20191015Stipulation and Settlement.pdf

David J. Meyer, Esq
Vice President and Chief Counsel of
Reguhtory and Covemnrental Affairs
Avista Corporation
l4l I E. Mlssbn Avenue
P.O. Box 3727
Spokane, Washington 99220
Phone: [phone] I 6, Fax [phone] I
John R. Hanmrond Jr.
Deputy Attorney General
Idaho Public Utilities Conanission Staff
P.O. Box 83720
Boise, lD 83720-0074
Phone: [phone],Fax: [phone]
IN THE MATTER OF THE APPLICATION
OF AVISTA CORPORATION DBA
AVISTA UTILITIES FOR AUTHORITY TO
INCREASE ITS RATES AND CHARGES
FOR ELECTRIC SERVICE IN IDAHO
RICEIVED
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BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
CASE NO. AVU-E-I9-04
STIPT]LATION AI{D SETTLEMENT
This Stipulation and Settlenrent ("Stipulation") is entered into by and affrcng Avista
Corporation, doing business as Avista Utilities ('Avista" or'Company'), the Staff of the Idaho
Public Utilities Commission ("Staff'), Clearwater Paper Corporation ('Clearwater'), Idaho Forest
Group, LLC ("ldaho Forest'), the Community Action Partnership Associatbn of ldaho, Inc.
("CAPAI'), the Idaho Conservation League ("lCL'), and Waknart, Inc. ('Waknart'). These
entities are collectively referred to as the "Paltbs" and singuhrly as a "Part5/", and represent all
who have appeared in these proceedings. The Parties understand this Stfuulation is subject to
approval by the ldaho Public Utilitbs Commission ("IPUC" or the 'Commission").
STIPULATION AND SETTLEMENT _ AVU-E- I9-04 Page I
I. INTRODUCTION
l. The terms and conditions of this Stipulation are set forth herein. The Parties agree
that this Stfuhtion represents afair, just and reasonabh conpromise ofall the issues raised in the
proceeding, ls in the public interest and its acceptance by the Commission represents a reasonable
resolution of the muhiph issues dentified in this case. The Parties, therefore, recontnend that the
Commisskrn, in accordance with RP 274, approve the Stipuhtion and all of its terms and
conditions without material change or condition.
II. BACKGROUND
2. OnJune 10,2019, Avista filed an Application with the Commission for authority
toincrease revenue effective January l,2020,forehctric service in ldaho. The Company proposed
an increase in electric base revenue of $5.255 million or 2.lYofor 2020. By OrderNo. 34368,
dated July 1,2019, the Commission suspended the proposed schedules of rates and charges for
electric service.
3. Petitions to intervene in this proceeding were filed by Cbarwater, Idaho Forest,
CAPAI, tCL, and Waknart. The Commission granted these interventions in IPUC Order Nos.
34369.34374 and 34384.
4. A setthnrcnt conference was noticed and held on October l,20l9,and was attended
by the Parties to this case. As a compromise of positions in this case, and for other consideration
as set forth below, the Parties agree to the following terms:
III. TERMS OF THE STIPULATION AND SETTLEMENT
5. Overview of Settlenrent and Revenue Requirenrent. The Parties agee that Avista
should be allowed to implement revised tariff schedules desigrred to decrease annual base ehctric
revenue by $7.188 million, or2.84o/o (on a billed basis the decrease is 2.800 ), with an effective
STIPULATION AND SETTLEMENT - AVU.E. I 9.04 Page 2
dateofDecember 1.2019. The Parties will takeall necessary stepstoestablish anapproval process
that will allow for the Stipulation to be approved and beconre effective by December l,2019.
6. Cost of Capital. The Parties agree to a 9.5 percent return on equity, with a 50.0
percent corrrrrcn equty ratio, which represents a continuation of the presentty authorired ROE
and capital structure. The capital struchre and resulting rate of retum is as set forth below:
Component
Capital
Structure Cost
Weighted
Cost
Debt
Common Equny
Total
50.00%
50.00%
5.20%
9.50Yo
2.600/o
4.75%
t00.00%735%
A. ELECTRIC REVENUE REQUIREMENT
7. Overview of Electric Revenue Requirement.Below is a sunrnrary table and
descrftions of the electric revenue requirenrcnt conponents agreed to by the Parties, effective
December 1,2019:
STIPULATION AND SETTLEM ENT - AVU.E- I9-04 Page 3
a.)
b.)
c.)
