20200902Reply Comments.pdf

listsra
Avista Corp.
1411 East Mission P.O.Box3727
Spokane. Washington 99220-0500
Telephone [phone]
Toll Free 800-727-9170
{-: rq,fi
-J cfh
ri' dr:5
::ir*', {fi -lrn"-: ,;:_ E-r1 iii
rit'I: -t E'fi
,P! i;".t/Er- I l+ 'i(1::-" f\) rnfrijU.-. dffip# HU{rrffi q(fJ ;*@&L# (jl
September 2,2020
Jan Noriyuki, Commission Secretary
Idaho Public Utilities Commission
11331 W Chinden Blvd. Building 8, Suite 201-A
Boise, D 83714
RE: Avista Utilities Reply Comments to Staff Comments in Case AVU-E-20-05.
Dear Ms. Noriyuki:
Avista Corporation, doing business as Avista Utilities, submits these Reply Comments
regarding comments submitted by the Staffof the Idaho Public Utilities Commission regarding
Avista's application for an order authorizing accounting and rate making treatment of costs
associated with the Company's Wildfre Resiliency Plan.
Please direct questions on this matter to me at [phone].
Sincerely,
/s/Elizabeth Andrews
Senior Manager, Revenue Requirements
Regulatory Affairs
liz.andrews@ avistacorp. com
DAVID J. MEYER
VICE PRESIDENT AND CHIEF COUNSEL FOR
REGULATORY AND GOVERNMENTAL AFFAIRS
AVISTA CORPORATION
P.O.BOX3727
1411 EAST MISSION AVENUE
SPOKANE, WASHINGTON 99220.37 27
TELEPHONE: [phone]
david.meyer@ avistacorp. com
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF AVISTA
CORPORATION'S APPLICATION FOR AN
ORDER AUTHORIZING ACCOUNTING AND
RATE MAKING TREATMENTOF COSTS
ASSOCIATED WITH THE COMPANY'S
WILDFIRE RESILIENCY PLAN
)
)
)
)
)
)
)
CASE NO. AVU-E-20-05
REPLY COMMENTS OF
AVISTA CORPORATION
I. INTRODUCTION
Avista Corporation, doing business as Avista Utilities (hereinafter "Avista" or
"Company"), submits these Reply Comments regarding comments submitted by the Staff
of the Idaho Public Utilities Commission ("Staff') regarding the above referenced case.
II. BACKGROUND
On May 29, 2020, Avista applied for an order authorizing the accounting and
ratemaking treatment for the incrernental costs the Company will incur associated with its
Wildfire Resiliency Plan ("WF Plan"). In the Company's filing, the Company requested
Reply Comments of Avista Corporation
Case No. AVU-E-20-05
Page 1
the Commission's approval to defer, for later rate-making treatment, the return on and of
incremental capital and expenses detailed in its Application, until such time the annual
costs and capital investment are included in base rates. Furthermore, Avista would seek a
prudence determination and recovery method of the deferred costs in a future Commission
proceeding. Finally, the Company requested that Pursuant to Commission Rule of
Procedure 201, its filing be processed under the Commission's Modified Procedure rules
through the use of written comments.
On August 26, 2020, Staff filed comments stating that they believe that the
Company's WF Plan is a targeted and reasonable approach to managing its system in
relation to wildfire mitigation and it supports the Company's ef[orts to mitigate the effects
ofwildfires. Staffrecommends that the Commission issue an order authorizing the deferral
of Operation and Maintenance ("O&M") costs associated with the WF Plan to a regulatory
asset for future prudence review and potential recovery; however, consistent with prior
deferral cases, Staff recommends that the capital investments be recorded to the appropriate
plant account when the asset becomes used and useful, with depreciation expense being
recorded in the usual manner. Staff further discussed its recommendation in greater detail
within their comments.
III. AVISTA'S REPLY COMMENTS
Avista appreciates the comments provided by Staff, and generally agrees with their
position, but respectfully requests that the Commission at least consider all expenses
associated with the WF Plan be considered for deferred accounting treatment.
