirements in federal networks, in critical infrastructure and for the nation in general.
The Federal Energy Regulatory Commission also issued Order 791 on November 22,
2013,approving the North American Electric Reliability Corporation (NERC) Critical
Infrastructure Protection (CIP) Standards, Version 5. Both of these activities will
increase our security-related operating costs because they require Avista's security
controls and processes to conform to new standards, guidelines, and best practices, and
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is the basis for the decision to make this technology investment now. For example,
Avista was required by NERC to adhere to the new CIP v.5 Standards by 2018. In
addition Avista also has requirements under the Payment Card Industry (PCI)
standards. These standards continue to change as updates are made to the standards on
a l-2 year cycle. If we delay or cancel Enterprise Security technology investments,
Avista risks non-compliance with federal mandates and recommendations, a weaker
and less reliable infrastructure (both cyber and physical), and we risk placing electric
and gas operations, sensitive customer and employee information and the safety and
security of people and critical operations and systems in jeopardy.
Endpoint Compute and Productivity Systems -2019: $10,324,000
Endpoint Compute and Productivity Systems include end-user hardware and software assets
that ensure access to and interface with all corporate applications required for employees and
contractors to perform their jobs in a safe, reliable and efficient manner. Hardware that falls
under this business case are: personal computers, virtualized application deployments, tablets,
printing, scanning, monitors, touch screens, global positioning systems, cellular modems,
scales, uninterruptable power supplies (UPS) and peripherals used in all areas of the company
from corporate office users, customer service agents, application developers, remote office
and mobile field workers. The following projects in 2019 update or replace end of life or
obsolete assets across the company: Microsoft Office System Replacement, Drafting Printers
refresh, Citrix Virtual PC & Application System upgrade, Windows 7 Operating System
Replacement, and Field Workforce Mobility System. Reducing or canceling investment under
this business case will result in endpoint devices and their management tools to be ran into
end of life by vendor-driven technology obsolescence that would result into returning to
manual processes where possible. In some cases, there would be no manual processes to revert
to.
Energy Delivery Modernization - 20192 $2,160,000
This business case supports the ability to refresh technologies that have been enabled to meet
business requirements throughout the Energy Delivery business area including: Electric
Engineering and Operations, Asset Management and Supply Chain, Facilities, Fleet
Operations and Metering. The major applications in the Energy Delivery Program portfolio
include: Geospatial .platform environment - ATcGIS solutions (Esri), Enterprise Asset
Management System - Maximo Solutions (lBM); Time Series Operational Data - Plant
Intelligence (PI) Solutions (OSlsoft); Mobile Workforce Management - Mobile Dispatch
solutions (ABB); Fleet Asset and Work Order Management - FASuite solutions (Asset
Works); Crew Planning and Scheduling - Crew Manager Solutions (Arcos); System
Operations Outage Management - CROW (Equinox); Transmission Planning - PowerWorld
solutions (PowerWorld); Metering solutions which include OpenWay, OpenWay Riva,
MV90, Field Collection System (FCS), Fixed Network, and TWACS (two-way automatic
communication system); Flight Tracker, and Global Mapper. Key projects for 2019 in the
Energy Delivery Modernization business case that address upgrades of the major applications
are the Maximo Application Upgrade, PI Upgrade, ESRI Upgrade ATcGIS v10.6x, Global
Mapper Upgrades and Service Suite v9.7x upgrade. This work enables Avista to maintain
system maintenance and support which includes security patching, bug fixes, version
upgrades, interoperability, and compatibility with other technologies thereby ensuringo
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application functionality and reliability. Not investing in this business case adds risk to
existing systems of record required to deliver energy to our customers.
Energy Delivery Operational Efficiency & Shared Services -2019: $3,276,000
This business case supports the ability to expand business functionality through the use of
technology throughout the Energy Delivery business area including: Gas Engineering and
Operations, Electric Engineering and Operations, Asset Management and Supply Chain,
Facilities, Fleet Operations and Metering. The projects represented herein support the need to
meet business requirements by enhancing existing functionality or adding brand new
functionality for users across the Energy Deliver business area.
Application expansion projects result from technology demand related to transformations in
the utility industry and continual changes required to meet expanding customer needs, as well
as the drive to achieve operational efficiencies. Recent trends in the area of mobility,
scalability, and the move towards Commercial off the Shelf (COTS) solutions that enhance
and/or improve conventional business practices and processes also influence application
expansion efforts. Key projects in this business case are GIS Enhancements Packages 1 and2; Maximo Enhancements Packages; CROW Enhancement Packages, Assetworks
Enhancements, PI Enhancements Package; and Arcos Enhancements.