SUMMARY TABLE OF ADJUSTMENTS TO ELECTRIC REVENUE REQUIREMENT
EFFECTIVE DECEM BER I, 20I9
(000s of Dollan)
Revenue
Requirement Rate Base
Amount as Filed: $
Adjustme nts:
Cost of Capital $
Company 2019 Net Rate Base Updates S
Miscellaneous Company Updates: Reduce Property Taxes, $
Colstrip/Cs2 Major Maintenance Expense. Colstrip Regulatory
Amortization and remove non-recurring AFUDC DFIT Expense.
Remove Offrcer Incentives and Reduce Non-Ofl-rcers Incentives S
Reduce OfIrcer Labor Expenses S
Adjust Employee Benefits S
Remove Certain 2019 Capital Projects $
Revise Fee Free Amortization and Annual Expense $
Restate Uncollectibles $
Weather Normalization Ad.iustment $
Update Net Pro Forma Power Supply Expense and Transmission
Revenues
Update Pro Forma Gas Prices $
lnclude Palouse and Rattlesnake Wind PPA Contracts in PCA S
Revise Transmission Revenues $
Remove 2020 Expense
2020 Non-Union Labor lncrease $
2020 Remove IS/IT 2020 Expense $
Miscellaneous Adjustments: Reclassification ofnon-utility flights $
and fixed costs, as well as expired lease expense associated with
the airplane; reclassifrcation of other administrative and general
expenses; adjust intervenor funding, and an agreed upon overall
expense adjustment to reflect level ofapproved expenses
5,255 $ 836,820
(7.713)
(22|)
(317) S
(eeO) $
(438)
(32)
86
( r2rs) $
(370)
( 163)
(287)
(r2ee)
(s8)
d.)
e.)
f.)
c.)
h.)
i.)
j.)
k.)
r.)
m.)
i.)
ii.)
iii. )
i.)
ii.)
Adjusted Amounts Effective December 1,2019
( r.620)
(4288)
(s20)
(274)
(2ss)
451
$ (7,188) $82 7,750
Table No. I
a. Cost of Capital. As previously described (see Paragraph 6 above). This adjustment
reduces the overall revenue requirerrcnt by $2,21 I,000.
b. Companv 2019 Net Rate Base Updates. Refucts adjmtments to net rate base to update
infbrmation related to 2019 capital additions, including related depreciation expense,
as well asthe impact on Accumulated Depreciation and Accumulated Deferred Federal
STIPI.JLATION AND SETTLEMENT - AVU.E. I 9.04 Page 4
lncome Taxes, to reflect bahnces as of December 31,2019. This adjustnrent decreases
the overall revenue requirernent by $317,000 and reduces net rate base by $1,299,000.
c. Miscellaneous Company Updates. Refucts adjustnrents for updated infonnation,
including: rernoval of certain 2018 AFUDC DFITI expense as non-recurring, nrajor
maintenance expense associated with the Corpany's Colstrip generation plant,
property taxes, and correction of DFIT within the Colstrip regulatory amortization
adjutnrcnt2. This adjustnrent decreases the overall revenue requirenent by $990,000
and reduces net rate base by $58,000.
d. Renrcve Officer Incentives and Reduce Non-Officer Incentives. Reflects the removal
of all officer incentives. Thls adjushnent also reduces incentives for non-offrcers to
2018 target versus the Conrpany's 6-year average. This adjustnrent decreases the
overall revenue requirement by $438,000.
e. Reduce Officer Labor Expenses. Reduce officer hbor expenses to 2018 test perbd
levels allocated 90%o utility / l0% non-utility. This adjustnrcnt decreases the overall
revenue requirernent by $32,000.
f. Update Pension and Medical Expenses. Reflects updated infonnation related to
incrernental pensbn and npdical expenses in 2019, and includes 40lK expense based
on 2018 test period levels adjmted for 3Yrbbor increases. This adjustment increases
the overall revenue requirenrent by $86,000.
g. Remove 2019 Capital Additions. Rernove capital investments rehted to: l) Digital
Grid Network project; 2) Rattlesnake Flats Interconnection and
I Allowance tbr Funds Ljsed l]nderConstruction ("AFIJDC"): Deti:ned F'ederal Inconre Taxes ("DFIT")
2 The Parties otherwise accept the Colstrip Regulatory Amo(ization ad.justment as filed by the Company, including
approval olthe Colstrip capital additions included in the Regulatory Asset through 2019. 'l"he resulting regulatorl
amortization beginning December 1.2019 totals 5863,000 annually.
