20200601Application.pdf

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Avista Corp.
14ll East Mission P.O.Box3727
Spokane. Washington 99220 -0500
Telephone [phone]
Toll Free 800-727-9170
May 29,2020
Diane Hanian, Commission Secretary
Idaho Public Utilities Commission
11331 WChindenBlvd.
Boise, D 83714
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RE: Avista Utilities Application for an Accounting Order regarding Wildfire Resiliency Plan.
Dear Ms. Hanian:
Avista Corporation, doing business as Avista Utilities, pursuant to Section 6l-524Idaho
Code and Rule 52 of the Idatro Public Utilities Commission, respectfully requests that the
Commission issue an order authorizing the accounting and ratemaking treatment related to the
incremental costs the Company will incur associated with its Wildfre Resiliency Plan. In this
filing, the Company is requesting Commission approval to defer, for later rate-making treatment,
the return on and of incremental capital and expenses detailed in this Application related to the
Company's Wildfire Resiliency Plan efforts, until such time the annual costs and capital
investment are included in base rates.
Please direct questions on this matter to me at [phone].
Sincerely,
lslLiz Andrews
Senior Manager of Revenue Requirements
Avista Utilities
liz. andrew s@ avistacorp. com
50949s-8601
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DAVID J. MEYER
VICE PRESIDENT AND CHIEF COI'NSEL FOR
REGULATORY AND GOVERNMENTAL AFFAIRS
AVISTA CORPORATION
P.O.BOX3727
14I I EAST MISSION AVENUE
SPOKANE, WASHINGTON 99220 -37 27
TELEPHONE: [phone]
EMAIL : [e-mail]
IN THE MATTER OF THE APPLICATION )
oF AVISTA CORPORATION FOR )
AN ACCOI.'NTTNG ORDER AUTHORIZING )
ACCOUNTING AND RATEMAKING )
TREATMENT OF COSTS ASSOCI,ATED WITH )
THE COMPANY'S WILDFIRE RESILIENCY )PLAN )
'""::_1 Dc! !.z1.-. '. ., c J t tl r: . JJ
BEFORE TTM IDAHO PUBLTC UTILITIES COMMISSION
CASE NO. AW.E-20-O'
APPLICATION OF AVISTA
CORPORATION FOR
DEFERRAL COSTS
ASSOCIATED WITH WILDFIRE
RESILIENCY PLAN
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I.INTRODUCTION
Avista Corporation, doing business as Avista Utilities (hereinafter Avista or Company),
at l4l I East Mission Avenue, Spokane, Washington, pursuant to Section 6l-524Idaho Code
and Rule 52 of the ldaho Public Utilities Commission ("Commission Rules of Procedure"),
respectfully requests that the Commission issue an order authorizing the accounting and
ratemaking treatment related to the incremental costs the Company will incur associated with
its Wildfire Resiliency Plan. [n this filing, the Company is requesting Commission approval
to defer, for later rate-making treatment, the retum on and of incremental capital and expenses
detailed in this Application related to the Company's Wildfire Resiliency Plan efforts, until
such time the annual costs and capital investment are included in base rates. Avista would
Application of Avista Corporation
Case No. AVU-E-20-
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seek a prudence determination and recovery method of the defened costs in a future
Commission proceeding.
Pursuant to Commission Rule of Procedure 201, the Company requests that this filing
be processed under the Commission's Modified Procedure rules through the use of wriffen
comments.
Communications in reference to this Application should be addressed to:
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David J. Meyer, Esq.
Vice President and Chief Counsel for
Regulatory and Governmental Affairs
Avista Corporation
P.O.Box3727
141I E. Mission Avenue, MSC-7
Spokane, WA 99220-3727
Phone: [phone]
[e-mail]
Patrick D. Ehrbar
Director of Regulatory Affairs
Avista Corporation
P.O.Box3727
l4l I E. Mission Avenue, MSC-27
Spokane, WA 99220-3727
Phone: [phone]
patri ck. ehrbar@avi stacorp.com
Avista Dockets (Electronic Only) - [e-mail]
A table of contents for this Application follows
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I. IntroductionII. Backgroundm. Summary of Avista's Wildfire Resiliency Plan
IV. Forecasted Risk and Cost Summary
V. Proposed Accounting TreatmentVI. ConclusionV[I. Request for Relief
Included with this application are the following supporting Attachments A - E:o Attachment A - Wildfire Resiliency Plan (May 2020)o Attachment B - Wildfire Risk Analysis Summary, Proposed Actions
(September 2019)o Attachment C - Wildfire Resiliency Cost Forecast (January 2020)o Attachment D - Proposed Wildland Urban Interface (WIJI) Mapo Attachment E - Wildfire Resiliency Communications Plan.
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Application of Avista Corporation
Case No. AVU-E-20-
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I II. BACKGROUND
As the number of large wildland fires in the Pacific Northwest continue to trend
upward, Avista, beginning in June of 2019, held a series of wildfire workshops to evaluate
opportunities to reduce the risk of wildfires associated with the Company's electric
transmission and distribution systems in its ldaho and Washington service territories. Data
from Climate Central's *2016 Westem Wildfire Report" suggests a 300%o increase in large
fires, and a600Yo increase in the number of acres burned, since 1970,1 and is particularly acute
in several states including Idaho, Wyoming and Montana, where a l0-fold increase has
occurred.2 / 3 Though southwestern states are most at-risk, Idaho and Washington are ranked
in the top ten of at-risk states. This increases the probability of fire starts and elevates the
overall risk of fire impact.