Energy Resources Modernization & Operational Efficiency -20192 $1,634,000
This program supports the technology-related application projects required for both expansion
and refresh activities required within the Energy Resources business area. This program is
required to support the application-related technology initiatives for all areas of energy
Resources - Power Supply, Gas Supply, and Generation Production and Substation Support
(GPSS). The business program functions that require major application support include the
following: Energy Risk Management and Energy Trading which includes Nucleus, Avista
Decision Support System (ADSS), and Settlement Solutions; Work Management - Maximo
for GPSS; Generation Plant and Substation Operations - Wonderware, and CROW Outage
Management; and Fuel Inventory Management - WeighWiz. Key projects in2019 within this
business case are the Nucleus Enhancement Blanket, GPSS Mobile Solution - Generation,
and Avista Decision Support System (ADSS) Package 2019. Not investing in this business
case puts risk on Avista's ability to support technology associated with generating power,
managing field assets in our hydroelectric plants, upgrading and maintaining operational
interfaces that monitor generation facilities, and participate in the wholesale market.
Enterprise & Control Network Infrastructure - 2019: $7,608,000
The Enterprise and Control Network systems business case will represent projects that are
driven by performance and capacity related issues on the following technologies: Network
Switching; Network Routing; Network Load balancing; Network Optimization; Network
communication links; Time Delay Multiplexed (TDM) systems; Virtual Private Network
(VPN) systems; Microwave and other telecommunication systems; Global Positioning
Systems (GPS); Time Synchronization;Network media converters; and Applications used to
monitor and manage systems. Key projects within this business case are: CdA - PIN OPGW
Phase 2,Data Center Patch Panels Refresh, Moscow to Terra View OPGW, P2P Mw Refresh
Mt. Spokane to Creston Butte, Wireless Access Point Enhancements, Post Street Network
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Improvements, Cisco AnyConnect Client Refresh, CMS Refresh - DCR/HAT/LOL/i{LW,
and Bennewah Fiber Appr and Network.
The enterprise and control network technology systems provide the data communication
foundation for basically all automated business processes, serving as the wired and wireless
data and communication super-highways. Not continuing to invest in this business case will
result in degradation of transport systems that move information, communication, and data
throughout our service territory to and from our field offices, control facilities, and workers.
Enterprise Communication Systems - 2019: $2,499,000
This business case enables the Company to manage technology replacement as well as to
address asset growth driven by business need for enterprise communication systems such as:
instant messaging systems, contact center automatic call distribution system, contact center
scheduling and QA systems, customer interactive voice response (lVR), voice recording,
electronic mail and calendar, voicemail, telephone, teleconferencing, video conferencing,
conference room technology, media walls, enhanced 9l I emergency services, electronic fax,
paging and application systems to manage enterprise communication technology.
Projects within this business case that address enterprise communication systems in2019 are
Skype Communication System upgrade; Electronic Mail System upgrade; Session
Management System (SIP), which is an upgrade to the current data communication
infrastructure to utilize more of the Company's IP network which will improve connectivity;
Customer Service application upgrade projects such as Verint Call Center Application
Refresh, Virtual Hold System, and Interactive Voice Response Platform. Technology
investments under this business case require continuous investment to maintain the reliability
of communication with our customers and our workforce to support operational, safety, and
customer service needs. Not investing in this business case will immediately hinder Avista's
ability to communicate with our customers and field staff, which can present operational,
safety, and customer dissatisfaction.
Environmental Control & Monitoring Systems - 2019: $283,000
The Environmental Control and Monitoring systems ensure reliable operation of Telecom
facilities by managing the perforrnance and capacity of assets that support safety, control,
customer facing and back office automated business processes. Assets require specific
operating environments to prevent physical damage, such as temperature, humidity, and
power supply voltages. Environmental Control and Monitoring systems monitor and control
these environmental parameters and alert operational personnel when they fall outside of
optimal conditions. The alarms allow operational personnel to respond to issues that may
cause damage to other assets well in advance of any failure resulting in loss of business
automation processes. This business case represents projects that are driven by performance
and capacity related issues to the following assets in Telecommunication facilities: emergency
generation systems; DC power supply plants; fire protection systems; HVAC systems;
Remote Terminal Unit (RTU) technologies; microwave towers; UPS systems support; and
applications systems used to monitor and manage the environment.
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Avista Corporation
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Work that addresses Environmental Control and Monitoring Systems will take place within
the following projects for 2019 at various sites: Generator Monitoring, which will put
monitoring systems on emergency generators; DC Plant Monitoring, Telecom Site HVAC
Systems Refresh; Emergency Generator Systems; and AC Power Systems. Not investing in
this business case adds risk to other technology investments that require control environments,
which can result in technology asset failure at any time, but likely in extreme weather
conditions, such as during a heat spell or a major freeze, as some of these assets are located in
very remote and difficult to reach locations (e.g. mountain tops, etc.) Responding to
technology asset failures resulting from the inability to have insight as to why the asset failed,
compounds the ability to remediate and prevent future incidents from occurring. Due to their
remoteness, access during the winter at times is unsafe and can extend a system outage.