STIPULATION AND SETTLEMENT - AVU-E- 19-04 Page 5
Transmission/Substation projects; 3) Dlstribution asset project (Metro Line); 4) IS/lT
Mobile Application and Custorner Facing Technology projects; and 5)
Transmission/Substation upgrade project, all originally phnned for20l9. The projects
have been rernoved for review in the Company's next general rate case due to timing
of completion of projects. This adjustnrent decreases the overall revenue requirement
by $ l,2l 5,000 and reduces net rate base by $7,713,000.
h.Revise Fee Free Amortization and Annual Expense Adjust the annual Fee Freel
expense to approxinrately $311,000 and Fee Free deferral bahnce to approxinrately
$696,000to reflect actual anrcunts tkough April 2019 and estirnated bahnces for the
remainder of the year. This adjustrnent also revises the arnortization expense of the
Fee Free deferral bahnce ($696,000) to reflect a tlree-year arnortization beginning
December l, 2019 of $232,000. This adjwtnrent decreases the overall revenue
requirernent by $370,000. a
i. Restate Uncolhctibles. Restate uncolhctible expense based on the 12 rnonth actual
expense balance as of Jure 2019. This adjustnrent decreases the overall revenue
requirernent by $ I 63,000.
WeAther Normalization Aditstnrent.Refucts higher nornnlized load revenues net ofJ
power suppty expense from that included in the Company's original filing. This
adjustnrent decreases the overall revenue requirernent by $287,000.
k. Power Supptv and Transmission Rehted Net Expenses.
3 The Fee Free program allows customers to make payments by credit or debit card without paying a service f'ee. This
programwasapprovedinCommission orderNo.33494, caseNos.AW-E-16-01 andAW-G16-01 andsuccesstirfu
implenrented in February 2017.
a 'I'he Cornpany will update the defbrral balance in its nes general rate case to reflect actualepenses defbrred through
November 2019 and true-up any remaining annunts to anprtize up or down fbr the renrainder of the three-year
amortizatkrn.
STIPULATION AND SET'TLEM ENT - AVU-E- I9-04 Page 6
i. Update Pro Forrna Gas Prices. Restates pro forrna power suppty net
expenses to reflect updated natural gas forward prices for January 2020
through December 2020 contract months based on the most recent one-
month settlement period. This adjustnrent decreases the overall revenue
requirenrent by $ 1,620,000.
ii. Include Palouse Wind and Rattlesnake Flats Wind PPAs in PCA. Reflects
the rernoval of the Palowe Wind and Rattlesnake Wind Power Purchase
Agreenrents ("PPA') net expenses from base power suppty expense. This
adjrstment decreases the overall revenue requirenrent by $4,288,000. See
Paragaphs 8 (Pakruse) and 9 (Rattlesnake) below for fi.lther information.
iii. Revise Transmission Revenues. Revise 2018 actu,al transmission revenues
to reflect a tlree year prior average for each month of November and
December, to normalize those months to remove the inpact of the October
2018 Enbridge pipeline rupture on Company transmission revenues. The
resuhing annu,al transmission revenues will also be reflected in the PCA
authorized base effective December 1,2019.
l. Remove 2020 Expense.
i. 2020 Labor Increase. Removes tlrc 2020 increnrental non-executive, non-
union labor increases. 2020 union hbor increases, however were included
based on u:rion contract increases for 2020. This adjustnrent decreases the
overall revenue requirement by $274,000.
ii. Reduce 2020 IS/IT Expenses. Reduce 2020 IS/IT expense included by the
Company by 50Yr. Increnrental IS/IT expense included for 2020 reflect
STIPULATION AND SETTLEMENT - AVU-E-I9-04 Page 7
actual contractual obligations. This adjmtnrent decreases the overall
revenue requirenrent by $255,000.
m. Miscelhneous Adiustnpnts. Reflects the net change in operating expenses rehted to:
l)rechssif,rcation ofnon-urtility flights and fo.ed costs,aswell asexpired lease expense
associated with the airphne ($93,000);2)anrr.ization of20l8 intervenor funding over
two-year period ($20,000);3) renroval of miscelhneous A&G expenses (accounts 912,
92l,and923,totalng $36,000); and 4) anagreed upon increase to overall expense to
reflect a level of approved expenses ($600,000). The net effect of thls adjustment
increases the overall revenue requirenrent by $451,000.