As a result of the workshops, together with consideration from the Wildfire Steering
Committeea and the broader wildfire Subject-Matter-Experts ("SME")s, served to inform
Avista's electric ldaho and Washington (combined) Wildfire Resiliency Plan. Avista
developed its Wildfire Resiliency Plan ("WF Plan") based on experience and information from
its peers in the energy and forestry industries that focus on reducing wildfire risk in the
I See Attachment A, page 5-6.
2 Both the fiequency and scope of wildfires are on the rise. Information from the 2016 Western Wildfires report
also indicates that the number of days associated with "High Fire Danger" or "Red Flag" is increasing. See
Attachment B, page 3.
3 Washington State Department of Natural Resources (DNR) takes the lead on most large wildland fires, outside
of federal lands, that occur within the state. In 2015, the DNR published a20-year "Forest Health & Strategic
Plan" for Central and Eastern Washington and identified 2.7 million acres (30%) as 'unhealthy forest.' As noted
in the 2015 DNR plan, the state of Washington has more lhan 22 million acres of forestland with approximately
l0 million forecasted acres in eastem Washington. As of 2015, 2.7 million acres - nearly 30o/o of all forestlands
in eastern Washington - need treatment to become more resilient to insects, diseases and wildfires. This same
information for Idaho is not as readily available or publicized. See Attachment B, page 4.
a The Wildfire Steering Committee is made up of Company management personnel across divisions including:
Operations, Environmental, Risk, Legal, Regulatory and Communications.
s Wildfire Subject-Matter-Experts included Avista division managers and area operating engineers representing
both Idaho and Washington electric facilities.
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Company's electric service territories in Idaho and Washington.u The WF Plan, included as
Attachment A to this Application, details the development and implementation of a
comprehensive multi-year effort that, as described later in this Application, includes enhanced
system hardening and vegetation management efforts that reflects a focus on reducing fire
ignition events, as well as other situational awareness and operational efforts.T
As provided in the WF Plan, Avista is proposing a proactive, strategic, continuous
improvement and risk informed approach to respond to the wildfire risks on our system,
encompassing immediate steps, as well as long-term efforts to reduce wildfire risk. Specific
WF Plan objectives include a focus in the following areas:
o Protect lives and property;8o Ensure emergency preparedness and align operating practices with fire threat
conditions; ando Protect Avista's energy delivery infrastructure.
Avista provides electrical service to approximately 400,000 customers in Idaho and
Washington, with over 120,000 of those customers living in elevated fire risk areas.e A key
factor in Avista's plan development is how best to reduce the likelihood of a wildfire related
6 To help inform Avista's Wildfire Resiliency Plan, Avista hosted a Pacific Northwest working group, including
Idaho Power, Puget Sound Energy, Portland General, Northwestern Energy, and PacifiCorp. In Idaho, Avista
continues to work closely with Idaho Power managers and engineers to ensure consistency. Avista also consulted
with Kootenai Electric and Northern Lights in the State of ldaho; Idaho's lead fire protection agency, the Idaho
Department of Lands; the Idaho community fire protection agency "Smart Growth Alliance"; and the University
of Idaho. Avista is also a member organization to the Western Energy Institute, participating in their Wildfire
Taskforce meetings.
7 The recommendations within the Company's WF Plan seek to reduce the risk of wildfire from the interaction of
Avista's energy delivery system and the environment, as well as the impacts of wildfire to Avista's system. The
recommendations represent Avista's initial WF Plan that will periodically be reviewed to ensure that it is
consistent with industry best practices and is providing benefits to customers and the communities Avista serves.
8 Though many elements of the WF Plan focus attention on Avista's transmission and distribution infrastructure
and the effort to reduce spark ignition events, the plan's primary objective is to protect lives and property by
reducing the number of utility-involved wildfires.
e As discussed below, the Company has created a wildland urban interface (WUI) map with designations of high
fire risk areas (Tier 2 and Tier 3) within Avista's Washington and Idaho service territories. Over 120,000 of
Avista's approximately 400,000 customers (or approximately 30%) live in WUI Tier 2 I Tier 3 high fire threat
area.
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to the Company's electric operations. The recommendations made in this plan are based on the
ability to reduce the risks associated with public and worker safety, the risks to property and
infrastructure, and to lessen the impact of electric system outages to customers and the
community.
This Application will provide a summary of the Company's recommendations and
forecasted costslo for the annual period 2020 through 2029.rr Approval of the proposed
incremental costs through some form of cost-recovery, as proposed in this Application, is an
important element of the Company's plan and helps support the level of wildfire mitigation
efforts proposed in the Company's WF Plan. The proposed incremental costs are not currently
included in Avista customer rates, or otherwise recovered through other recovery mechanisms
or tools.l2
III. SUMMARY OF AVISTA'S WILDFIRE RESILIENCY PLAN
In June 2019, Avista convened a series of subject matter expert wildfire workshops to
evaluate opportunities to reduce the risk of wildfire associated with its electric transmission
and distribution systems in its Idaho and Washington service territories.l3 The primary goal of
r0 All costs provided in the Company's Wildfire Resiliency Plan are provided as combined electric system (Idaho
and Washington) expenditures. However, expenditures will be allocated or directly charged to Idaho and
Washington depending on the type of cost and location of the activity. The split between Idaho and Washington
is estimated to be approximately 35o/oto 41o/oldaho I Si7oto 65% Washington. A higher percentage (up to 45%)
of the cost is expected in Idaho due to a higher concentration of WUI Tier 2 and Tier 3 areas at risk in Avista's
Idaho service territory compared to Washington.It The Wildfire Resiliency Plan was informed by information and analysis completed and summarized in
Attachments B, "Wildfire Risk Analysis Summary, Proposed Actions September 2019" and Attachment C,
"Wildfire Resiliency Cost Forecast, January 2020."