ET Modernization & Operational Efficiency - Technology - 2019: $2,288,000
The Enterprise Technology (ET) Modemization and Operational Efficiency business case
supports the technologies and processes necessary to support application implementation,
application development, delivery automation, application operations, application support,
and data delivery. The focus is on the tools and systems used by ET personnel to deliver
solutions to the rest of the organization. These efforts can be divided into the following
activities: IT Incident and Asset Management which includes the following applications:
Tracker, Resource Library, and Change Management Solution;Non-production Environment
and Data Management which include Continuous Integration Workflows, Automation, Data
Management, and Development Environments; ET Portfolio Management - Clarity;
Application Lifecycle Management (ALM) Tools which include Microsoft Team Foundation
Server (TFS), VersionOne and TaskTop, and Microsoft Visual Studio / MSDN; Shared
Systems and Tooling which include AppDynamics, BizTalk / API Management, Shared
Project Licensing, and Databases. Key 2019 projects represented in this business case are ET
Content Management (ECM) Enhancements, Actian Data Connect Upgrade v1l, Enterprise
Content Management: Taxonomy, Data and Analytics Platform - Foundations, Minor App
Purchase & Licenses, Tracker and Resource Library Replacement (Phase l), Clarity
Application Upgrade 2019, and BizTalk Upgrade. Not investing in these systems reduces the
technology's team ability to manage other systems, provide technology support, or the
application development tools to enhance functionality.
Fiber Network Lease Service Replacement - 2019: $253,000
The Company utilizes leased fiber optic cables to transport primarily Emergency and Control
data. The current contracts for leased fiber network services is due to expire in 2025.
Transitioning the Company's Emergency and Control network data from leased network
services to a private network infrastructure aligns with the long term network strategy and will
reduce both risk and Operate and Maintain (O&M) costs to the Company. The project
representing this work commenced in 2018 due to the anticipated complexity associated with
rights of ways, permitting, construction, and coordination with other parties (city/county
planning departments) to take advantage of complementary projects. Not funding this
initiative will keep Avista from moving off expiring lease agreements that may result in higher
O&M costs in future agreements.
Kensok, Di
Avista Corporation
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Financial & Accounting Technology - 2019: $1,789,000
This business case supports technologies for Finance and Accounting groups which include:
Accounting, Tax, Finance Planning and Analysis, Treasury and Trust, Risk Management, and
Internal Audit. The financial and accounting business processes are critical to the routine
operations of Avista. Work within this business case addresses changing accounting standards
and regulations that require frequent updates to the financial systems in order to support
accurate and timely financial and accounting business processes, as well as the need to manage
enhancements to meet internal and external business requirements.
Major applications in the Financial & Accounting Technology business case are: Oracle
Enterprise Business Suite; Power Plan; Impact Budget; Utilities International Planner;
BancTec Systems; and a small number of Commercial off the Shelf (COTS) and in-house
developed applications to support various accounting requirements. Key 201 9 projects for this
business case are the Budget System Replacement; Oracle EBS Consolidated Reporting
Implementation; EBS/PP Enhancements 2019 Packages I and 2; and EBS Additional
Modules - Replace Cashbook. Not funding investments under this business case will result in
putting our financial and accounting systems at risk of not being able to report out various
financial data required for routine operations.
Human Resources Technology -20192 $401,000
The Human Resources Technology business case supports the technology-related application
projects required for both expansion and refresh activities required within the Human
Resources business area. This program is required to support the application related
technology initiatives for all areas of Human Resources including Human Resources Labor
and Employee Relations, Leadership and Organizational Development, Human Resources
Shared Services, Craft Training, Safety, and Internal Communications. The largest
applications within the Human Resources business case poftfolio are the Ultimate Product
Suite and Skillsoft / SumTotal Learning Management System. Key projects for 2019 include
Enterprise Health & Safety System, Enterprise Performance Management (Craft/Technical),
Classroom Smart Boards, and Ultipro Expansion Module 2019. Not investing in this business
case may result in the ability to maintain HR systems that support payroll, talent management,
recruitment, management of required training certifications, etc.
Land Mobile Radio & Real Time CommSystems -20192 52,596,000
This business case represents projects that are driven by performance and capacity for the
following technology systems: Private 2-way Land Mobile Radio (LMR) System for field
operations, and Radio Telephone Command and Control System (RTCCS) used by Dispatch
and System Operations to perform critical radio and telephone communication to field
personnel. Key 2019 projects for this business case are: Mobile RF Repeater Expansion, LMR
Coverage Enhancements - Stensgar Mountain, LMR Coverage Enhancements - Idaho
Mountain, Mobile Radio Refresh 2019, DMR Transition - Mobiles and Handhelds, and DMR
Transition - Base Station Refresh 2019. Not investing in this business case may result in
degradation of the LMR and RTCCS systems, which can result in an unplanned outage to a
critical communication tool used by our field staff for communication throughout Avista's
service territory, which at times can be in rural and hard to reach locations and being the only
communication available, in turn presenting a safety risk.o
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Avista Corporation
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Legal & Compliance Technology - 20192 $151,000
This business case represents projects that will ensure constant management of enhancements
to meet internal and extemal business requirements for the following business areas: Legal,
Environmental Affairs, Real estate, Claims Management, Corporate Compliance, FERC
Compliance, Reliability Compliance, and Ethics Compliance. The main applications are
CATSWeb, Claims Management System, Valuemation, Serengeti Law, StackVision, and a
small number of COTS and in-house developed applications to support various legal and
compliance applications. Key projects within this business case for 2019 are CATSWeb
Enhancements and Avista Claims Management (ACM) System Replacement (to COTS). Not
investing in this business case can result in losing track of documents required to meet
compl iance requirements.
