20200407Final_Order_No_34621.pdf

ORDER NO. 34621 1

Office of the Secretary
Service Date
April 7, 2020
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION

IN THE MATTER OF THE APPLICATION
OF AVISTA CORPORATION, D/B/A AVISTA
UTILITIES FOR AN ACCOUNTING ORDER
AUTHORIZING ACCOUNTING AND
RATEMAKING TREATMENT OF AFUDC
(ALLOWANCE FOR FUNDS USED DURING
CONSTRUCTION)
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CASE NOS. AVU-E-19-15
AVU-G-19-09

ORDER NO. 34621

On December 31, 2019, Avista Corporation (“Avista” or “Company”) applied for
authorization of its proposed accounting and ratemaking treatment to a portion of its Allowance
for Funds Used During Construction (“AFUDC”) for January 1, 2010, through December 31,
2017. The Company requested that the Commission process this case by Modified Procedure.
On February 4, 2020, the Commission issued Notice of Application, Notice of
Modified Procedure and Order setting comment and reply deadlines. Order No. 34351. The
Commission Staff (“Staff”) filed the only comments and recommended the Commission approve
the Application. The Company did not reply.
With this Order, we approve the Company’s Application.
BACKGROUND
AFUDC includes the cost of debt and equity used to finance utility plant additions
during the construction period. During construction, AFUDC is capitalized as part of the cost of
the utility plant. The Company is permitted to recover the capitalized AFUDC by including it in
rate base after the plant is placed in service. The Company capitalizes AFUDC in Washington,
Idaho, and Oregon monthly using the rate of return established in its most recent Washington
general rate case.
The Company's most recent rate of return approved by the Washington Utilities and
Transportation Commission is 7.50%. The Federal Energy Regulatory Commission ("FERC")
also maintains an AFUDC rate. FERC calculates its AFUDC rate based on guidance in the
Uniform System of Accounts. FERC’s AFUDC rate was 6.12% in 2018. FERC has indicated that
if its AFUDC rate differs from the state-approved rate, the capitalized AFUDC should be split
between the utility plant and a regulatory asset. The amount capitalized in the utility plant is to be
ORDER NO. 34621 2

based on the FERC AFUDC rate. The amount in the regulatory asset is to be the difference
between the state AFUDC rate and the FERC AFUDC rate.
On May 2, 2019, the Commission approved Avista’s request to defer the difference
between the state AFUDC rate and the FERC AFUDC rate as a regulatory asset to be amortized
over the composite remaining life of the plant-in-service beginning in January of 2018 and
continuing forward. See Order No. 34326 at 3. The Commission also authorized Avista to use
deferred accounting for the decrease in deferred federal income taxes that would result from the
accounting change for the equity portion of the AFUDC. Id.
APPLICATION
Consistent with the authority granted to it in Order 34326, Avista requests Commission
authorization to defer part of the AFUDC-related costs as follows:
For the period January l, 2010 through December 31, 2017, authorize the
Company to defer the AFUDC difference calculated between using the State
AFUDC rate and the FERC AFUDC rate as a regulatory asset (i.e. FERC
Account No. 182.3), which would be included in rate base, and amortize this
regulatory asset over the composite remaining life of the plant-in-service, as
described in this Application. This proposed treatment would result in no impact
to overall rate base, nor impact present customers' rates.

Application at 2. The Company makes this request based on FERC recommendations. Id. at 3.
Using the proposed accounting described above, the Company's level of rate base and
depreciation/amortization expense does not change. Id. at 4. Based on FERC’S recommendations
in the Audit Report, Exhibit l, at page 26, the Company recalculated the AFUDC amounts from
January 1, 2010, through December 31, 2017, to determine excess AFUDC that had been
capitalized using the state AFUDC rate instead of the FERC rate. Id. On a system basis, this
amount is about $37.7 million. Id. After adjusting for accumulated depreciation, the Company
would transfer about $32.8 million from plant rate base (FERC Account No. 101 - Plant in Service)
to a regulatory asset rate base (FERC Account No. 182.3 - Regulatory Asset (AFUDC)).1 Id. at 5.
COMMENTS
Based on its review of Avista’s Application and the FERC Audit Report, Staff
recommended the Commission approve the Company’s proposed accounting and ratemaking

1 Idaho’s electric share is approximately $8.5 million and the State’s natural gas share is approximately $0.8 million.
ORDER NO. 34621 3

treatment for AFUDC. Staff Comments at 3. Staff noted the proposed accounting treatment would
not change customer rates. Id.
COMMISSION FINDINGS AND DECISION
The Commission has jurisdiction over this matter under Idaho Code §§ 61-502 and 61-
503. The Commission is statutorily authorized to investigate rates, charges, rules, regulations,
practices, and contracts of public utilities and to determine whether they are just, reasonable,
preferential, discriminatory, or in violation of any provision of law, and may fix the same by order.
Idaho Code §§ 61-502 and 61-503. We have reviewed the Application and the comments of Staff.
Based on our review, we find it reasonable to approve the Application. There will be no impact
on the Company's overall rate base, and the move will align the Company's practices with FERC
recommendations and procedures.
ORDER
IT IS HEREBY ORDERED that the Company's Application for accounting and
ratemaking treatment related to its AFUDC for January 1, 2010, through December 31, 2017, is
approved.
THIS IS A FINAL ORDER. Any person interested in this Order may petition for
reconsideration within twenty-one (21) days of the service date of this Order with regard to any
matter decided in this Order. Within seven (7) days after any person has petitioned for
reconsideration, any other person may cross-petition for reconsideration. See Idaho Code §§ 61-
626 and 62-619.
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ORDER NO. 34621 4

DONE by Order of the Idaho Public Utilities Commission at Boise, Idaho this 7th
day of April 2020.

PAUL KJELLANDER, PRESIDENT

KRISTINE RAPER, COMMISSIONER

ERIC ANDERSON, COMMISSIONER

ATTEST:

Diane M. Hanian
Commission Secretary

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