12 Due to the current COVIDI9 pandemic, it is unclear at this time the timing of Avista's next general rate case.
A deferral mechanism to capture the Company's WF Plan expenditures (capital and expense) will help ensure
recovery of these important costs, until such time as they can be included in base rates.
13 These workshops were divided into three sub-sections: l) Design based (material and construction standards;
2) Operations (control center and field operations) and 3) Maintenance (programmatic asset maintenance and
vegetation management).
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these workshops was to: l) tdenti$ actions to reduce the probability of electric ignition; and
2) Quantiff the consequence or impact of potential actions. As a result, during the course of
the six workshops held, over one hundred and sixty potential action items were identified. (See
Attachment B, pages l9-20 for more workshop information.)
The workshops, together with consideration from the Wildfire Steering Committee and
the wildfire SMEs, served to inform Avista's electric system Wildfire Resiliency Plan.
Included as Attachment B, the "Wildfire Risk Analysis Summary, Proposed Actions" report,
provides a summary of that effort and includes preliminary recommendations for systems and
practices, along with modifications to existing maintenance and construction programs. As
noted in the report, and summarized below, the stated goals of the Wildfire Resiliency Plan
Enhance Emergency Operation Preparedness (EOP)la: to recognize wildfire as
a recurring threat to utility infrastructure, the communities we serve, and our
customers.
Promote Safety: to protect physical assets, property, and human lives. To
manage the risk of wildfire through design-based, system operations, asset
maintenance, and outreach activities. ls
o Safeguard Company Assets: to mitigate the impact of direct financial costs and
liability exposure associated with large-scale wildfire events.
ln addition to these objectives, a model-framework was identified to promote a
comprehensive approach to wildfire risk. The elements of this model approach include: l)
Planning, such as EOP response, insurance review, communications planning and outreach;2)
ra Fire is unlike other storms that disrupt power, and utility experts recognize that service restoration must be in
coordination with fire protection activities and, in many instances, be postponed until it is safe to enter an area.
One of the recommended actions identified through Avista's wildfire workshops is to delineate fire in Avista's
Emergency Operations Procedure to ensure close coordination with fire incident command and to promote the
safefy of employees and lst responders above service restoration.
t5 The Wildfire Resiliency Plan includes an emphasis on collaboration with land-management and fire response
agencies.
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enhanced System Operations and Maintenance, such as system hardening, vegetation
management, and fire resiliency "Ops Toolkit"; 3) Weather and Fire Risk Monitoring, such as
situational awareness and performance metrics; and 4) Regulatory and Industry efforts, such
as utility industry engagement, partnering with fire protection agencies, legislative
opportunities and Commission engagement.l6
As a part of the Company's wildfire resiliency analysis, the Company focused on
understanding the risk exposure of wildfires in general, but also the opportunity to reduce risk
through specific actions taken associated with the Company's transmission and distribution
areas. Specifically, "Risk" was quantified as the probability of an event occurring, times the
financial impact of the event (Rlsft : Probability X Impact), where impact is characterized as
the sum of: l) Direct Financial Cost (replacement costs, fire suppression, I't party damages) +
2) Customer (intemrption cost estimate (ICE), 3'o pu.ty claims) + 3) Safetv (public and
employee injuries).
Prior to the SME workshops held in June 2019, Avista contracted with the Core Logic
Consulting Group to conduct a risk analysis to ascertain the risk impact of a single large
wildfire event. Core Logic's analysis was based on historic observation and was limited to the
impact to property. It did not include the potential for loss of life, injury, fire suppression,
timber loss, and other economic loss factors. This exercise was conducted to provide a baseline
for the subsequent SME risk workshops and to determine if Avista's liability insurance levels
were adequate to protect against a single large event.
The Wildfire Risk Analysis Summary report (Attachment B) reflects the findings of
16 The goals and objectives, as well as the framework of the Company's WF Plan are also summarized in
Attachment A, page 8 - 9, *Wildfire Resiliency Plan," Executive Summary.
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the SME workshop participants together with direct feedback from the Avista Wildfire
Steering Committee, Operations & Technical Staff, and Executive Management. It forms the
basis of Avista's 2020 Wildfire Resiliency Plan (Attachment A). Avista's risk analysis
indicates that the accumulated lO-year risk of wildfires is at least $8 billion dollars and is the
driving force behind adding wildfire specific defense strategies.
The Wildfire Risk Analysis Summary report (Attachment B) provides a detailed
description of all electric transmission and distribution inherent and managed risk costs
together with the treatment implementation costs over the planned ten-year period.lT Further,
proposed treatment actions in these areas are identified and grouped as follows:
o Base Level - efforts that support or enable other actions; or standalone actions that
can be readily incorporated by the organization.o PrimarT - actions that represent significant value (risk reduction) and are
recognized as industry best-practices.o Secondary - actions that represent the highest risk value but require significant
human and or financial commitments.o Future - identified as providing value but of lower priority and therefore, not
considered in the initial phase of the Wildfire Resiliency Plan.