Security Systems - 2019: $3,940,000
The security of our electric and natural gas infrastructure is a significant priority at a national
and state level, and is of critical importance to Avista. Threats from cyber space, including
viruses, phishing, and spyruvare, continue to test our industry's capabilities. And while these
malicious intentions are often unknown, it is clear the methods are becoming more advanced
and the attacks more persistent. In addition to these threats, the vulnerabilities of hardware
and software systems continue to increase, especially with industrial control systems such as
those supporting the delivery of energy. For these reasons, Avista must continue to advance
its cyber security program and invest in security controls to prevent, detect, and respond to
these increasingly frequent and sophisticated attacks. Projects that address these threats in
2019 are Network Malware Monitoring (FireEye), Data Center Firewall Services, Website
Filtering - Servers, Surveillance Cameras, Removable Media Control, Generation Control
Network Vulnerability Scanning, and Endpoint Protection Suite Refresh. Not investing in this
business case increases Avista's risk to cyber-attacks and vulnerabilities, which can have
direct impacts on our ability to server customers or delivery energy.
Facilities and Storage Locations Security -2019: S1,245,000
This business case represents projects that cover the physical security at the Company's
facility and storage locations. These locations contain people, equipment and material that
are critical to support our day to day operations and in turn the delivery of safe and reliable
energy. A physical security incident at any of these locations may harm people, damage
equipment, or even restrict our ability to respond to our customers. In addition, physical
attacks can also give intruders access to critical cyber equipment, which can lead to a cyber
security event. Therefore, this creates the need for additional physical security protections, at
all facility and storage locations. The Identity Access Management project will take place in
201 9 under this business case. Not investing in this business case can leave gaps in how Avista
secures and protects its facilities that house people, equipment, and material, potentially
affecting our ability to maintain system performance and reliability.
Generation, Substation & Gas Location Security -20192 $330,000
This business case covers physical security at the Company's generation, substation and gas
locations. These locations contain equipment that is criticalto the delivery of safe and reliable
energy. Many of these locations are remote, unmanned and vulnerable, which makes them
difficult to protect. A physical security incident at any of these locations could deny, degradeo
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Avista Corporation
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or disrupt the delivery of energy. In addition, physical attacks can also give intruders access
to critical cyber equipment, which can lead to a cyber security event. Therefore, this creates
the need for additional physical security protections, at all generation, substation and gas
locations. Projects that will represent the work in this business case for 2019 include Model
Office Substation Security. Not investing in this business case can leave gaps in how Avista
secures and protects its generation, substation and gas facilities, potentially impacting our
ability to maintain system performance and reliability.
Telecommunication & Network Distribution Security - 20192 $l13,000
This business case covers the physical security at the Company's telecommunication and
network distribution locations. These locations contain equipment that is critical to the
operation of safety, control, customer and back-office networks. These networks support the
delivery of safe and reliable energy. Many of these locations are remote, unmanned and
vulnerable, which makes them difficult to protect. A physical security incident at any of these
locations could deny, degrade or disrupt any of the networks and impact critical business
processes. In addition, physical attacks can also give intruders access to critical cyber
equipment, which can lead to a cyber security event. This creates the need for additional
physical security protections, at all Avista telecommunication and network distribution
locations. ln2019, the Mission Campus Network Distribution Security project will take place
under this business case. Not investing in this business case increases risk to these facilities
that transmit operational data and communication to reliably operate and maintain the
performance of our systems.
Facilities Driven Technology Improvements - 2019: $153,000
The Facilities Driven Technology Improvements business case is in direct support of the
Structures and Improvements business case that is managed by the Facilities Department.
This business case represents projects that deliver technology infrastructure refreshes or
expansions for projects identified by the Structures and Improvements business case.
Structures and Improvements covers capital maintenance, site improvement, and furniture
budgets for all of Avista's offices, storage buildings, and service centers throughout the
service territory.
Many of the structures and improvements require technology in place for effective use of the
space by employees and/or contractors. The technology under this business case includes, but
is not limited to: conduit, network cabling, computers, telephones, printers, audio visual
equipment. Not investing in this business case may result in partially completed upgrades or
improvements without the technology infrastructure to support the optimal use of the facility.