8. Paloue Wind. The Parties agree that, for purposes of this case, the recovery of
costs related to the Palouse Wind PPA will continue to be included in the PCA, subject to the
current sharing (907o custonrer, l0% Company).5 Idaho will continue to be assigrred its
proportional share of all environmental attributes.
9. Rattlesnake Wind. The Parties agree that, for purposes ofthis case,the recovery of
costs related to the Rattlesnake Wind PPA will be included in the PCA, subject to the current
sharing (90%o custonrer, l0% Company).6 Idaho will be assigred its proportional share of all
environrne nta I attributes.
B. OTHER SETTLEMENT COMPONENTS
10. PCA Authorized Level of Expense. The new level of power supply revenues,
expenses, retail load and Load Change Adjustment Rate resuhing from the December 1,2019
5 The Palouse W ind PPA is a 30-y ear contract that was erccuted in 20l l by the Company and purchases all of its
output (105 MW nameplate capacity) and environmental attributes. The pro.iect began commercial operation in
December 2012.6'l'he Rattlesnake Flat Wind PPA is a 20-year contractwhich consistsof 50 Siemen's 3-129 2.9 MW wind turbines
withatotal capacityolapproimately l45MW's.'thepro.iectwill bedirectlyconnectedtotheAvistaelectricsystem
and is epected to begin commercial operation in December 2020.
STIPULATION AND SETTLEMENT - AVU-E- 19-04 Page 8
setthment revenue requirement for purposes of the nronthly PCA nrechanism calcuhtions are
detailed in the attached Appendix A, incorporated by reference herein.
I l. Electric Fixed Cost Adiutnrent Mechanisms Authorized Base. The new level of
baseline values for the electric and natural gas foed cost adjustnrent mechanlsm ("FCA') resulting
from the December 1,2019 settlenrent revenue requirenrnts aredetailed in the attached Appendix
B, incorporated by reference herein.
C. COST OF SERVICE/RATE SPREAD/RATE DESIGN/LOW INCOME
12. Costof Service/Rate Soread (Base Rate Chanses). The Parties do not agree onany
particuhr cost of service methodology. In recogrition, however, that certain rate schedules are
well above their relative cost of service the Parties agree that Schedules llll2 and 21122 will
receive a revenue decrease well above the overall percentage base rate change in order to rnove
these schedules closer to cost-of,service panty. The renraining scheduhs will receive revenue
decreases below the overall percentage base rate change, at varying levels, that will nnve the
majorrty of these schedules closer to thetr relative cost-oFservice. The Parties have agreed to
restate present base revenue reflecting the agreed-upon electric weather normalization adjmtment.
13. Rate Desipn. The Parties agee that the base revenue changes would be collected
through the volunretric enerry rates, with no changes to the basic charges. 7 Appendix C provides
a surnmary of the clrrent and revised rates and charges (as perthe Settlenrent) for electric service.
14. Resuhine Percentaee Chanqe bv Electric Service Schedule. The following table
reflects the agreed-upon percentage change by schedule for electric service:
i -l"his includes the proposed addition olbanded t.tlD rates and administrative changes as described in the direct
testimony olCompany witness Mr. Miller on pp. 13-14. In addition. the Parties agree with the Company's pmposal
to incorporate the current Schedule 72 (Permanent Federal Tax Rate Credit) as part ofbase rates and to cancel Schedule
72 altogether.