Electric Transmission
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20 Avista operates 2,270 miles of transmission in portions of western Montana, northern
2l Idaho and eastem Washington. In 2006, Avista adopted tubular steel poles as the 'standard
22 installation' for I l5kV and230 kV powerlines. Since that time, Avista has worked to replace
23 its aging wooden structures with steel, and all new construction is exclusively steel. In 2009,
24 NERC published the 'oTransmission Vegetation Managemenf' standard FAC-003-2 which
25 fundamentally reshaped the industry's approach to transmission line clearance activities. For
26 Avista, the combination of system hardening and well-maintained rights-of-way have
r7 All costs are indicated as l0-year accumulated amounts and are order of magnitude estimates.
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increased the fire resiliency of its transmission system.
Transmission fire ignition events are relatively rare. From 2014 to 2018, there were
6l I sustained outages, but only 252 between May and September (fire season). However,
there were over 3,000 momentary outages and nearly half of those (1,500) occurred during fire
season. Eighty percent (80%) of transmission line faults are momentary (less than 5 minutes)
and are generally the result of lightning, wind, and planned switching operations.
Conversely, the impact of fire to transmission structures can be significant. For
example, the replacement cost of a single wood transmission structure ranges from $7,500 to
over $25,000, and damages to conductor can escalate into the millions of dollars. For treatment
actions identified on the transmission system (base, primary, secondary and future), see
Attachment B pages 6 - I l.
Electric Distribution
The vast majority of electric outages occur on the distribution system, but the impact
to customers is typically restricted by line fuse action (l-100 customers typical). To contrast
this situation, transmission outages are infrequent (low probability) but often impact thousands
of customers. However, from a fire prevention standpoint, the distribution system is the
ignition source for most utility related fires. Data from the Outage Management System
(OMT) indicates that annually, one hundred (100) fire ignition events are associated with
overhead distribution lines. In almost all cases, these fires naturally extinguished or were
extinguished by lst responders, including Avista line servicemen. In the current risk
environment, the distribution system warrants enhanced focus with respect to fire ignition, and
this risk is especially acute in the wildland-urban interface (WUD areas (discussed further
below).
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Fire ignition sources include tree contacts with powerlines, but also include animal
contacts, equipment failure, and electrical pole fires.l8 Between 2014 and 2018 there were
I ,933 tree related outages with I ,01 I occurring during fire season. Over that time period there
were 462 reported pole fires. Though the Company's distribution vegetation management
spend annually is approximately $8 million, there is a $3 million work backlog and the number
of danger trees continues to increase.le For treatment actions identified on the distribution
system (base, primary, secondary and future), see Attachment B pages 12 - 17.
Wildland Urban Interface (W'UI)
Because the Company's WF Plan was developed using a risk-based approach, the
Company has identified higher risk areas that can benefit the most from prudently applied
expenditures, rather than blanket solutions applied to our entire service territory. The
recommendations provided in the Company's WF Plan are based on each recommendations'
ability to reduce the operating and financial risk associated with wildfires. Therefore,
understanding risk and how risk is monetized is an important component of understanding the
content of the WF Plan.
One element of risk reduction includes the prioritized application of solutions.
Recommendations within the WF Plan consider geographic location and apply risk reduction
measures in areas with higher fire threat potential. The boundaries of forest lands and homes
and businesses are referred to as the Wildland Urban Interface (WUI). Homes and businesses
located near the WUI are determined to be most at-risk from the impact of wildfires and are
18 Whereas the risk profile of transmission is largely associated to the costs of fire impact to transmission lines,
the risk profile of distribution is aligned with ignition. The l99l Firestorm involved over ninety ignition events.
A majority of those fire starts were related to distribution lines.
re A warming climate and drought conditions have stressed trees resulting in widespread damage from insects and
disease. In many cases, trees subject to insect damage die within six to eighteen months making it difficult to
identifr dead or dying trees with ground patrols.
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often located in rural areas that lack fire suppression resources. In 2019, Avista's GIS
Technical Group created a combined WUI map for Avista's electric ldaho and Washington
service territories that is based on the following principles:
o Fuel Concentration - areas identified as having moderate to very high fuel
concentrations (areas with a high volume of trees) were considered in the analysis. Fuels
data was derived from the U.S. Department of Agriculture's Wildfire Hazard Potential
map (2018 USDA WHP).
o Housing Density - parcels smaller than 20 acres were included in the analysis but
highly-developed urban areas were excluded. Urban areas do not meet the definition of
Wildland Urban Interface.
Using this information, Avista "WIJI Risk Levels" were established, similar to the
13 work done in California, identiffing three wildfire risk levels:
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o Tier I - Moderate levels of fuel and low to moderate housing densities (low)
. Tier 2 - Moderate to high levels of fuel and moderate housing densities (medium);
and
o Tier 3 - High fuel levels and moderate to high housing densities (high)
The WUI map helps the Company identify and prioritize areas of greatest risk and
20 serves to inform our recommendations and operational decisions related to wildfire resiliency.
2l The WF Plan denotes the combination of WUI Tiers 2 & 3 as "elevated fire threat areas".
22 These areas comprise 40Yo of Avista's electric distribution and, 20Yo of the Company's
23 transmission systems. As shown on Attachment D (Avista's Proposed Wildland Urban
24 Interface Map), elevated fire threat levels are depicted in orange (Tier 2) and red (Tier 3)
25 highlighted areas. Portions of the map not highlighted are classified as Non-WU[ and represent
26 areas with low fuel concentrations, very low housing densities, or large urban areas (> 10,000
27 population).