Infrastructure Technology Failed Assets -20192 $557,000
The Infrastructure Technology Failed Assets business case represents work that is driven by
asset failures. Infrastructure technology assets experience failures due to manufacture defects,
human error, natural disasters, malicious actors, or agelruntime of the equipment. These
failures can or may occur within or after an asset's end of life. Depending on the asset, it may
be more cost effective to replace versus repairing. As there are higher failure rates related to
assets used for mobility, the most common hardware covered under this business case are
laptops, tablets, and mobile phones. Not funding this business case may result in not having
Kensok, Di
Avista Corporation
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available spare assets to replace the failed assets, which may in turn result in delay in returning
back to work for office or field staff or reverting to manual work processes.
Microwave Replacement with Fiber -20192 $261,000
Avista manages an ongoing program to systematically-replace aging and obsolete technology
under "refresh cycles" that are timed to optimize hardware/software system changes. This
project will replace aging microwave communications technology with current technology to
provide for high speed and more reliable data communications. These communication
systems support relay and protection schemes of the electrical transmission system. The
decision to make this technology investment at this time will reduce Avista's risk that failure
of these critical communication systems will have a significant impact on Avista's
transmission capacity and ability to serve our customers electrical needs. If we delay or cancel
this microwave refresh technology investment, Avista risks out of date communications
technology that could result in a shut-down of critical communications and transmissions
systems.
High Voltage Protection Upgrade for Substations -20192 5265,000
Telecommunication facilities, including Phone, Communication Switches, SCADA, and
Metering & Monitoring systems, are commonly co-located inside Avista's high voltage
substations. This requires communications technicians to work in close association with our
high-voltage electrical equipment. Avista has implemented new high-voltage protection &
isolation standards that are designed to lower potential risks to our personnel and equipment.
The decision to make this technology investment at this time will ensure implementation of
the clearance changes required to meet the new standards and will result in a safer working
environment for our crews who work in close proximity to high voltage electrical equipment.
If we delay or cancel this high voltage protection upgrade investment, Avista crews will be at
a higher risk of injury or death.
Project Atlas (Avista Facilities Management Replacement) -20192 $944,000
Avista Facility Management (AFM) is the legacy custom-coded system that the utility uses to
manage the location and current operating state of its critical electric and gas assets (e.g. pipes,
poles and wires). Environmental Systems Research Institute (ESRI) GIS serves as the
foundational data structure on which AFM applications are built or rely on. AFM is the system
of record for spatial electric and gas facility data and provides the connectivity model to
support the AFM applications. This program replaces legacy custom-coded systems with
COTS technology common in the utility industry. Project examples include the replacement
of the Electric and Gas Design tools, which are applications for the design of electric and
natural gas facilities, as well as Electric and Gas Edit tools inherent in the system used for
data edits prior to committing final data changes and additions. These tools also include a
mobile version for inthe-field updates by field staff, enabling real time changes in the system,
as well as meeting customer responsiveness expectations. For the reliability of system records
and the efficiency reasons stated above, this technology investment is made at this time. If we
delay or cancel this AFM technology investment, Avista risks not having up to date
information on our natural gas and electric assets that could result in harm to our customers,
crews and business operations.
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Avista Corporation
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Customer Facing Technology - 20192 511,344,000
In an effort to keep pace with customer demands and quickly changing technologies, Avista
intends to expand on the foundationaltechnologies established during previous business cases,
and offer more channels of choice including self-service options that meet customer needs and
help reduce overall business cost. A primary example of a project funded under the Customer
Facing Technology Program business case is the expansion of our outage mobile app to
include payments, SMS messaging around payments and billing, and "pay by text"
functionality. Expanding our mobile options can reduce call center volumes, resulting in
reduced hold times and enhanced customer satisfaction. It can also increase adoption of
electronic billing and payment transactions, which can lead to lower processing costs. Efforts
like this are focused on providing tools for our customers that support general consumer
preferences for mobile devices. Key projects taking place in 2019 within this business case
are: Prior Notification: Leak Survey/Atmospheric Corrosion; Customer Portal for AMI
(Aclara); myAvista Web-Automated Testing; myAvista Web Enhancements; CC&B/MDM
Enhancements; CC&B COBOL to Java Replacement; CXP (Customer Experience Platform)
System and Architecture Design; and CFTP: Mobile App Enhancements (Payments). The
decision to make this technology investment now is based on industry practice and trends.2 If
we delay or cancel this technology investment, Avista risks longer call center wait times,
lower customer satisfaction and generally, less efficient and higher cost operations.
Payment Card Industry Compliance (PCD -2019: $730,000
Avista accepts credit cards over the phone, in person and through the Company's website.