STIPULATION AND SETTLEMENT- AVU-E-19-04 Page 9
Effective December l, 2019
Rate Schedule
Residential Schedule I
General Service Schedules I I ll2
Large General Service Schedules 21122
Extra Large General Service Schedule 25
Clearwater Paper Schedule 25P
Pumping Service Schedules 31132
Street & Area LEhts Schedules 4l-48
Overall
Decrease in
Base Rates
Decrcase in
Billing Rates
-1.0%
-8.4%
-4.5%
-1.0%
-r.0%
-1.6%
0.0%
-1.0%
-8.2%
-4.4%
-r.0%
-r.0%
-t.5%
0.0%
2.8% -2.8%
15. Low Income Issues. The Parties agree to increase fi.rnding for the Low Incorne
Weatherization Progam from the current Commission-approved levels of $800,000 to $850,000.
D. ENERGY EFTICIENCY COMMITMENTS
16. For consideration rehted to the agreed-upon revenue requirement adjustments
discussed above, Avista, as a part of the give-and-take of settlement negotiations, and for other
settlenrent considerations, agrees to the following:
a. The parties agee that Avista will establish an Enerry Efficiency Assistance Fund
("EEAF'). The purpose of the EEAF is to provide additional funding for projects that
are not otherwise fully fi.uded through existing enerry efficiency hcentives, or do not
otherwise qualifo for traditional enerry efficiency flnding. The EEAF will be fi.nded
and disbursed as follows:
The final deferral balance related to the 'AFUDC Equrty Tax Deferral",
addressed in Case Nos. AVU-E-19-02 and AVU-G-19-01, as ordered in
Commission Order No. 34326 will be a source of funding. The estimated
deferral balance is approxinrately $800,000.
Avista will contribute below-the-line dollars of $800.000 in 2019 as a rnatch to
the estinrated AFUDC Equrty Tax Deferral (in subsection i.).
The funding will be disbursed as directed by the EEAF Advisory Group, a new
committee of stakeholders tasked with determining which existing or new
programs should receive this funding to address enerry efficiency,
STIPULATION AND SETTLEMENT - AVU-E- I9-04 Page l0
l.
weatherization, conservatbn, and low-inconre needs in Avista's ldaho service
territory.
The EEAF Advisory Group will consi,Cer the needs of all parties and remain
flexible on the timing of any disbursenrents. Any entity seeking fi.lrding must
fost attenpt to qualifu their applicable project mder Avista's exlsting energy
efficiency prograrns.
The committee will initially consist of representatives from the folhwing
stakeholders: Avista, Stafi the Lewiston Community Action Partnership, ICL,
Idaho Forest, and Clearwater. The Comrnittee may add representatives at its
discretion.
b. Clearwater DSM Assistance: Avista agrees to work with Clearwater to attempt to
qualify the following projects for DSM funding urder Tariff Schedule 90:
o Variabh speed drives on the No. I paper rnachine hydropulper.
o Variable speed drives on the No. 4 power boiler demineralized water pumps.. Enerry efficient chillers and conpressors forthe Lurgi system.o A variable speed drive on the No.l paper machine white water system.. Variable speed drives on the two waste water outlbll pumps.
Tariff Schedule 90 allows for possible DSM funding ofup to70o/o ofthe cost of the project,
subject to meeting certain specified cost-effectiveness criteria. The portion of the
estimated cost of these identified projects that 'rs not reimbursed under Schedule 90 will be
consi,Cered for flnding through the EEAF, who will consider the needs of all parties and
remain flexible on the timing of any disbursenrents.
Idaho Forest DSM Assistance: Avista agrees to work with Idaho Forest to attempt to
quahry the following projects for DSM funding under Tariff Schedule 90, upon closing
of the Proposed Transaction:
IV
c
Installation of inforrnation technology to gather phnt infornration data (PI Data)
on enerry usage at ldaho Forest's Lewiston plant, and through an installed
interhce, transmit real tinre enerry load inforrnation data for each operating
station to ldaho Forest and Avista. Thls rnay serve as a useful demonstration
project for data interfrces with other custonrcrs on Avista's system. The total
estirnated cost is $300,000.
Rephcenrnt of aging compressors, saws and otlrer equipnrnt with state of the art
nrachinery at ldaho Forest's Lewiston and Grangeville phnts, in order to increase
productivity and enerry efficiency.
STIPULATION AND SETTLEMENT - AVU-E- I9-04 Page I I
a
a
Tariff Schedule 90allows fbr possibh DSM funding ofup toTlYoofthe costof the project,
subject to meeting certain specified cost-effectiveness criteria. The portion of the
estirnated cost of these iCentified projects that is not reimbursed under Schedule 90 will be
considered for flrnding through the EEAF, who will consider the needs of all parties and
renratn flexible on the timing of any disbursenrents.