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Plan Recommendation Summarv
As provided in Attachment A, the WF Plan includes detailed information on the 28
individual "Plan Recommendations," grouped into four categories. Similar to other utility
wildfire plans (including those from Pacific Gas and Electric, San Diego Gas and Electric,
Southern California Edison, and PacifiCorp) these categories include:
o Grid Hardening - Replacing infrastructure in fire prone areas. The likelihood of a
spark-ignition source is mitigated and critical infrastructure is protected from the
impacts of fire. (See Attachment A, pages 25,28-37)
o Enhanced Vegetation Management - Identi&ing potential conflicts on an annual basis
and prioritizing those risks from highest to lowest. Wildfire Resiliency aligns resources
with risk. (See Attachment A, pages 26,38-49)
o Situational Awareness - Adding line and monitoring equipment, system operators can
respond quickly to variable weather and fire threat conditions. (See Attachment A,
pages 26,50-56)
o Operations and Emergency Resoonse - Through training and simulation, Avista
personnel will be better prepared to work with fire professionals during an event.2o
(See Attachment A, pages 26,57-65)
Plan recommendations also reflect cost prudency and were adopted on their basis to
o Leverage existing asset programs and operating practices;
o Promote public safety; and
o Mitigate financial risks.
Within the WF Plan each recommendation is described, and the "Current" and "Future
20 This category includes the creation of "Wildfire Performance Metrics." Electric reliability is determined
through a series of metrics established by the Institute of Electrical and Electronics Engineers (IEEE), and
includes outage frequency and duration. Indices such as MAIFI (momentary outage frequency), SAIDI (sustained
outage duration), and CEMI (customers experiencing multiple intemrptions) are commonplace throughout the
industry. In contrast, fire metrics are characterized as the number of acres burned, suppression costs, structures
damaged, and injuries. Avista does track some fire-related information, such as the number of pole fires. This
recommendation, however, would implement a set of performance measures to quantify and better understand
the risk of wildfire on its operating systems. Avista will be monitoring the effectiveness of its wildfire mitigation
measures over time and sharing these results with the Commission. The creation of performance measures should
allow for evaluation and continuous improvement following the "Plan-Do-Check-Act" model. See Attachment
A, page 60.
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State" of each distribution and transmission operation recommendation, as well as expected
benefits, are provided. (See summary tables on pages 9-l I of Attachment A.) Further detail of
the costs associated with these recommendations is described further in Avista's WF Plan
(pages 25 - 65) and summarized below.
Wildfire Resiliencv Communications Plan
A key element of the Company's Wildfire Resiliency Plan is ensuring that Avista
stakeholders know the plan is in place and that the Company is taking the right precautionary
steps to reduce the potential for and impact of a wildfire. A strong and effective strategic
communications campaign is critical to the Company to ensure broad awareness and
demonstrate Avista's commitment to reducing the impact of wildfires. This plan must be in
place and directed at all of Avista's key stakeholders, including customers, employees, state
and local govemment officials and regulators, law enforcement and fire departments, local
media, and shareholders. The Company's Wildfire Resiliency Communication Plan objectives
include the following:
. Ensure awareness among all key stakeholders of the significant actions and investment
Avista is taking to prevent or mitigate the risk of wildfires.o Instill confidence in Avista as a proactive and responsible corporate citizen.
o Get "buy-in" support and recognition from key stakeholders that Avista is taking
wildfire safety seriously and has a Wildfire Resiliency Plan in place.. Help generate support and recognition for Avista as a leader that is doing all it can to
help avoid wildfires and has in place a strong wildfire prevention and safety program.
o Demonstrate Avista's focus on prioritizing the safety and well-being of its customers
and the communities it serves.
The first phase of the Wildfire Resiliency Communication Plan is focused on the plan's
initial launch and the communications objectives noted above. The timing and implementation
of the tactics will be aligned with when the plan is finalized and made publicly available. No
communications will begin until the organization is ready from an operational and regulatory
Application of Avista Corporation
Case No. AVU-E-2O-
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standpoint.
The second phase of the Wildfire Resiliency Communication Plan will support specific
strategies included within the WF Plan, such as enhanced vegetation management. Each
initiative that requires customer or external stakeholder behavior changes, would have its own
communications plan with objectives, tactics and timelines associated.
Included as Attachment E is a summary of Avista's Wildfire Resiliency
Communication Plan.
IV. FORECASTED RISK AND COST SUMMARY
Precise identification of the risk and cost for any given year is not possible nor realistic,
and for wildfires in particular, there is a significant difference between small fire events which
can occur many times each season versus a large event which may occur once every few years.
Therefore, in orderto represent a more realistic picture of relative risks and costs, a l0-year
planning horizon was adopted.
As noted above, Avista developed its WF Plan based on experience and information
from peers in the energy and forestry industries that focuses on reducing wildfire risk in our
elechic service territories of Idaho and Washington. As a part of this development, and
included as Attachment C, is Avista's "Wildfire Resiliency Cost Forecast," dated January
2020, which provides detailed information of the l0-year cost forecast for the period 2020
through 2029. This cost information, along with the detailed risk analysis of the selected plan
recommendations, helped inform Avista's WF Plan recommendations (Attachment A), and is
consistent with the "Wildfire Risk Analysis Summary - Proposed Actions" report included as
Attachment B.