Credit cards are becoming the most common form of payment and has become an expectation
with Avista's customers. In addition, it aligns with the Company's Customer Engagement &
Value Strategy which states "our relationships, programs, products and services are relevant
and add value or convenience for our customers." As a company that accepts credit card
payments, Avista is subject to the Payment Card Industry (PCI) standards. These standards
specify controls that must be in place in order to meet the standards and be complaint. Failure
to achieve and maintain PCI compliance will result in fines and the ability to continue
accepting credit cards can be revoked. There are two projects slated for 2019 in this category,
PCI Web Site Payment Compliance and PCI Phone Payment Compliance to further meet the
requirements of the Payment Card Industry standards. Not investing in this business case will
result in Avista not meeting PCI compliance for credit card payment transactions that may
result in fines and the overall ability to take credit card payments, thereby affecting our
customers that chose to use automatic bill pay.
Critical Infrastructure Protection v5 Transition - Cyber Asset Electronic Access -2019:
$1,239,000
Avista, as a regulated utility, is required to meet North American Electric Reliability
Corporation ("NERC") Critical Infrastructure Protection ("CIP") Reliability Standards
("Standards"). Specifically, Avista has been complying with CIP Version.3 Standards
("CIPv3") and needs to transition to CIP Version.5 Standards (CfPv5).
This Business Case will suppoft achieving compliance for Low Impact Bulk Electric System
Cyber Systems by implementing electronic access controls. While this requirement is for
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Kensok, Di
Avista Corporation
2 KPMG, The race for the customer, Winning in a dynamic marketplace (201 6)
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electric service critical infrastructure protections, a component of the security is to prevent
cyber-attacks. A cyber-attack can affect all, gas and electric, infrastructure in the event that a
security vulnerability has been exploited. Key projects for 2019 in this business case are
Electronic Access per site and Cyber Transient Assets per site. Not investing in this business
case will result in not meeting required NERC CIP Reliability Standards.
Critical Infrastructure Protection 14vl - High Impact Assets -2019: $750,000
Avista, as a regulated utility, is required to meet North American Electric Reliability
Corporation ("NERC") Critical Infrastructure Protection ("CIP") Reliability Standards
("Standards"). CIP l4 vl went into effect and now Avista has a substation that requires
additional security controls in order to be compliant. This Business Case will support
achieving compliance for NERC CIP 14. While this requirement is for electric service critical
infrastructure protections, a component of the security is to prevent cyber-attacks. A cyber-
attack can affect all, gas and electric, infrastructure in the event that a security vulnerability
has been exploited. The 201 9 key project for this business case is P-CIPOl 4 Physical Security
Corporate. Not investing in this business case will result in not meeting required NERC CIP
Reliability Standards.
Data Center Compute and Storage Systems -20192 $3,289,000
This business case represents projects that are driven by performance and capacity of the
following technologies: data center compute technology, which includes both on premise
servers and cloud services; remote office compute and storage; application systems to manage
compute and storage technology, server operating systems (OS); data storage systems; data
center racks and power distribution units (PDU); and backup and recovery systems.
Projects addressing the work to replace and update data center compute and storage systems
in2019 are as follows: Windows 2008 Operating System Replacement; Linux RH6 Operating
System Replacement; Headquarter Data Center Improvements; Data Storage System
Replacement; Headquarter Compute Replacement, which is a server technology replacement
project in the main data center; San Jose Compute Replacement, which is a server technology
replacement project in the San Jose data center location; Physical Server Replacement; Active
Directory System; and Remote Office Compute and Storage Refreshes. Not investing in this
business case will puta at risk existing systems of record (e.g. Asset Management System,
Customer Care & Billing System, Geospatial Information System, etc.) that allow Avista to
operate and maintain back office, field operations, and customer service demands.
Digital Grid Network Expansion - 20192 $2,752,000
This business case represents work to expand network systems to support digital endpoints
throughout the service territory in support of work that will be conducted within the Grid
Modernization, Washington AMI, and Idaho AMI business cases. 2019 projects within this
business case are Rural Digital Grid Satellite Implementation, Fixed Network 3G Cellular
Replacement, and Field Area Network Expansion. Continuous investment in this business is
necessary to keep up with demands on an aging infrastructure that supports multiple use cases.
Not investing in this business case may result in reduced quality and performance of our
network system to transmit information, data and communication for back office transactions,
operation systems, and customer service centers, across our service territory.o
Kensok, Di
Avista Corporation
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I IV. IS/IT OPERATING AND MAINTENANCE EXPENSES
2 Q. Please summarize the incremental IS/IT O&M expenses beyond the
3 Company's 2018 historical test period, included in this case.
4 A. In Company witness Ms. Andrews' Electric Pro Forma Study, she has pro
5 formed certain information services and technology expenses, including non-labor costs
6 associated with products and services, licensing and maintenance fees, and other costs for a
7 range of information services programs that will be in place during the rate period. These
8 incremental expenditures are necessary to support Company cyber and general security,
9 emergency operations readiness, electric and natural gas facilities and operations support, and
l0 customer services. In this case, IS/IT has narrowed the scope of incremental expenses to
I I known and measureable non-labor items. These incremental expenses are based on having a
12 contractual agreement in place, are pre-paid costs, or are the continuation of costs for products
l3 and services that have increased since the previous rate case filing. Workpapers and further
l4 detail supporting these IS/lT incremental expenses have been included with Ms. Andrews'
l5 workpapers and provided with the Company's filed case.