IV. OTHER GENERAL PROVISIONS
17. The Parties agree that this Stipuhtion represents a compromise of the positions of
the Parties in this case. As provided n RP 272, other than any testimony fihd in support of the
approval of this Stipulation, and except to the extent necessary for a Party to explain before the
Commlssion its own statenrcnts and positions with respect to the Stipuhtion, all statenrents nade
and positions taken in negotiations rehting to this Stfuhtion shall be confidential and will not be
admissible in eviCence in this or any other proceedtng.
18. The Parties submit this Stipulation tothe Commission and recommend approval in
its entirety pursuant to RP 274. Partbs shall support this Stipulation before the Commission, and
no Party shall appeal a Commission Order approving the Stipuhtion or an issue resolved by the
Stipuhtion. If this Stipuhtion is challenged by any person not a party to the Stipuhtion, the Parties
to this Stipulation reserve the right to file testinrony, cross-examine witnesses and put on such case
as they deem appropriate to respond fully to the issues presented, including the right to raise issues
that are tncorporated in the settlernent terms embodied in this Stipulation. Notrvithstanding this
reservation of rights, the Partbs to this Stipulation agree that they will continue to support the
Commission's adoption of the terms of this Stipulation.
19. If the Commission rejects any part or all of this Stipuhtion or inposes any
additional nraterial conditions on approval of thils Stipuhtion, each Party reseryes the right, upon
written notice to the Commission and the other Parties to this proceeding, within 14 days of the
date of such action by the Commission, to withdraw from this Stipuhtion. In such case, no Party
STIPULATION AND SETTLEMENT - AVU-E- 19-04 Page 12
shall be bound or prejudiced by the terms of this Stipuhtion, and each Party shall be entitled to
seek reconstCeration of the Commission's order, file testinrrcny as it chooses, cross-examine
witnesses, and do all other things necessary to put on such case as it deems appropriate. In such
case, the Parties immediately will request the prompt reconvening of aprehearing conference for
purposes of establishing a procedural schedule for the completion of the case, in accordance with
law.
20. The Parties agree that this Stipulatkrn is in the public interest and that all of its terms
and conditions are frir, just and reasonable.
21. No Party shall be bound, benefited or prejudiced by any position asserted in the
negotiation of this Stipuhtion, except to the extent expressty stated herein, nor shall this
Stipuhtbn be construed as a waiver of the rights of any Party unless such rights are expressly
waived herein. Execution ofthis Stipulation shall notbedeenredtoconstitute anacknowledgment
by any Party of the valiC ity or invalid ity of any particuhr nrthod, theory or princip le of regulat io n
or cost recovery. No Party shall be deenred to have agreed that any nrethod, theory or prtncip le of
reguhtion or cost recovery employed in arriving at this Stipuhtion is appropriate for resolving any
issues in any other proceeding in the fi.rture. Noftrdings of fact orconclusions of law other than
those stated herein shall bedeenred to be inplicit in this Stipuhtion.
22. The obligations ofthe Parties under this Stipulation are subject tothe Commission's
approval of this Stipulation in accordance with its terms and conditions and upon such approval
being upheld on appeal, if any, by a court of conpetent jurisdiction.
23. This Stipulatbn nny be executed in counterparts and each signed counterpart shall
constitute an original document.
STIPULATION AND SETTLEM ENT - AVU-E- 19-04 Page 13
DATED this [n:,of October,20l9
Avista Corporation Idaho Public Utilities Commission Staff
David J. Meyer
Attomey for Avista Corporation
John R. Hammond Jr.
DepW Attomey General
C Paper Corporation Idaho Forest Group LLC
Richardson RonaH Williams
Attomey for ldaho Forest Group LLCfor Cbarwater Paper
Corporation
Community Action Partnership Association
of ldaho, Inc.
Idaho Conservation League, Inc
Brad Pwdy
Attomey for CAPAI
Ben Otto
Attomey for ldaho Conservation
League, Inc.
Wahnart, Inc.
Vicki M. Baldwin
Attomey f,or Walnrart Inc
STIPULATION AND SETTLEMENT - AVU-E- I 9.04 Page 14