Application of Avista Corporation
Case No. AVU-E-2O-
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The Wildfire Resiliency Cost Forecast report (Attachment C) focuses on forecasted
capital investments and operating expenses based on the recommendations from the Risk
Analysis Summary (Attachment B). The cost forecast reflects a refinement in scope versus
that of Attachment B and includes preliminary cost estimates. Several estimates are based on
results of Avista's Subject-Matter-Expert Fire Workshops (June 2019), while others reflect
parametric estimates based on subsequent efforts to develop the Wildland Urban Interface
(WUD map (Attachment D). Feasibility estimates generally reflect accuracy levels between
30 and 50%o. Definitive cost estimates require final engineering design and contractual
commitments for materials and labor.
Consistent to that discussed above, in developing the cost forecast for the l0-year
planning horizon ftom2020 to 2029, activities were grouped into the four main areas:
Enhanced Vegetation Management - This includes actions in excess of Avista's
current Vegetation Management program and reflects a focus on reducing fire ignition
events. Plan elements include collecting vegetation data via digital hi-resolution
photography and Light Imaging, Detection, and Ranging (LIDAR), increasing the
frequency of the Risk Tree treatments in fire prone areas, and conducting a public
outreach campaign associated with 'right tree-right place' concepts.
Situational Awareness - This category includes extending Supervisory Control and
Data Acquisition (SCADA) systems to a portion of Avista's thirty-three non-
communication substations (dark stations). Using SCADA to monitor and control
powerlines is a fundamental tenant of utility wildfire plans across the western U.S. and
Canada. Avista also plans to develop a web-based 'fire-weather dashboard';
combining publicly available weather and fire threat information to inform operational
readiness and enable enhancements to the Dry Land Mode (DLM) distribution
protection scheme.
Operations "Toolkit" & Metrics - Avista has a number of existing work processes
and programs aimed at reducing the impact of wildfire. Enhancements to existing
programs and the addition of other'operating' elements are included in this group.
Grid Hardening & Dry Land Mode - Avista developed a non-reclosing distribution
protection scheme back in the early 2000's to mitigate fire ignitions. The protection
scheme known internally as Dry Land Mode (DLM) will be updated to ensure
alignment with program objectives. Additionally, infrastructure replacements or grid
Application of Avista Corporation
Case No. AVU-E-20-
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hardening will be implemented to reduce fire ignitions.
Summarized risk values, along with cost values, for these categories are shown in Table
No. I below, representing the l0-year electric system (Idaho and Washington) planning
horizon for both incremental operating expense as well as capital improvements to
infrastructure. In simple terms, risk is the product of the probability of an event and its
consequence:
.Ris/r : (The likelihood of occurrence, or probability) X (The financial impact of an event)
Risk -describes the current state risk level and reflects defense strategies
already in place.
. Managed Risk - describes the future state risk level with the addition of Wildfire
Resiliency elements
The values shown for risk in Table No. I are percentage based and reflect a range for each
category.
Vegetation and grid hardening risk scores indicate a "bounded range" because the
probability of occurrence is based on the frequency of forced outages. Although the probability
of electrical outages is well understood, an event's impact can vary widely based on many
factors, including weather, fire risk levels, emergency response, and location. Managed risk
scores represent future state levels, and lower levels of event probability and event outcome.
In Table No. l, the column labeled 'Risk Mitigation' indicates the average percentage
difference between current state and future state risk levels.
Application of Avista Corporation
Case No. AVU-E-20-
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Table No. I Resiliencv Risk and Cost Summarv - Idaho and Washineton Electric
As noted in the Table No. l, the wildfire resiliency program includes a capital
investment of $268,965,000 over a l0-year period with corollary operating expenses of
$59,586,000 (all electric system numbers).21 Comprehensive risk analysis indicates a l0-year
inherent potential risk exposure of at least $8 billion dollars. This value includes the
accumulated risks associated with all 28 WF Plan recommendations and should not be
interpreted as a precise financial estimate. A better metric is the percentage of risk mitigation
which reflects an 89Yo reduction for the overall plan.
The following Graph No. I illustrates the total estimated capital and operating expense,
on a per year basis (Washington and Idaho electric) from2020 to 2029.
2l All operating expenses provided in this report reflect incremental amounts above existing expense levels and
are specific to the Wildfire Resiliency Plan.
Application of Avista Corporation
Case No. AVU-E-20-
Risk and Cost Summ
Operations & Emergenry
Response
Grid Hardening & Dry Land
Mode
25.9-,100
19.7-r00
41-1oO
44.1-100
3.2-14.5
0.8-1.1
5.3-23.4
0.7-2.7
2.8-12.5
88o/o
98%
760/o
98o/o
89o/o
$17,965,000
$300,000
$245,600,000
$268,965,000
$51,175,
$1,019,
$2,378,
$5,014,
48.3-100 $5,100,0001
Plan Tota!