16 a. What are the primary incremental IS/IT non-labor O&M expenses?
17 A. The primary incremental non-labor O&M expenses include Hardware and
l8 Software License support and maintenance, and Software Services and Subscriptions.
19 Hardware and Software License support and maintenance are costs associated with a
20 traditional licensing model where a capital asset license is purchased along with the required
2l license support and maintenance costs. Support and maintenance is the ongoing expense
22 portion associated with vendor provided security patches, bug fixes, incremental upgrades,
23 and expert technical support with pre-determined service level agreements. Software Services
Kensok, Di
Avista Corporation
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o 1 and Subscriptions are costs associated with a less traditional but increasingly more common
2 licensing model where all or most of the license cost is considered ongoing expense, rather
3 than a capital asset license. Examples can include items like Software as a Service, data feeds
4 or site license subscriptions. Costs in this category range from solutions that enable or
5 supplement on premise systems, to complete end-to-end solutions (infrastructure, networks,
6 computing, storage, hosting, etc.) with little to no on premise footprint. The incremental
7 expenses included in this case, on a system basis, are categorized by general cost types below
8 in Table No. 2.
9 Table No.2 Non-Labor O&M (System):
r0
2018
81,,263
1,,073,209
336,491_
209,U4
7,72'.1,,454
2,618,64'l_
11,449,191
2019
incremental
8,842
288,883
40,965
32,077
526,925
729,934
1,626,526
2020
incremental
7,929
170,282
0
9,344
349,639
1,761,124
2,299,319
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General Cost Types
Dedicated Voice and Data Circuits
Hardware License Support
Professional Services
Radio Tower Site Leases
Software License Support
Software Se rvices and Subscription
Grand Total
t5 a. What is driving the increase in these non-labor O&M expense categories?
16 A. There are several factors driving the increase in IS/lT non-labor operational
17 expenses. Drivers of non-labor costs include: groMh in capital investments in technology that
18 results in an increase to product maintenance and support expenses for each of the systems;
19 vendor changes to their licensing and delivery models - from a perpetual license to a
20 subscription license, or from an on-premises solution to a cloud-based solution; and, vendor
2l changes to their basic pricing of products and services such as annual consumer price index
Kensok, Di
Avista Corporation
o
22 increases.
22
o
2
1J
4
5
6
7
8
9
l0
ll
12
13
14
15
l6
t7
l8
t9
20
2t
22
23
24
25
26
27
28
29
30
3l
32
33
34
35
36
Functiona! Areas
Central Systems
Commu n ications Systems
Distributed Systems
General Business Systems
Network Systems
Security Systems
Grand Total
Table No. 3 below categorizes the non-labor incremental system expense increases
included in this case into general functional areas that can drive incremental increases.
Table No.3 (Svstem):
LL,449,191
2019 2020
incremental incremental
88,517 25,66t
84,588 5,821
170,662 -34,469
812,345 1,,952,593
222,489 231,972
247,823 116,74L
1,626,526 2,298,319
A descriotion of these seneral functional areas. combined for 2019 and 2020 are as
follows
. Central Systems (5114,278) include expense associated with the Company's
data centers, such as servers, storage, computer processing and disaster recovery
planning.
(590,409) include expense associated with the
2018
440,932
801,897
526,850
7,628,1U
t,027,813
'1,,014,425
o ons
Company's enterprise voice communications, such as inbound and outbound calling,
call centers, two way radio crew communications and cellular communications.
. Distributed Systems ($136,193) include expense associated with employee
productivity tools, such as tablets, desktops, laptops, printers and Microsoft Office
products.
. General Business Systems ($2.765 million) include expense associated with
the support, maintenance and licensing of other products and services leveraged by
areas across the Company, from items like Oracle E-Business Suite for back office
financial systems, to IBM Maximo for the Company's Enterprise Asset Management
system.
. Network Systems ($454,461) include expense associated with products,
services and leases that provide network and telecommunication solutions for the
delivery of energy, safety systems, customer contact channels and back office
productivity.
. Security Systems (5364,564) include expense associated with the Company's
cyber systems, such as anti-virus, firewalls and business continuity software.
Kensok, Di
Avista Corporation
o
23
o Table No. 4 below provides five examples of incremental expenses that have
contractual agreements in place, are pre-paid costs, or are the continuation of costs for
products and services that have increased beyond the 2018 historical test period:
Table No.4 Examples of IS/IT Incremental Expenses:
a. Please discuss an example of a product or service with maintenance and
support expense, and how it affects technology used by the Company.