In their comments at pase 8, Staff states the following:
Reply Comments of Avista Corporation
CaseNo. AVU-E-20-05
Page2
Staff recommends that capital costs be excluded from the deferral
mechanism and accounted for as they would be through normal procedures.
capital costs are recorded to Plant-in-Service when the project becomes
used and useful, and depreciation begins at that point. The Company will
include capital in rate base and will begin recovery of prudent capital costs,
and the associated depreciation expense, when new base rates become
effective after its next general rate case. In order No. 33706 (case No. Ipc-
E-16-19), the commission disallowed capital costs for Idaho power to be
included in a regulatory asset, stating that 'the deferral treatment applies to
the O&M expenses of joining the EIM, and not to capital costs, which
should be treated as any other capital expenditure." Id at 10. Staffs
recofirmendation in this case to include only o&M expenses, and not capital
costs, in the deferral mechanism is consistent with the Commission's prior
order."
Although the Company appreciates StafPs support of its WF Plan, and deferral of
the associated O&M expenses prior to new rates going into effect in its next general rate
case, the removal of all costs associated with capital investment limits the opportunity for
Avista to recover at a minimum its WF Plan expenses that will be incurred prior to new
rates going into effect. While capital investment, net of accumulated dqpreciation, may be
included in net plant in future general rate case (GRC) proceedings, all expenses associated
with that investment, prior to new rates going into effect, are lost to recovery unless
deferred at the time the expense is recorded, or included in rate year expenses per the latest
GRC. The Company, therefore, requests the Commission, at a minimum, also consider
including for deferred accounting the actual depreciation expense, associated with actual
Wildfire plant investment costs that are transferred to plant-in-service, be set aside
monthlyl for the opportunity for future recovery.
I Similar to O&M expense, the Company would defer actual depreciation expense on its Wildfue plant
investment, beginning in the month that the investnent fansfers to plant, and would continue deferring this
expense monthly until such plant is included in retail rates in a future general rate case (GRC) proceeding.
Reply Comments of Avista Corporation
Case No. AVU-E-20-05
Page 3
Furthermore, Avista does not believe that the precedent related to treafrnent of EIM
costs (i.e., excluding deferral gf and on investment) is completely germane in this
proceeding. In Avista's EIM defenal application (Case No. AVU-E-20-01, Order No.
34606), related to deferral of expenses of Avista joining EIM, the Commission stated at
page 5:
"We find it proper. where the Company exoects a stream of future benefits based
on its rrresent investment. to defer recovery of the present investment costs until
later. Deferral allows the costs and future benefits to be more aliened and helps
minimize the potential impacts to rates before benefits can be realized. While the
company may defer its o&M expenses associated with joining the EIM, this
deferral will end on its go-live date. A prudency review of the deferred expenses
will occur before the Company is allowed to recover any Idaho jurisdictional
incremental O&M costs associated with joining the EIM. (emphasis added)
In Avista's EIM application, the Company had not requested deferred accounting
treatment of its investment - return of or on that investment, as the Company expects future
benefits associated with those investments, which would need to be aligned in a future
GRC. That is not the case here. With the WF Plan, there isn't a stream of future benefits
that will start once the capital investment is placed into service. As such, deferral of at
least the retum of investrnent (depreciation expense) would help to minimize the cost to
the Company prior to a base-level of costs associated with the WF Plan are built into rates
at the end ofour next general rate case.
Iv. CONCLUSION
Avista respectfully requests the Commission not only consider deferral of
incremental O&M expenses, but at a minimum, deferral of monthly depreciation expense
associated with its Wildfire Plan investment, to preserve the opportunity in a future
Reply Comments of Avista Corporation
Case No. AVU-E-20-05
Page 4
proceeding to address the prudence of the investment and recovery of the costs in a future
GRC.
DATED at Spokane, Washington, this Znd day of Septemb er 2020.
AVISTA CORPORATION
By
Pahick Ehrbar
Director of Regulatory Af[airs - Avista
Reply Comments of Avista Corporation
Case No. AVU-E-20-05
Page 5