al Awareness
Enhanced Vegetation
Management
2020-2029
Operating Horizon
lnherent
Risk
Managed Risk
(range o/ol
Risk
Mitigation
10-yr Capital
lnvestment ($)
10-yr Operating
Expense ($)
%
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I Granh No. I
S35,0@
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_0o(,o!,
Avista Wildfi re Resiliency
Plan Cost Forecast
2021 2022 2023 2924 2@5 2026 2(W 2024 2029
s16B8s $ZZ,OSS s3riSo s31.3EO s3r380 s31380 $Sr"380 $31,380 s31380
ss,gzr $e,srz $zlss s7,354 s6,772 ses+o seoss ss,ozz ss,oge
r. l,
2020
ss,zos
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rCapltal rOpcruting
While capital plan elements are projected to sunset in lO-years, the majority of
operating expense items are on-going and are generally related to enhanced vegetation
management.22
As discussed above, the 28 specific individual plan recommendations that result in
these costs estimates are provided in the WF Plan. By far the single largest capital investment
is associated with electric distribution grid hardening. This accounts for $193,200,000 invested
in distribution systems located in elevated fire risk areas, with another $44,000,000 invested
to convert wood poles to steel on the transmission system. These two plan elements account
22 As noted above, the majority ofthe incremental operating expenses are generally related to enhanced vegetation
management. Current vegetation management expenses included in Idaho base rates are based on 2018 electric
system levels totaling approximately $7.9 million for distribution and $1.3 million for tansmission operations.
Idaho's share of these amounts included in base rates today is approximately $2.1 million for dishibution and
$450,000 for transmission.
Application of Avista Corporation
Case No. AVU-E-20-
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for 88o/o of total capital spend, over the ten-year period.
For operating expense, three elements: transmission and distribution digital data
collection; annual risk tree; and the public safety initiative 'right hee right place,' account for
$42,700,000 (72%) over the same l0-year period. Though the WF Plan includes 28
recommendations to mitigate the risk of wildfire, five of the elements accounts for 85Yo of the
total program costs.
Potential Operatins & Maintenance Expense Offsets
The goal of wildfire resiliency is to reduce the overall risk associated with wildfires. [n
short, the benefits of this plan are largely measured in terms of risk reduction for all parties
involved. The Company, however, recognizes a potential for costs savings and cost shifts from
operating and maintenance expense towards capital investment. The overall impact of cost
savings and cost shifts will not be well understood until the plan is operational and performance
data can be obtained and analyzed. However, one of the objectives of this plan is to reduce the
number of equipment failures and tree related outages and by doing so, avoid emergency
response.
The following Table No. 2 lists a number of potential cost savings opportunities
associated with the Wildfire Resiliency Plan.
Application of Avista Corporation
Case No. AVU-E-20-
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Table No.2
It should also be noted that this plan indicates program level spend estimates and does
not differentiate between incremental and embedded cost elements. Though many plan
elements represent incremental costs, some activities will simply be absorbed by the
workforce. For example, annual fire safety training will occur at monthly safety meetings
which are already in place. This is an embedded cost estimated at $1,300,000 over l0-years.
However, the bulk of plan elements including enhanced vegetation management and grid
hardening represent additional activities and incremental costs. As previously indicated, these
categories account for 85Yo ofoverall program costs.
V. PROPOSED ACCOUNTING TREATMENT
In this Application, the Company is requesting an Order allowing the Company to
defer, for later rate-making treatment, the revenue requirement associated with the WF Plan
costs. These costs include investment transferred to plant-in-service and incremental related
expenses, detailed in this Application (or its attachments), related to the Company's Wildfire
Application of Avista Corporation
Case No. AVU-E-20-
process for vegetation and
structure condition i ns pection
lmproves System Performance
(fewer outages)
Enables remote monitor and
control or equipment
Reduced spend on emelgency
response and unplanned repairs
Reduces field inspection
activities. Enables computerized
aA/ac functions
Reduced spend on emergency
response and unplanned repairs
Reduced service related iruci
rolls
Grid Hardening
accidents
Annual Risk Tree and Right
Right Place Programs
Operations & Emergency Better prepared and equipped
fi rst
Reduces the risk of injury and
lmproved System Performance
(fewer outages)
Automates data gatheringDigital Data Collection
Situationa! Awareness
(communication & contro!
systems)
Cost SavPlan Element Benefit
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Resiliency Plan efforts annually starting in2020, until such time the capital investment and
expenses can be included in future base rates.
Avista proposes to record amounts that would be subject to the defenal in accordance
with the Code of Federal Regulations to Federal Energy Regulatory Commission ("FERC")
Account 182.3 (Other Regulatory Assets) as described below. The prudence and recovery of
the costs associated with the Company's WF Plan would be addressed in future regulatory
proceedings. With deferred accounting, the Commission will have the opportunity to review
the costs after-the-fact and make a prudency determination prior to the Company receiving
recovery of the prudently incurred costs through retail rates.
Deferred accounting treatment, as proposed in this filing, allows costs associated with
the WF Plan to be set aside for the opportunity for future recovery. This includes the WF plan
operating expenses, as well as depreciation expense and property taxes on the plant that is in
service, the financing costs associated with the investment, and the related state and federal
taxes. By deferring all costs, including the financing costs on the investment, the amount
recognized by the Company is the same amount that is recognized when the investment is
included in base rates. The deferral of the revenue requirement for plant investment would
begin in the month that the investment transfers to plant in 2020 and would continue monthly
until such plant is included in retail rates in a future proceeding. Monthly WF Plan expenses
starting in2020 will be recorded or debited to various expense accounts monthly, with deferral
of those costs accounted for as shown below.
The monthly accounting entries for the Idaho electric deferral of capital and expenses
are provided in Table No. 3:
Application of Avista Corporation
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I Table No.3
In the absence of a deferred accounting order from the Commission, the costs will
remain in the various capital and expense FERC accounts.