A. Systems are becoming more and more highly integrated as business
transactions become more integrated. In some cases, issues can arise while business
transactions are traveling through these integrated paths resulting in system errors. These
errors can cause data transmission delay or overall system unresponsiveness, restricting
customers and employees from being able to complete a transaction (e.g. how the customer
o
2
J
4
5
6
7
8
9
l0
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12
13
t4
l5
t6
l7
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2l
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o
Kensok, Di
Avista Corporation
Source of lncrease Functional Area General CostType Primary Driver of lncrease lncremental
Expense
Budget System
Replacement
General Business
Systems
Software Service and
Su bscri ption
Obsolescence: current system is
no longer supported s 274,s02
The Budget System is used company wide for budgeting, forecasting, and variance analysis. The current system is
obsolete and must be replaced. No support cost is in place at this time. No support costs existed in 2018.
FirewallUpgrade Software Service and
Subscription
Security: evolving threats drive
security upgrades 5 228,293
Firewalls protect against u na uthorized cybe r access to the Company's systems. Software subscriptions a re required for
advanced features to be fully functional.
Network Support and
Maintenance Network Systems Hardware License Support Required Refresh and Strategic
lnvestment S gor,:.ss
Networks are the backbone of the Company's communications inf rastructure. Replacement of aged or obsolete
equipment and strategic investment in networks drives incremental uplift in support and maintenance.
Schneider Electric
Product Support
General Business
Systems Software License Support Capital lnvestments in
Geospatial Mapping of Assets S 181,7s6
This product is foundational to the Company's investments to model, design, maintain and manage electric and gas
inf rastructure maps and information, dramatically enhancing safety, reliability and efficiency.
Customer Experience
Platform
General Business
Systems
Software Service and
Subscri ption
lnvestment in Customer
Ex pe ri e nce S 1,4N,s78
To support our custome r engage me nt strategy, we will provide ou r employees with visibility a nd access to valuable
information across channels and systems; thus enabling personalized and cross-channel customerexperiences.
24
Security Systems
o 1 facing web integrates with customer billing, which integrates into financial and accounting
2 systems, etc). Quick identification and root cause analyses of these issues are paramount to
3 system recovery and mitigation of future similar causes.
4 ln2017, Avista invested in an application performance management and IT operations
5 tool. This tool quickly pinpoints issues when they arise to assist in the quick identification of
6 the root cause in application or system performance degradation. Based on the complexity and
7 number of disparate systems our business and customer transactions traverse, it would not be
8 feasible to maintain industry standard service levels by relying on our previous manual
9 approach to system support without incurring significant cost increases.
l0 a. How has Avista focused on managing its overall IS/IT expenses for the
I I benefit of its customers?
12 A. Avista focuses on increasing reliability and optimizing systems for our
13 customers' needs through the deployment, maintenance and support of technology. To
14 optimize operating expense increases, Avista works to automate our systems through
15 technology where reasonable and prudent to do so. For example, in 2017 we introduced a
16 performance monitoring tool that automates a portion of the labor performed by our
17 Information Systems teams. The automation successfully reduced internal labor costs, which
18 more than offset the cost of the product maintenance and support expense. This has allowed
19 us to redeploy our Information Systems operations team labor resources, and provides an
20 immediate benefit by reducing the time to determine root cause and rectify system issues when
21 they arise.
22 Another way we look to mitigate increasing expenses is to work with our vendors, and
23 where appropriate to do so, negotiate multi-year contracts that result in discounted
Kensok, Di
Avista Corporation
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o 1 maintenance and support rates. An example of this involves a 2017 telecommunications
2 contract that had two years remaining on its term. The contract was renegotiated, resulting in
3 an avoided cost increase of $215,000 overthe life of the new agreement.
4 A third example comes from an expense optimization opportunity that surfaced when
5 the Microsoft Lync system underwent a technology refresh to the Microsoft Skype system.
6 The Skype system included a software integrated telephone function that duplicated the
7 traditional telephone hardware. An analysis was performed to identify the benefits of
8 eliminating a majority of the traditional desk telephones. Areas of opportunity, included: a
9 reduction of product support expense and repurposing labor associated with adding, moving,
l0 and supporting telephone hardware; and, a conversion from the traditional desk telephone
I I system to a computer based software telephone system, resulted in avoiding expected
12 operating expense increases tied to this work.
13 Lastly, another example of the Company seeking ways to manage its cost, is our
l4 "Work Digitization Effort". Started in mid-2018, the effort sought to identify and prioritize
15 opportunities that may have cost savings potential through digitizing work or other processes.
16 We continue to review and refine the ideas collected for new ways to further avoid or reduce
17 expense.
l8 These examples of cost reductions and cost management initiatives, illustrate some of
19 the continuous improvement practices the Company employs to manage costs over time.
20 a. Does this conclude your pre-filed direct testimony?
2l A. Yes.
Kensok, Di
Avista Corporation
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