In a future proceeding, Avista would address the prudence of the costs incurred and
request recovery of the deferred costs, including a carrying charge on the deferral at the
authorized rate of return. At that time, the Company would also propose an amortization period
to recover the costs from Idaho customers over a future period.
The amortization of the regulatory asset, after approval in a future proceeding, would
be accounted for as provided in Table No. 4:
Application of Avista Corporation
Case No. AVU-E-2O-
Accounting Entry to Record the Defen:al of Revenue Requirement - Recorded Monthlv
Accormt Descrintion FERC Account Debit Credit
-
RegulatoryAsset - Defered Costs 182.3)0( ED.ID )OO(
Reguhtory Credit - Deferred Costs 407.4W. ED.ID )OO(
ReguhtoryAsset(Confia)-F4urfyRetumonlnvestrrnt(l) 182.3)0( ED.ID )OO(
The Company's monthly accounting entries will include the standard calcuhtions, inchrding adjusting for
revenue related expenses (ie. uncollectible customer accounts, commission fees and Idaho income taxes)
and deferred federal income taxes.
(l) In accordance with FASB ASC 980-340, Avista would capitalize the deferred revenue requirement of
the WiHfre Resiliency Plan costs in FERC Account No. 182.3. The portion that represents incurred costs
that would otherwise be charged to expense (ie WF Plan expenses, as well as deprecbtion expense and
interest) would be recorded in FERC Account No. 407.4. The portion that represents the earnings on
shareholders' investrnent wouh be recorded in a contra regulatory asset (FERC Account No. 182.3) until
recovery occurs in future years.
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Table No.4
VI. CONCLUSION
The risk of large wildfire events is increasing across the western United States. Recent
fire events in Califomia illustrate that utility operating risk is increasing related to wildfires.
Reducing the risk of wildfires is critical for customers, communities, investors, and the
regional economy. Avista has taken a proactive approach for many years to manage wildfire
risks and impacts, and through this plan, the Company has identified additional wildfire
defenses for implementation. The goals, strategies, and tactics set forth in this plan reflect a
quantitative view of risk. Additional research, conversation and analysis with Avista's
operating staffand steering group provided critical qualitative and contextual information that
also shaped the recommendations. This combination of quantitative and qualitative analysis
ensures the recommendations are robust, well-rounded, and thoughtful, and that they align with
the plan goals and are appropriate.
As noted above, the comprehensive risk analysis indicates a l0-year inherent electric
system risk exposure of at least $8 billion dollars. This value includes the accumulated risks
associated with all 28 plan recommendations included in the WF Plan and should not be
Application of Avista Corporation
Case No. AVU-E-20-
Page23
Accounting Entry to Record Amrtization of Defenal - Recorded Monthlv
Account Descriotion EERC Account Debit
CrstonrerAccounts Receiyabb 142.100 ED.ID )OO(
Custonpr Revenre 44XJOO( ED.ID
Reguhtory Debit - Anprtization ofCosts 407 .3W ED.ID )OO(
Reguhtory Asset (Conha) - EquO Return on lnvestrpnt 182.3)0( ED.ID )O(X
Regulatory Asset - Deferred Costs 182.3)0( ED.ID
Crcdit
)oo(
)oo(
The Company's montlly accounting entrbs will inchrde the standard calculations, inchrding adjusting for
revenue related expenses (ie. uncollectible customer accounts, commission fees and Idaho income taxes)
and deferred federal income taxes.
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interpreted as a precise financial estimate. A better metric of the value provided by the WF
Plan is the percentage of risk mitigation, reflecting an estimatedS9% reduction. This reflects
the combination of the reduction in event probabilities, primarily through enhanced vegetation
and grid hardening efforts, and also a reduction in impact severity through improved
emergency response and better situational awareness.
Though planned investments in infrastructure and vegetation maintenance defenses
represent the bulk of costs, human investments in training, partnerships, and engagement with
customers are another important feature of Wildfire Resiliency. Wildfire Resiliency represents
a departure from traditional utility strategies aligned with meeting customer demand (capacity)
and maintaining service continuity (reliability). Avista's strategy aligns with other utility
wildfire plans by adding defenses in four key areas: vegetation management, grid hardening,
situational awareness and operations and emergency response.
Approval by this Commission to defer the return on capital investment and incremental
expenses associated with the Company's Wildfire Resiliency Plan, would allow the Company
to set these costs aside for an opportunity to recover these costs in a future rate proceeding.
Furthermore, the Commission will have the opportunity to review the costs after-the-fact and
make a prudence determination prior to the Company receiving recovery of the prudently
incurred costs through retail rates.
Avista respectfully requests that this Application be processed under Modified
Procedure; i.e., by wriffen submissions rather than by hearing. RP 201, et seq.
Application of Avista Corporation
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YII. REOUEST FOR RELIEF
WHEREFORE, Avista respectfully requests that the Commission issue an Order
authorizing the deferred accounting treatment detailed in this Application related to the
Company's Wildfire Resiliency Plan capital investment and expenses. The revenue
requirement associated with the Company's actual investment (transfers to plant-in-service)
and actual operating expenses of implementing its Wildfire Resiliency Plan, would be deferred
to preserve the opportunity in a future proceeding to address the prudence and recovery of
these costs, with this Application being processed under Modified Procedure.
DATED at Spokane, Washington, this 29s day of May 2020.
AVISTA CORPORATION
By
Patrick Ehrbar
Director of Regulatory Affairs
Avista Corp.
Application of Avista Corporation
Case No. AVU-E-2O-
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